REPORT DIGEST

GOVERNORS STATE UNIVERSITY

COMPLIANCE EXAMINATION AND SINGLE AUDIT
FOR THE YEAR ENDED JUNE 30, 2017

Release Date:  March 29, 2018

FINDINGS THIS AUDIT:  19

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 0 -- 0
Category 2:  6 -- 13 -- 19
Category 3:  0 -- 0 -- 0
TOTAL:  6 -- 13 -- 19

FINDINGS LAST AUDIT: 20

Category 1: Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State laws
and regulations (material noncompliance).
Category 2: Findings that are significant
deficiencies in internal control and
noncompliance with State laws and
regulations.
Category 3: Findings that have no internal
control issues but are in noncompliance with
State laws and regulations.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park
Plaza, 740 E. Ash Street, Springfield, IL
62703
(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are also
available on the worldwide web at
www.auditor.illinois.gov

INTRODUCTION

This Digest covers our federal Single Audit
and Compliance Examination of the Governors
State University (University) for the year
ended June 30, 2017.  A separate Financial
Audit as of and for the year ended June 30,
2017 was previously released on January 11,
2018.  In total, this report contains 19
findings, none of which were reported in the
financial audit.
SYNOPSIS

• (17-02) The University failed to accurately
report separation dates for Federal Perkins
Loan borrowers.
• (17-03) The University’s Federal Perkins
loan cohort default rate is in excess of the
threshold for administrative capability
stipulated by the U.S. Department of
Education.
• (17-09) The University had inadequate
controls over to its property and equipment.
• (17-12) The University did not maintain
adequate controls over purchasing cards
expenditures.
• (17-13) The University needs to improve
controls over verification of information
included on a job applicant’s resume or
application prior to hiring for a specific
position.
• (17-14) The University did not comply with
the Illinois State Collection Act of 1986.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FEDERAL PERKINS LOAN CONVERSION TO REPAYMENT

The University failed to accurately report
separation dates for Federal Perkins Loan
borrowers.

We tested 25 Federal Perkins Loan recipients
whom the University reported to its loan
servicer as having separated (enrollment
ended) and were due to start repaying loans
during Fiscal Year 2017.  The University
reported inaccurate separation dates to the
loan servicer for 19 (76%) of those
borrowers.  Due to these errors, students
were scheduled to begin repayment anywhere
from 11 months early to 28 months late. In
addition, four of the students were converted
to repayment despite still being enrolled at
least half-time at the University.  (Finding
2, pages 19-20)

We recommended the University improve its
procedures for accurately reporting
separation dates for Perkins Loan borrowers
who have ceased half-time attendance at the
University.

University officials agreed with the finding
and stated they have instituted a process to
correct identified issues.

FEDERAL PERKINS LOAN COHORT DEFAULT RATE TOO
HIGH

The University’s Federal Perkins loan cohort
default rate is in excess of the threshold
for administrative capability stipulated by
the U.S. Department of Education.

The Federal Perkins Loan cohort default rate
as of June 30, 2016 (the default rate data
trails the fiscal year by approximately ten
months) was 15.43%, which exceeded the 15%
threshold, and was obtained from the U.S.
Department of Education’s website.  (Finding
3, pages 21-22)

We recommended the University ensures its
cohort default rate is not in excess of the
threshold for administrative capabilities
stipulated by the U.S. Department of
Education.

University officials agreed with the finding
and stated the University will continue to
explore options to reduce the default rate
and to increase collection efforts.

INADEQUATE CONTROLS OVER PROPERTY AND
EQUIPMENT

The University did not fully comply with the
requirements applicable to its property and
equipment.

During our examination, we noted the
following:

• In August of 2017, the auditors requested
to examine 16 iPads which were issued to
employees during prior fiscal years and had
the wireless cell service cancelled during
the current fiscal year or earlier. We were
unable to examine one iPad (6%) because it
had been stolen while taken off campus in
June of 2016. The employee informed the
University of the theft and provided a copy
of the police report filed when theft
occurred to the University after our audit
inquiry, approximately 14 months after the
theft.

• We tested 156 computers that were sent to
surplus according to the University’s
property control records to determine the
University maintained evidence such computers
had been “wiped” prior to transfer. The
University could not provide any evidence
that eight (5%) of these computers were
cleared of data and software before they were
transferred to surplus. In addition, one of
these computers was subsequently found on the
University campus by Information Technology
personnel even though the records indicate it
had been sent to the State surplus in May of
2017.

• We examined a listing of surplus property
held by the University at June 30, 2017 and
noted three items with a value of over $500
included on the list. One of these items
(exam table) with a reported value of $835
was not included on the University’s property
control records.

• During our examination of the University’s
Agency Report of State Property (C-15), we
noted the University did not report software
totaling $827,822 which was purchased during
the fiscal year.

• We tested 10 equipment additions made
during the year and noted two (20%) items
(digital mixer and fluorometer) did not
include the delivery costs (totaling $129) in
the purchase price of the equipment.

