REPORT DIGEST

GOVERNORS STATE UNIVERSITY FOUNDATION

FINANCIAL AUDIT

For the One Year Ended:

June 30, 2004

Summary of Findings:

Total this audit                       1

Total last audit                       1

Repeated from last audit        0

 Release Date:

January 27, 2005

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

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 is also available on

the worldwide web at

www.auditor.illinois.gov

SYNOPSIS

¨      The Foundation did not properly interpret and apply Government Accounting Standards Board (GASB) Statement No. 33 Accounting and Financial Reporting for Nonexchange Transactions.

FINANCIAL OPERATIONS (ALL FUNDS)

FY 2004

FY 2003

(Restated)

REVENUES

      Operating revenues......................................................

EXPENSES

      Operating expenses.....................................................

            Operating loss.......................................................

NONOPERATING REVENUES (EXPENSES)

      Contributions...............................................................

      Investment income ......................................................

      Net nonoperating revenues...........................................

      Loss before other revenues, expenses,

      gains and losses...........................................................

      Total other revenues or (expenses)...............................

      Decrease in net assets..................................................

NET ASSETS

      Net assets-beginning of year........................................

      Net assets-end of year.................................................

$37,331

$242,637

($205,306)

$118,938

   57,572

$176,510

($28,796)

$16,713

($12,083)

$2,062,329

$2,050,246

$63,374

$303,449

($240,075)

$163,701

   17,535

$181,236

($58,839)

($7,035)

($65,874)

$2,128,203

$2,062,329

 OTHER SIGNIFICANT ACCOUNT BALANCES

AT JUNE 30,

2004

AT JUNE 30,

2003 (Restated)

Cash and Investments........................................................

Capital assets....................................................................

Accounts Receivable.........................................................

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

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

Net Assets

        Invested in capital assets.............................................

       Restricted Nonexpendable..........................................

       Restricted Expendable................................................

       Unrestricted................................................................

       Total Net Assets.........................................................

$ 987,671

1,117,851

                 0

$ 2,105,522

$55,276

$1,117,851

681,842

256,135

      (5,582)

$2,050,246

$ 945,847

1,117,851

          3,274

$ 2,066,972

$4,643  

$1,117,851

663,437

278,353

        2,688

$2,062,329

FOUNDATION CHIEF EXECUTIVE OFFICER

During Audit Period: Vacant (7/01/03 to 1/31/04), Dr. James Britt (2/01/04 to 6/30/04)

Currently: Dr. James Britt

The Foundation reported a prior period adjustment in the amount of $171,733

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES NOT PROPERLY APPLIED

     Governors State University Foundation (Foundation) did not properly interpret and apply Government Accounting Standards Board Statement No. 33 entitled, "Accounting and Financial Reporting for Nonexchange Transactions".

     During our review of grant documents we noted that the agreements did not stipulate that the Foundation must first incur allowable costs in order to qualify for the resources (an eligibility requirement).  Therefore, upon award of the grant and the beginning of the period of availability, the Foundation had met the eligibility requirements for these voluntary nonexchange transactions.  After we brought this to the attention of management, they recorded and reported a prior period adjustment in the amount of $171,733 and restated the prior year comparative information in the accompanying financial statements and management discussion and analysis to correct this error.

     Foundation management indicated that they believed they were not required to recognize the revenue until the applicable expenditures were made from the grant program.

     We recommended the Foundation improve its system for identifying eligibility requirements for voluntary nonexchange transactions and properly account for such transactions in accordance with generally accepted accounting principles.  (Finding 1, page 8)

     Foundation management accepted the finding and stated that they will implement the suggested changes.

     Foundation responses were provided by Dr. James Britt, Chief Executive Officer.

AUDITORS’ OPINION

     Our auditors stated the financial statements of Governors State University Foundation as of June 30, 2004 and for the year then ended are fairly presented in all material respects.

_______________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:TLK:pp

SPECIAL ASSISTANT AUDITORS

     Our special assistant auditors on this audit were Nykiel Carlin & Co., LTD.