SOUTHERN ILLINOIS UNIVERSITY

COMPLIANCE EXAMINATION AND SINGLE AUDIT

FOR THE YEAR ENDED JUNE 30, 2007

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FY2007

FY2006

OPERATING REVENUES

Student tuition and fees.........................................................

Auxiliary enterprises................................................................

Grants and contracts...............................................................

Sales and services of educational activities........................

Other..........................................................................................

Total Operating Revenues..............................................

OPERATING EXPENSES

Instruction.................................................................................
Research...................................................................................

Public services........................................................................

Academic support..................................................................

Student services.....................................................................

Institutional support.............................................................

Operation and maintenance of plant...................................

Scholarships and fellowships..............................................

Auxiliary enterprises.............................................................

Depreciation............................................................................

Other........................................................................................

Total Operating Expenses...................................................

Operating Loss.............................................................................

NON-OPERATING REVENUES (EXPENSES)

State appropriations................................................................

Payments on behalf of the University..................................

Other non-operating revenues (expenses), net...................

Net Non-operating Revenues ..........................................

Income (Loss) Before Capital Contributions..........................

Capital appropriations, additions to endowments and capital grants

INCREASE IN NET ASSETS......................................................

Net assets, beginning of the year...............................................

Net assets, end of the year...................................................

$182,140,804

83,367,711

89,604,596

52,529,185

39,603,670

$447,245,966

$259,860,902

57,700,962

56,378,043

112,268,877

55,192,637

54,640,752

65,398,396

19,159,776

77,328,543

34,958,458

350,826

$793,238,172

($345,992,206)

$223,149,103

106,525,874

34,315,848

$363,990,825

$17,998,619

$32,650,797

$50,649,416

$375,488,020

$426,137,436

$156,557,921

78,597,396

100,738,941

92,141,388

322,278

$428,357,924

$249,878,046

63,636,130

54,923,313

103,935,635

51,296,734

51,562,883

66,850,255

19,047,927

73,435,273

35,641,988

439,978

$770,648,162

($342,290,238)

$217,597,790

94,771,410

29,676,351

$342,045,551

($244,687)

$8,681,091

$8,436,404

$367,051,616

$375,488,020

SELECTED ACCOUNT BALANCES

JUNE 30, 2007

JUNE 30, 2006

Cash and investments.............................................................

Capital assets, net of accumulated depreciation................

Total Assets.............................................................................

Revenue bonds, notes payable and capital lease obligations..............................................................................

Accrued compensated absences..........................................

Total Liabilities......................................................................

Net assets................................................................................

$221,463,550

$572,516,218

$868,278,645

$239,784,222

$46,820,844

$442,141,209

$426,137,436

$255,911,273

$501,153,312

$827,406,841

$247,983,156

$45,304,330

$451,918,821

$375,488,020

EMPLOYMENT STATISTICS (unaudited)

FALL 2006

FALL 2005

Carbondale ..................................................................................

Edwardsville...............................................................................

Total Employees..................................................................

6,974

2,802

9,776

6,812

2,857

9,669

ENROLLMENT STATISTICS (unaudited)

FALL 2006

FALL 2005

Carbondale (Full-time and Part-time students)....................

Edwardsville (Full-time and Part-time students).................

Total Enrollment..............................................................

21,003

13,449

34,452

21,441

13,460

34,901

UNIVERSITY PRESIDENT

During Audit Period: Mr. Glenn Poshard

Currently: Mr. Glenn Poshard

Gift cards for restaurants and entertainment establishments were purchased with federal funds

Matter under review

Controls not in place to ensure vendors have not been suspended or debarred

Vehicles were omitted from the list of federally funded equipment

Changes in student enrollment status are not being reported as required

FISAP reports inaccurate

Federal grants were excluded from the SEFA

Non-compliance with the State Officials and Employees Ethics Act

Timesheets are only maintained for the Universities civil service and student employees

Information on students released to a financial institution

Four adjudicated cases were not reported

University officials disagree

Auditor’s Comment

INTRODUCTION

Our 2007 Single Audit and State Compliance Examination of Southern Illinois University are presented in two reports. One report contains compliance findings disclosed by our tests and certain supplemental information. The other report contains supplementary financial information and special data requirements.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER SPENDING OF TRIO EDUCATION TALENT SEARCH FUNDS

The University did not have adequate controls over expenditures of Trio Educational Talent Search funds (CFDA #84.044).