• We tested 25 equipment expenditures and
noted 4 (16%) expenditures in which the cost
of freight and installation charges was not
added to the purchase price of the equipment
in the University’s property control records.
This understated the purchase price of these
items by $2,461.  We also noted one
expenditure which was recorded in the
property control records based upon the
purchase order instead of the actual amount
paid. This overstated the purchase price of
this item by $100.  (Finding 9, pages 33-35)

We recommended the University improve the
operation of its internal controls over the
accountability of University equipment and
compliance with University policies and
procedures for documenting wiping of computer
equipment prior to disposal. We also
recommended the University improve its
internal controls to ensure property and
equipment records are accurate and properly
maintained. Finally, we recommended the
University evaluate whether the employee
should be held financially accountable for
the stolen iPad.

University officials agreed with the finding
and stated they will continue to work on
improving property control processes and
entry/reporting accuracies.

INADEQUATE PURCHASING CARD PROCEDURES

The University did not maintain adequate
controls to ensure University purchasing
cards (P-Card) expenditures are made in
accordance with University’s P-Card
Purchasing Guidelines and other University
procedures.

During Fiscal Year 2017, the University
expanded its P-Card program and made net
purchases totaling $390,007 with its P-Cards.

We reviewed 8 of the 35 Procurement Card
Authorization/Agreements and noted four (50%)
of the cardholder agreements tested were
approved after purchases had already been
made on the P-Card.  The total purchases made
prior to approval were $2,475.

In addition, we tested 40 P-Card transactions
totaling $43,960 and noted the following:

• Six (15%) transactions were for
unauthorized purchases of food ($597).
• One (3%) transaction was for the purchase
of gasoline for a rental car ($16).
• Three (8%) transactions totaling $322
included Illinois sales tax included on the
transaction amount. The total sales tax paid
was $29.
• One (3%) transaction did not include a
detailed receipt for expenditures ($134).
Only a summary receipt was included.
• One (3%) transaction for $610 was included
on the P-Card holder’s monthly transaction
log, but the log was not approved by the
department head or appropriate vice
president.  (Finding 12, pages 38-39)

We recommended the University enhance its
internal controls relative to P-cards and re-
evaluate its P-Card Purchasing Guidelines and
enforce adherence.

University officials agreed with the finding
and stated the University has improved the
training, review and approval process for the
issuance and use of P-Cards.

INADEQUATE CONTROLS OVER VERIFICATION OF JOB
APPLICANT’S INFORMATION

The University did not have adequate controls
over verification of information included on
a job applicant's resume or application prior
to hiring for a specific position.

During our testing of the University's
compliance with its policy and procedures for
verification of information on a job
applicant's resume, we noted no reference
check documentation was on file for all ten
(100%) personnel selected for testing.
(Finding 13, page 40)  This finding has been
repeated since 2014.

We recommended the University improve its
processes to ensure compliance with
University policy and procedures.

University officials agreed with the finding
and stated the University will not move
forward with the hiring process without the
reference check documentation from the hiring
department.  (For the previous University
response, see Digest Footnote #1.)

NONCOMPLIANCE WITH THE ILLINOIS STATE
COLLECTION ACT OF 1986

The University did not comply with the
requirements of the Illinois State Collection
Act of 1986 (Act).

As of December 31, 2016, the University’s
accounts receivable aging report included
2,723 accounts totaling $7,756,004 with
receivable balances greater than $1,000 and
in excess of 90 days past due.  We tested a
sample of 30 such accounts (totaling $80,137)
and determined 18 (60%) of those accounts
(totaling $41,770) had not been submitted by
the University for placement with the
Comptroller’s Offset System.  (Finding 14,
page 41)

We recommended the University improve its
procedures to ensure all debts owed to the
University are placed in the Comptroller's
Offset System once they exceed $1,000 and are
90 days past due.

University officials agreed with the finding
and stated the University expects to be
current by the end of Fiscal Year 2018.

OTHER FINDINGS

The remaining findings are reportedly being
given attention by the University.  We will
review the University’s progress towards the
implementation of our recommendations in our
next engagement.

AUDITOR’S OPINIONS

The financial report was previously released.
The auditors stated the financial statements
of the University as of and for the year
ended June 30, 2017 are fairly stated in all
material respects.

The auditors also conducted a Single Audit of
the University as required by the Uniform
Guidance.   The auditors stated the
University complied, in all material
respects, with the types of compliance
requirements that could have a direct and
material effect on the University’s major
federal programs for the year ended June 30,
2017.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the University for the year
ended June 30, 2017 as required by the
Illinois State Auditing Act.   The auditors
stated the University complied, in all
material respects, with the requirements
described in the report.

This Single Audit and compliance examination
were conducted by Borschnack, Pelletier & Co.

JANE CLARK
Division Director

This report is transmitted in accordance with
Section 3-14 of the Illinois State Auditing
Act.

FRANK J. MAUTINO
Auditor General

FJM:JGR

DIGEST FOOTNOTES

#1 – INADEQUATE CONTROLS OVER VERIFICATION OF
JOB APPLICANT’S INFORMATION

2015 – The University agrees with this
finding and accepts the recommendation. The
University will continue to work with
University units toward compliance with
hiring procedures to ensure that all required
documentation is forwarded to the Human
Resources Department as a part of the hiring
process.