|
INTRODUCTION
Our 2006 financial audit, single audit, and State compliance
examination of the University of Illinois are presented in three
reports. The financial audit consists
of one report which include the various financial statements of the
University. The financial audit has
been previously released. The Single
Audit and Compliance Examination contains 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
INAPPROPRIATE CHARGES PAID BY THE UNIVERSITY
The Chicago Campus paid vouchers with inappropriate
charges. According to the University,
fictitious documents were prepared by 2 employees to collect incentives paid
to human test subjects. The employees also allegedly claimed mileage expenses
for travel not associated with the project.
Also, one of the employees allegedly used University P-Cards for
personal expenditures. The charges
and expenditures were incurred from November 2004 through September 2005.
The University was alerted to accounting
irregularities by a University employee and an internal investigation was
conducted. This investigation
concluded that two employees were creating documents for fictitious participants
of a research study and disbursed participant incentives to themselves for
personal gain. According to the
University, the employees also made up fictitious locations for these
participants so that they could receive mileage reimbursements for personal
gain. The internal investigation also
concluded that the one employee was using a University P-Card for personal
expenses including lunches, taxis, and gasoline. According to the University, the total inappropriate charges for
this activity were $13,124; of this amount, $11,099 was paid with Federal
grant funds.
The
University of Illinois Chicago Police Department arrested one employee on
March 8, 2006, and the other employee on May 31, 2006. Neither employee works for the University
at this time. One employee has been
convicted on felony theft and ordered to pay $12,134 in restitution to the
University. The University has not
yet repaid the federal agency for the $11,099 in federal questioned costs.
(Finding 1, pages 10-11)
We
recommended the University continue its communication with the federal
cognizant agency regarding the return of all questioned costs as well as
review its internal controls and segregation of duties.
University
officials stated that communication with the federal cognizant agency is
ongoing and that a comprehensive corrective action plan has been implemented
to increase the level of internal control and provide for the necessary
segregation of duties.
NEED TO IMPROVE INTERNAL CONTROLS AT THE TESTING CENTER
The Testing Center at the Urbana Campus had inadequate
internal controls in place pertaining to examinations administered and
revenues collected.
The Testing Center administers examinations for both the
University and for third parties. The
Testing Center provides proctors for the tests. These proctors are University employees. When tests are administered for third
parties, the University is compensated by the third party based upon the
number of tests administered.
During fiscal year 2006, the University testing records
reflected revenues totaling $54,083 from computer-based testing and 2,196
examinations administered. All of the
examinations in fiscal year 2006 were administered for third parties.
The third party billing system allowed a University employee
to receive direct payments, payable to an individual proctor, in addition to
payments to the University. Although
the individual proctors made periodic reports on tests administered and
revenues collected, no controls were in place to ensure the revenues due the
University reconciled to the reports from third parties. This was a
significant internal control weakness.
During our audit period, the new Director of the testing
center discovered that the amounts reported to a third party as due the
University were not the same as the fees due the University for the number of
tests administered. University
officials indicate that revenues of approximately $90,000 may have been lost
over a three-year period due to inadequate reconciliations and the lack of
segregation of duties. (Finding 3,
pages 15-16)
We recommended the University review the segregation of
duties surrounding the payments of proctoring exams and determine if duties
are properly segregated. Also, the
University should establish formal procedures for appropriate revenue
reconciliations to be performed on a timely basis and steps should be taken
to address the matter of restitution to the University from the former
employee.
University officials accepted our recommendation and stated
that written procedures have now been put in place. These procedures: 1)
provide for the proper segregation of duties; and 2) ensure that appropriate
revenue reconciliations are performed.
Further, the University is pursuing restitution from the former
employee through the appropriate legal channels.
CONTRACTS AND REAL ESTATE LEASES NOT FILED TIMELY
Contracts and real estate leases were not
filed with the Illinois Office of the State Comptroller on a timely basis.
Our testing of 37 contracts and real estate leases revealed
that 18 (49%) were not filed timely with the Office of the State
Comptroller. The late filings ranged
from 2 to 182 days late.
The Illinois Procurement Code (30 ILCS 500/20-80(b)) and the
Statewide Accounting Management System (Procedure 15.10.40) require State
agencies to file contracts for professional and artistic services exceeding
$5,000 and all other contracts leases exceeding $10,000 with the State Comptroller within 15 calendar days
after execution. (Finding 5, page 18)
This finding was first reported in 2004.
We recommended the University revise its procedures to ensure
all contracts and real estate leases are filed with the Office of the State
Comptroller in accordance with State statutes and guidelines.
