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INTRODUCTION
Prairieland Energy, Inc. is an Illinois corporation formed
and wholly owned by the Board of Trustees of the University of Illinois. Prairieland was formed November 19, 1996
for the purpose of producing, acquiring and selling various forms of energy
for the University and other customers.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INADEQUATE SALES AND
ACCOUNTS RECEIVABLE RECORDS
The Company did not have adequate accounting
records of sales and accounts receivable related to sales of energy to
private individuals and companies.
Prairieland Energy entered into agreements with
several private individuals and companies to provide electricity, steam and
chilled water starting in October 2004.
The Company maintains its accounting records on a cash basis and used
an informal excel spreadsheet to track the activity related to these energy
sales. The Company did not have an accounts receivable subsidiary ledger that
kept track of amounts owed to the Company for energy sales. Energy sales were
recorded based on deposits reflected on the Company bank statements and not
based on a detailed sales or cash receipts journal. (Finding 1, page 9)
We recommended the Company maintain its accounting records
on the accrual basis and establish an accounts receivable subsidiary ledger,
sales journal, and cash receipts journal.
The Company acknowledged the need to have adequate
accounting records for its activities and stated that they are in the process
of converting accounting processes to an accrual basis and will establish the
appropriate ledgers and journals for FY 2007.
TIME SHEETS NOT REQUIRED
The Company 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 sheet 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 company has not
incorporated these policies into the Company’s policies.
We noted the Company’s employee, who was paid a salary, did
not submit time sheets in compliance with the Act.
Company personnel stated they were not aware this was a
requirement for this University subsidiary. (Finding 2, Page 10)
We recommended that the Company amend its policies to
require all employees to submit time sheets in compliance with the Act.
The Company stated that they will monitor the University’s
progress, coordinate with the University on any proposed solution(s), and
determine what additional actions the Company may be required to take to
comply with the Act.
USE OF UNIVERSITY RESOURCES
The
Company used University of Illinois facilities, assets, services, and
resources without consideration paid to the University. The University and the Company were not
tracking the expenses incurred by the University on behalf of the Company
until it was brought to their attention as a result of the audit. In addition, the transactions were not
initially recorded on the financial statements of the Company.
The Company was formed on November 19, 1996 and is a
component unit of the University of Illinois. The Company is recognized by the University as a University
Related Organization (URO) pursuant to a contract between the University and
the Company.
During the year ended June 30, 2006 the Company received
legal services and management oversight for which the University failed to
bill the Company or to charge the cost of these expenses to the Company’s
ledger account. As a result, the
Company did not provide any consideration to the University for these
resources provided by the University.
Total resources used for the year ended June 30, 2006 were estimated
to be $20,510. This amount was
subsequently recorded on the Company’s Statement of Revenues, Expenses and
Changes in Net Assets as revenue and as an expense.
University Guidelines adopted November 30, 1982, (as
amended September 10, 1997) by the Legislative Audit Commission, Section VI,
University Related Organizations, Subsection E: Use of University Facilities
state that the University may allow the University Related Organization to
use University facilities, assets, services, and resources provided that such
use is supported by consideration at rates charged other University users, if
such charges are regularly made, or at the cost of furnishing such services
if no internal charges are in existence.
Further, Subsection F, requires that the University budget
processes or the contract will expressly identify all support provided the
URO. Revenue accounts will be
maintained to identify all payments received from the URO for repayment of
funds advanced and as reimbursement for the use of university assets,
facilities or services. If the URO
maintains separate financial records, companion entries will, of course,
appear in these records as well.
Company personnel stated they felt the use of University
resources was covered in the lease agreement currently in place. The Company was not aware that a specific
accounting of each service was required beyond the existing lease provisions.
(Finding 3, Pages 11-12)
We recommended that the Company work with the University to
establish a system for tracking the use of University resources and that
appropriate amounts be recorded on the Company’s financial statements.
Company personnel stated that they will monitor and track
University resource use and account for it more directly in FY 2007.
AUDITORS’ OPINION
Our
financial audit for the year ended June 30, 2006 was previously issued.
Our auditors stated the Corporation’s June 30,
2006 financial statements are fairly presented in all material respects.
____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:TLK:pp
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors were Clifton
Gunderson LLP.
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