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Failure to maintain
supporting documentation Questioned costs
totaling $13,702 Need to improve
property control records
University agrees
with auditors $1,519,500 of
expenditures contained no evidence of bidding
$58,359 of
expenditures contained no evidence of bidding
$1,596,637 of
expenditures contained no evidence of bidding
$1,309,692 of
expenditures contained no evidence of bidding
University agrees
with auditors
Competitive
procurement regulations not followed Cash draw-downs
exceeded the quoted cost by $76,894 $39,650 cash
drawn-down pertained to another program
University agrees
with auditors
No evidence of
competitive bids for 5 contracts totaling $679,927
One contract for
$251,000 was with an employee of the University
18 of 26 contracts
tested were executed after the date that services commenced
4 contracts
exceeding $250,000 each were not approved by the Board of Trustees
University agrees
with auditors Credit card charges
were not always supported
Payment
documentation did not identify any specific business purpose
Lack of receipts
University accepted
the recommendation
Some outstanding
checks were issued over 10 years ago University agrees
with auditors
Reconciliations for the first 5 months were not performed until December 2006 University agrees
with auditors
Inadequate controls
over property and equipment records Several items
observed were not on the property list Items could not be
located
Financial Statement
adjustments needed as a result of auditor testing
Several items
tested totaling $229,556 were missing on the DCMS list
Annual
Certification of Inventory submitted 7 months late
University agrees
with auditors |
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS INADEQUATE DOCUMENTATION FOR FEDERAL PROGRAM EXPENDITURES
The University did
not have supporting documentation and proper approvals for certain
expenditures charged to Federal programs.
Specifically, the University charged lodging and per diem rates in
excess of rates allowed by State travel regulations. Further, certain equipment purchased with
Federal funds had not been properly recorded in University property control
records. Some
of the items noted during our review of federal programs follow: ·
Eleven of
seventy-seven (14%) expenditures ($48,966) tested for the U.S. Department of
Education – Trio Cluster, were missing appropriate supporting
documentation. ·
One of forty-one
(2%) expenditures ($29,598) tested for the U.S. Agency for International
Development – Textbook and Learning Materials, included $13,702 of
promotional items that were incorrectly charged to the program. ·
Three of
forty-one (7%) expenditures ($366,943) tested for furniture and equipment
were not properly recorded or tracked in the University’s property control
records. (Finding 5, Pages 14-16) This finding was first reported in 2003. We recommended that the University
improve control procedures to ensure that payments are only made once a
proper invoice with appropriate documentation and approval is received. In addition, we recommended that the
University maintain a filing system that allows them to locate supporting
documentation (including documentation of the necessity for any non-standard
travel costs) for all invoices paid and to ensure proper tracking and
accounting of property expenditures. University
officials accepted our recommendation and stated that they will develop
policies and procedures to ensure that payments are made only when a proper
invoice and appropriate documentation and approval is received. (For the previous University response, see
Digest footnote #1.) GRANT EXPENDITURES NOT PROPERLY BID
The University’s
procurement policies have requirements for competitive bidding; however no
evidence of competitive bidding was noted during testing of Federal
transactions. During our audit of major federal
programs in compliance with OMB Circular A-133 we noted the following: ·
In our expenditure testing of the U.S. Department of Health and Human
Services – Head Start Program we tested 52 expenditures totaling
$1,574,760. We noted that 7 (13%)
expenditures totaling $1,519,500 were over the small purchase threshold of
$25,000 and contained no evidence of bidding. ·
In our expenditure testing of the U.S. Department of Education - Trio
Cluster we tested 77 expenditures totaling $263,820. We noted that 2 (3%)
expenditures totaling $58,359 were over the small purchase threshold of
$25,000 and contained no evidence of bidding. ·
In our expenditure testing of the National Institutes of Health,
National Science Foundation and the Department of Defense - Research Cluster
we tested 67 expenditures totaling $1,742,176. We noted that 11 (16%) expenditures totaling $1,596,637 were
over the small purchase threshold of $25,000 and contained no evidence of
bidding. ·
In our expenditure testing of
the U.S. Agency for International Development – Textbook and Learning
Materials Program we tested 41 expenditures totaling $1,513,680. We noted that 17 (41%) expenditures
totaling $1,309,692 were over the small purchase threshold of $25,000 and
contained no evidence of bidding. accordance (Finding 6, Pages 17-18) We recommended that
the University improve its policies and procedures to ensure that purchases
made with grant funds are competitively bid. University officials agree with the recommendation and stated that they
will provide training for fiscal officers and program directors to refresh
their understanding of University bidding requirements, especially as those
policies relate to grants. FAILURE TO COMPLY WITH CASH
MANAGEMENT REQUIREMENTS The University failed to comply with cash management requirements. During our testing of the U.S. Agency for International Development –
Textbook and Learning Materials Program we noted that the University
purchased equipment for this program and then subsequently determined that
competitive procurement regulations were not followed and that the equipment
could have been purchased for a lesser amount. As a result of a review of other vendor quotes, University officials
determined that the acquisition cost exceeded the quoted cost by
$76,894. The University had
drawn-down the funds at the time of purchase and then subsequently adjusted