During our testing, we noted the Edwardsville campus purchased gift cards for various restaurants and entertainment establishments using Trio Talent Search funds. Insufficient documentation was maintained to substantiate that the meals for which the gift cards were purchased were incidental for program activities, and thus an allowable activity of the program. In addition, the gift cards represented an estimate of the cost of the meals rather than the actual costs, which were not known at the time of procurement of the gift cards. We noted no similar instances at the Carbondale campus.

University management indicated that the cause of this situation is currently under review.

Purchases of gift cards with TRIO funds and other unsupported expenditures resulted in noncompliance with federal requirements and questioned costs, the dollar amount of which cannot be estimated at this time. (Finding No. 07-1, pages 12-3)

University officials accepted our recommendation to implement controls to ensure federal funds are spent in accordance with federal requirements.

INADEQUATE CONTROLS TO ENSURE POTENTIAL VENDORS ARE NOT SUSPENDED OR DEBARRED FROM A FEDERAL AWARD OR CONTRACT

The University did not have adequate controls in place to ensure that vendors to which it disburses federal funds have not been suspended or debarred.

When procuring goods or services with federal funds, the Carbondale and Edwardsville campuses did not verify vendors were not suspended or debarred, however, we did not note any instances in which the University paid federal funds to a suspended or debarred vendor. (Finding No. 07-3, pages 16-17)

We recommended that controls be put in place to ensure compliance with the suspension and debarment requirements.

University officials accepted our recommendation and anticipated implementation by Spring 2008.

NEED TO IMPROVE CONTROLS AND ACCOUNTING FOR VEHICLES PURCHASED WITH HEAD START PROGRAM FUNDS

The University did not properly account for the acquisition of vehicles for the Head Start Program.

During our examination on the Edwardsville campus, we noted that the cost of acquiring five vehicles by the Head Start Program, totaling $64,007 was incorrectly recorded as Transportation Expense rather than Equipment. As a result of this miscoding, the vehicles were omitted from the list of federally funded equipment provided to the auditors.

The improper coding of the vehicle purchases resulted in the inability of the University to track equipment purchased with federal funds in accordance with federal regulations. (Finding No. 07-4, pages 18 - 19)

We recommended the University strengthen controls for the recording of vehicle purchases and transfers related to the Head Start Program.

University officials accepted our recommendation and anticipated implementation by June 30, 2008.

FAILURE TO PERFORM DIRECT LOAN RECONCILIATIONS

A reconciliation of direct loans with the Direct Loan School Account Statement (DLSAS) was not performed by the University’s Edwardsville campus on a monthly basis.

The Edwardsville Campus is instead using the 30-Day Warning Report as its monthly reconciliation with DLSAS.

Per the Direct Loan School Guide, the University is required to reconcile the information on the DLSAS data report to its internal records on a monthly basis. The Department of Education defines the reconciliation as the process by which the Direct Loan cash balance reported by the Loan Origination Center (LOC) is reviewed and compared with the University’s internal records on a monthly basis by the school. The 30-Day Warning Report is a tool that may be used to reconcile Direct Loan information from the University’s Direct Loan System and the University’s business office to the Loan Detail section only of the DLSAS. However, it is not a tool that may be used to reconcile the Cash Summary and/or Cash Detail sections of the DLSAS. (Finding No. 07-05, pages 20-21)

We recommended that the University complete the direct loan reconciliation on a monthly basis.

University officials accepted our recommendation and anticipated implementation by June 30, 2008.

ENHANCEMENT OF CONTROLS NEEDED OVER LOAN REPORTING

The University did not ensure timely and accurate reporting of information to the National Student Clearinghouse (NSC) for the Direct Loan Program.

During our review of the student status changes reported to the National Student Loan Data System (NSLDS) by the Carbondale Campus, 15 of 66 (23%) students tested that were labeled as withdrawn or graduated per University records did not agree with NSLDS records. We noted that the University reports student status changes to the NSC, after which the NSC submits the information to NSLDS.

The NSLDS enrollment reporting guide requires the University to report enrollment information to NSLDS whenever the student’s attendance pattern changes. It is the school’s responsibility, as a participant of Title IV aid programs, to monitor and report these changes to NSLDS on the next available submission after being alerted to the changes. (Finding No. 07-7, pages 24-25)

We recommended the University enhance both electronic and manual procedures to monitor enrollment changes to ensure that NSLDS reporting complies with Federal regulations.