University officials accepted our finding and
recommendation. (For the previous
agency response, see Digest footnote #1.)
TIME SHEETS NOT REQUIRED
The University did not require all employees to submit time
sheets as required by the State Officials and Employees Ethics Act (Act).
The Act required the Illinois Board of Higher Education
(IBHE), with respect to State employees of public universities, to adopt and
implement personnel policies. The Act
(5 ILCS 430/5-5(c)) states, “The policies shall require State employees to
periodically submit time sheets documenting the time spent each day on
official State business to the nearest quarter hour; contractual State
employees may satisfy the time sheets requirement by complying with the terms
of their contract, which shall provide for a means of compliance with this
requirement.” The IBHE adopted
personnel policies for public universities on February 3, 2004 in accordance
with the Act. The University has not
incorporated these policies into the Universities policies.
During the current year, we selected 25 employees across all
three campuses and noted that 14 did not file timesheets in compliance with
the Act. Based upon inquiry of
University management employees classified as board members, faculty, and
academic professionals generally track their time using a “negative”
timekeeping system whereby the employee is assumed to be working unless noted
otherwise. (Finding 6, pages 19-20)
We recommended the University amend its policies to require
all employees to submit time sheets in compliance with the Act.
University officials acknowledged the requirements of the Act
and stated that they are currently reviewing University wide personnel
policies and department, college and campus procedures to determine what
changes and additions would be required to comply with the Act.
REAL ESTATE LEASES NOT IN ACCORDANCE WITH GUIDELINES
Real estate leases were not in accordance with guidelines of
the Illinois Office of the State Comptroller.
We examined 25 real estate leases from all areas of the
University. Some of the items noted
in our testing follow:
·
5 leases were executed after the lease term
began. The lease executions ranged
from 14 days to 173 days late.
·
7 leases included Real Estate Disclosure Forms which
were signed after the lease term began.
The late disclosure forms ranged from 2 days to 177 days late.
·
1 lease for a freestanding building did not contain
an option to purchase the building or documentation that a purchase option
was not feasible or in the State’s best interest. (Finding 7, pages 21-22)
This finding was first reported in 2003.
We recommended the University improve its procedures to
ensure all leases are completed, approved, and executed prior to the start of
the lease term. Further, the
University should implement uniform procedures to ensure all appropriate
clauses and certifications are obtained prior to execution for all real
estate lease agreements.
University officials accepted our recommendation and stated
that they have invested substantial efforts to improve their procedures and
that they now utilize standard lease templates to ensure all appropriate
clauses and certifications are included in all real estate lease agreements.
(For the previous agency response, see Digest footnote #2.)
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 report which has previously been released
contains four sets of financial statements in the Annual Financial Report;
and the revenue bond financial statements of the Auxiliary Facilities
System, the Willard Airport Facility, and the Health Services Facilities
System.
Our auditors stated the June 30, 2006 financial statements
are fairly presented in all material respects.
_____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:TLK:pp
SPECIAL ASSISTANT AUDITORS
Clifton Gunderson LLP were our special assistant auditors.
DIGEST FOOTNOTES
#1 Contracts and Real Estate Leases
Not Filed Timely – Previous University Response
Partially
accepted. We agree that the
University failed to file four (4) contracts with the Office of the
Comptroller due to an oversight.
Eighteen (18) contracts were filed in accordance with historical
procedures used at the University (on the Start date of the contract versus
the Execution date). Based on an
audit finding for FY2004, these procedures have now been changed for filing
to occur within 15 days of Execution date in order to comply with State
statutes and guidelines. Three (3)
purchase orders were not filed with the Office of the Comptroller because the
University has never filed purchase orders unless accompanied by a separate
contract agreement. These purchase
orders did not have separate contract agreements. This interpretation of “contract” as it relates to filing
requirements is currently under review.
One (1) land acquisition contract was not filed with the Office of the
Comptroller because it is the understanding of the University that land
acquisition contracts are not subject to filing requirements.
#2 Real Estate Leases Not In
Accordance With Guidelines – Previous University Response
Accepted. The University reviewed its clauses and certifications to
ensure they are up-to-date and will incorporate them into all new leases or
renewals. Efforts are ongoing to
enhance procedures to ensure compliance.
Further, University will ensure that all real estate leases in excess
of $10,000 have been filed with the Comptroller’s Office in accordance with
State guidelines and that all leases are filed with the Secretary of State’s
Office within the required 15-day deadline.
|