its Federal drawdown to reduce the equipment expenditures of the
program. However, this resulted in the
University drawing down Federal funds in excess of a reasonable amount had
the University competitively procured the purchase. During our testing of the U.S. Department of Education – Federal
Academic Competitiveness Grants we noted that the University had expenditures
of $43,300 for this grant. However,
the University had cash draw-downs of $82,950 under this program for the year
ended June 30, 2007. The draw-downs
exceeded expenditures as the University erroneously requested reimbursement
for monies, in the amount of $39,650, spent under another grant program. (Finding 8, Pages 21-22) We recommended that the University establish policies and procedures to
ensure that cash management requirements are met. University officials accepted the recommendation and stated that they
will establish an internal review process for grant billings in an effort to
uncover any errors in the grant billing process. NEED TO IMPROVE CONTROLS OVER
CONTRACTING The University did not have adequate controls over contracting
procedures. During the audit, we noted numerous deficiencies in our examination of
26 contracts. Some of these
significant deficiencies are as follows: ·
Five contract files for goods and services that exceeded professional
and artistic procurement maximums ($20,000) and small purchase amounts
($30,500) did not contain evidence of attempts to request competitive
bids. These contracts totaled
$679,927. One of these contracts for
$251,000 was with an employee of the University, who failed to disclose any
conflict of interest. ·
Eighteen contracts tested, totaling $2,043,222, were dated and signed
by a University official and the vendors however, the date of the signatures
was after the date of the commencement of services for the contract. ·
Two of the contracts on file at the University did not contain vendor
signatures. These contracts were for
services totaling $275,163. ·
Four contracts, each exceeding $250,000 for goods and services, were
not approved by the University Board of Trustees. ·
One University employee was paid $12,000 on a consulting contract after
he had become a full time faculty member. (Finding 9, Pages 23-24) We recommended that the University establish internal controls to
ensure compliance with the Illinois Procurement Code, SAMS Manual, University
policies and procedures and to ensure that contracts are fully executed prior
to commencement. University officials agreed with the recommendation and stated that
they now have annual training for all fiscal officers to review and explain
the University’s procurement policies and to reinforce universal application
of the policy to all areas of University’s operations. NEED TO IMPROVE CONTROLS OVER
EMPLOYEE TRAVEL AND USE OF UNIVERSITY CREDIT CARD The University did not always follow travel policies issued by the
Illinois Higher Education Travel Control Board and Property Control Rules
issued by the Department of Central Management Services. We also noted numerous charges to the
University credit card that were not supported by appropriate receipts or
documentation. During our testing of University credit card expenditures and employee
travel documents some of the items we found are as follows: ·
Five charges for meals and entertainment expenses totaling $1,095 were
paid without documentation supporting the specific business purpose. ·
A number of restaurant charges totaling $538 were not supported by a
receipt or documentation identifying any specific business purpose for the
expenditure. In addition, four
airline ticket charges, totaling $1,489, were not documented by receipts or
specific business purpose. ·
Six charges for gasoline, hotel and entertainment expenditures were
paid by the University and should have been expenses reimbursed by the
Chicago State University Foundation.
The total of these expenditures were $778. ·
A direct payment voucher in the amount of $34 was also paid on a credit
card. Therefore, the University paid
twice for the same meal. ·
Four charges on the credit card totaling $207, for purchases for the
President’s residence, were not documented by receipts and therefore the
items purchased could not be determined. After bringing these matters to the University’s attention, the
University provided some of the meeting purposes and itineraries; however,
this documentation was not presented with the charge card expenses submitted
for payment by the University. (Finding 11, Pages 27-28) We recommended that the University implement procedures to ensure
compliance and require all employees to adhere to regulations established by
the Higher Education Travel Control Board and Travel Regulation Council. We further recommended that the University
recoup the overpayments. University officials accepted the recommendation and stated that they
will instigate a second review process for credit card expenditures to
monitor the completeness of the documentation for the expenditures. FAILURE TO
MONITOR COMPLIANCE WITH UNCLAIMED PROPERTY ACT The University did not have procedures in place to periodically monitor
unclaimed monies to determine proper and timely disposition of the funds in
compliance with the Act. During our audit we noted that the University had three accounts
included in the accounts payable balance that solely contained stale
checks. There was no evidence that
checks in these accounts had been periodically reviewed to determine the
status or proper disposition. Some of
these checks were issued over ten years ago.
The Uniform Disposition of Unclaimed Property Act (765 ILCS 1025/11(a))
states that every person holding funds or other property, tangible or
intangible, presumed abandoned under this Act shall report and remit all
abandoned property specified in the report to the State Treasurer with
respect to the property as hereinafter provided. According to the Act (765 ILCS 102/8.1(a)), all tangible personal
property or intangible personal property and all debts owed or entrusted
funds or other property held by any federal, state or local government or
governmental subdivision, agency, entity, officer or appointee thereof, shall
be presumed abandoned if the property has remained unclaimed for 7 years.