University officials accepted our recommendation and indicated that implementation would be immediate.

INADEQUATE CONTROLS OVER FISAP AND SEFA REPORTING

The University did not have adequate controls in place over the Fiscal Operations Report and Application to Participate (FISAP) and the Schedule of Federal Expenditures (SEFA). During our review of the FISAP and the SEFA reports at the Edwardsville Campus, we noted the following:

• There was no supervisory review performed on the FISAP report to ensure completeness and accuracy. Consequently, we noted several erroneous entries on the FISAP report. These items were subsequently corrected by the Director of Student Financial Aid upon notification.

• Two (2) new federal student grants from the Department of Education, with total expenditures of $317,677 were not included in the FY2007 SEFA. These two grants were new grants received by the University during the Award Year 2006-2007. (Finding No. 07-8, pages 26-28)

We recommended that the reports be properly reviewed to ensure their completeness and accuracy.

University officials accepted our recommendation and indicated that implementation would be made by the next report submission deadline of September 30, 2008.

TIME SHEETS ARE NOT MAINTAINED IN COMPLIANCE WITH THE STATE OFFICIALS AND EMPLOYEES ETHICS ACT

The University does not have a policy that requires all employees to periodically submit time sheets documenting the time spent each day on official University business to the nearest quarter hour as required by the State Officials and Employees Ethics Act (Act).

We noted that the University's salaried employees did not maintain timesheets in compliance with the Act. The employees documenting time to the nearest quarter hour were only Civil Service bi-weekly paid employees and student employees, who record their time on time sheets.

According to University personnel a plan for a policy change was developed in April 2007 for all employees except faculty to periodically submit time sheets, with a target date of implementation on July 1, 2007. (Finding No. 07-10, pages 31-32) This finding was first reported in 2005.

We recommend the University amend its policies to require all employees to submit time sheets in compliance with the Act.

University Officials indicated that beginning in July 2007 the University began requiring administrative/ professional and exempt civil service employees to submit time sheets. However, at this time, the University has not required faculty to maintain such time sheets. The University is exploring the legal and institutional implications of expanding this new procedure to the faculty and it is expected that a final decision will be made in FY08. (For the previous agency response, see Digest footnote #1).

NEED TO COMPLY WITH THE SOUTHERN ILLINOIS UNIVERSITY MANAGEMENT ACT

The University violated the Southern Illinois University Management Act (Act) upon the release of certain student information to a financial institution.

In August 2006, a financial institution made a request for the names and addresses of all students registered for the fall 2006 semester at the Carbondale campus under the Freedom of Information Act. All registered student’s names, addresses and class, including students less than 21 years of age, were provided to the financial institution.

The Act (110 ILCS 520/16) states the University may not provide student information to a business organization or financial institution that issues credit or debit cards, unless the student is 21 years of age or older. (Finding No. 07-11, page 33)

We recommended the University establish controls in order to ensure that student information outlined in the Act is not released.

University officials accepted our recommendation and indicated that controls have already been implemented.

FAILURE TO REPORT IN ACCORDANCE WITH THE BOARD OF HIGHER EDUCATION ACT

The University’s Carbondale campus did not submit the required monthly reports to the Department of Human Rights (DHR) and the Attorney General for four adjudicated cases in which there was a finding of racial, ethnic or religious intimidation or harassment, as required by the Board of Higher Education Act (Act). (Finding No. 07-12, page 34)

We recommended the University establish controls to ensure reports are filed as required by the Act.

The University took exception to the finding. The University believes the statute does not place any requirements on institutions of higher education, but rather the requirements are placed directly on the Illinois Board of Higher Education (IBHE). Furthermore, the University contends that IBHE has not required institutions of higher education to take any actions. Therefore, an audit finding against the University for failing to report in accordance with the Board of Higher Education Act is inappropriate since the University has no such requirement.

Furthermore, it is the University’s interpretation that neither IBHE nor IDHR have provided any rules or regulations or made any request for this information or requests to provide this information to the Attorney General or IDHR. IDHR has not promulgated any rules or regulations requiring submission of materials and provided no guidance regarding the implementation of this provision, or the definition of critical terms such as “adjudicated cases”.