(Finding 12, Page 29) We recommended that the University establish appropriate procedures for
stale checks and comply with the Act.
University officials agreed with the recommendation and stated that
they have created a task force to review outstanding stale checks and
determine their proper disposition. UNTIMELY RECONCILIATION OF
AGENCY’S RECORDS TO THE COMPTROLLER’S MONTHLY REPORTS The University did not perform timely reconciliations of University’s
records to the Office of the State Comptroller. During our audit we noted that the reconciliations between the
University’s expenditures and the Office of the State Comptroller’s Monthly
Appropriation Status Report for the first five (42%) months of the fiscal
year were not performed until December of 2006. And the reconciliations for two (16%) of the remaining seven
months were each performed one month late.
(Finding 14, Page 32) We recommended that the University comply with SAMS and perform monthly
reconciliations in a timely manner. University officials agreed with the recommendation and stated that
they will take the necessary steps to hire additional staff, which will
facilitate the timely performance of reconciliations. NEED TO IMPROVE CONTROLS OVER
PROPERTY AND EQUIPMENT RECORDS The University had inadequate controls over its property and equipment
records. We toured the University campus and judgmentally selected 25 items for
review. After confirming the existence
of the item we tried to trace it to the property control list maintained by
the University. The list provided to
us by the University is the same one the University provides to the
Department of Central Management Services (DCMS) for property items with a
cost of $500 or more. Further, the
University, pursuant to its capitalization threshold for financial statement
reporting purposes, maintains a listing of property and equipment for items
in excess of $5,000. In performing our testing of University equipment, we found the
following:
· Of the 25 items that we observed, 14 items (56%) were not on the property control list. · Three items observed, with a total cost of $16,369 (two copiers and a computer) were not on the property listing as provided to the Department of Central Management Services, however these were included on the University’s property control records used for financial statement reporting purposes.
We judgmentally selected 50 items from the University’s property control listing and attempted to locate these items. Some of the exceptions we noted are as follows:
· One item (2%) on the property listing could not be located with a total cost of $1,832. This item did not have a description. In addition, another item (ceramic stirrer) (2%) on the property control listing did not have a cost and did not have a location code of the listing. · Six items (12%) were assigned tag number however they did not have tags affixed. These items totaled $99,129. In addition, 9 items (18%) totaling $16,217 did not have tags affixed and were not on the property listing. · One item (2%), a laptop costing $891, could not be located. This had been loaned to a student however the University could not provide us with the documentation.
Additionally, one item was listed on the property control records for financial reporting purposes for a value of $521,089 greater than on the property listing. It was determined that the value of the records for financial reporting purposes was incorrect and resulted in an adjustment of $521,089 to assets, and $264,887 to depreciation expense.
As a result of the exceptions noted the auditors performed additional testing of the two different property control listings maintained by the University. We judgmentally selected 25 items from the property control listing used for financial statement reporting purposes and tried to locate those items on the property control listing used for DCMS reporting purposes. Ten items (40%) totaling $229,556 could not be found on the DCMS list.
The Annual Certification of Inventory submitted to the Department of Central Management Services for the period ended March 31, 2007 was submitted by the University on February 6, 2008. This report was due on July 2, 2007. The University had requested three extensions subsequent to July 2007, with the last requesting an extension until January 14, 2008. (Finding 18, Pages 36-38) This finding was first reported in 1997.
We recommended that the University adhere to its procedures to ensure that the property and equipment records are properly maintained and accounted for.
University officials agreed with the recommendation and stated that they realize the need to continue to improve controls and procedures over equipment. (For the previous University response, see Digest footnote #2.)
OTHER FINDINGS
The remaining findings are reportedly being given attention by University management. We will review the University’s progress toward implementation of our recommendations in our next examination.
AUDITORS’ OPINION
The financial audit report was previously released. Our auditors stated the June 30, 2007 financial statements were fairly presented in all material respects.
___________________________________ WILLIAM G. HOLLAND, Auditor General
WGH:TLK:pp
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this audit were DeRaimo Hillger & Ripp.
DIGEST FOOTNOTE
#1 INADEQUATE SUPPORTING DOCUMENTATION FOR FEDERAL EXPENDITURES - Previous University Response We agree with the recommendation. The University had established control procedures to ensure that prepaid costs are subsequently compared to final actual invoices to ensure prepayments were proper. The University will develop procedures to ensure compliance with travel guidelines and exceptions properly explained and submitted to the Travel Control Board, where necessary. The vehicle was included on the schedule of Property and Equipment supporting the fixed assets reported on its financial statements. The University will arrange to reimburse the Department of Health and Human Services for these loans.
#2 INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT RECORDS - Previous University Response We agree with the recommendation. The University continues its efforts to improve controls and procedures over equipment. The item (a metal filing cabinet) was reported by the Fiscal Officer to Property Control as scrap and appropriately removed from the Property Module. However, the item was retained by another department for storage until they purchased a replacement. The University plans to appeal to the Illinois Comptroller’ Office to change its procedures pertaining to reporting of CDB transfers. The current accounting systems utilized by the state agencies and universities allow recording such transfers in the quarter they belong. |