In an Auditor’s Comment we noted that the intent of this provision of the Board of Higher Education Act is to require each public institution of higher education to report monthly to the Illinois Department of Human Rights and the Attorney General on each adjudicated case as described in the Act. Furthermore, this intention was communicated in the Board’s Report to the Governor and General Assembly on Underrepresented Groups in Public Institutions of Higher Education in Illinois dated January 5, 1993. It is our understanding that this report was included on the Board’s agenda, which was distributed to each public institution of higher education, including Southern Illinois University. The Board of Higher Education considers this report to be sufficient instruction to each public institution of higher education regarding the reporting requirements. Further, it is our understanding that SIU Edwardsville has reported such cases monthly to the Department of Human Rights in the past. We continue to recommend the University report as required by the law and if necessary, seek guidance from the Board of Higher Education on the reporting requirement.

OTHER FINDINGS

The remaining findings are reportedly being addressed by University management. We will review the University’s progress toward the implementation of our recommendations in our next examination.

AUDITORS’ OPINION

The financial audit reports were previously released. Our auditors stated the financial statements of the University as of June 30, 2007 and for the year then ended are fairly presented in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Crowe Chizek & Company, LLC were our special assistant auditors for this audit.

DIGEST FOOTNOTE

#1 TIME SHEETS ARE NOT MAINTAINED IN COMPLIANCE WITH THE STATE OFFICIALS AND EMPLOYEES ETHICS ACT – Previous University Response

As indicated in our 2005 response, Southern Illinois University (“University”) again respectfully takes exception to this finding. The University has taken the steps necessary to comply with the State Officials and Employees Ethics Act (“Ethics Act” or “Act”) and has adopted the necessary policies to comply with the Act. Furthermore, the University believes that it is in compliance with the Ethics Act, based on advice received from the Office of the Executive Inspector General (“OEIG”), interpretation of the Ethics Act and the University’s efforts to comply with relevant federal and state laws.

All Southern Illinois University employees are subject to SIU policies. After reviewing the University’s policies, it is clear that employees are required to report their time as required by the Ethics Act. For example, at SIUC, the policy states:

Each time an employee finds it necessary to be absent during a scheduled work period, a report explaining the absence should be filed with the department. Except for emergencies, the use of vacation should be submitted for approval in advance. When an absence is due to illness or injury, a properly completed absence form should be presented to the department on the day the employee returns to work. If benefit time is not or cannot be used to compensate an employee, the employee will not be paid for the absence. Documentation pertaining to employee absences should be retained by the department for a minimum of three years.

As reported in 2005, University employees have a scheduled work period during which they are required to be at work and engaged in their duties as University employees. Any absences from the scheduled work period must be reported on University approved forms and in accordance with the policy quoted above. If the employee is not present during his/her scheduled work period, then he/she must report the absence. Further, employees are subject to discipline for violating work duties. In fact, the University’s policy provides greater reporting requirements than those specified in the Ethics Act because employees are required to report any and all absences from their scheduled work period rather than absences in fifteen minute increments.

Further, upon enactment of the State Officials and Employees Ethics Act, the University, along with other public institutions of higher education, met with the previous Executive Inspector General, Z. Scott, to discuss the Universities’ requirements under the Ethics Act. During that meeting, the Universities questioned whether their current practice of time reporting satisfied the requirements of the Ethics Act. The Executive Inspector General indicated that such practices were in compliance with the Ethics Act.

Notwithstanding the change in personnel related to the position of the Executive Inspector General, the University community has not received any change or additional instructions on the issue of time reporting. Based in part on the interpretation by the Agency responsible for enforcement of the Ethics Act, the University has maintained its current system of timekeeping.

In addition, given the guidance that was provided by the Executive Inspector General, the University does not believe that it could unilaterally require members of the bargaining units to maintain time sheets in the fifteen minute increment as indicated by the Auditor General without first bargaining the issue. The University believes that making a unilateral change would expose it to an unfair labor practice charge without a sound legal basis to defend its actions.

To summarize, Southern Illinois University’s current timekeeping policies and procedures, as approved by the OEIG, meet the intent of the Ethics Act and do so in a more efficient and cost-effective manner than the procedures specified by this finding. Finally, the University believes that requiring a change for represented employees would potentially violate the current collective bargaining agreements and would result in unnecessary and additional administrative burdens for both represented and non-represented employees.