For the Two Years Ended:

June 30, 2003

Total this audit                     2

Total last audit                     1

Repeated from last audit      1

Release Date:

April 20, 2004

State of Illinois

Office of the Auditor General

AUDITOR GENERAL

http://www.state.il.us/auditor

• The Illinois Century Network, a division of the Board, did not identify excess equipment and make it available for transfer.

• The Board has not fully implemented recommendations made in the Management Audit of Tuition and Fee Waivers (April 1998).

EXPENDITURE STATISTICS

FY 2003

FY 2002

FY 2001

$115,710,051

$104,703,809

15%

14%

3%

104

113

61

83%

83%

1%

3%

3%

20%

1%

1%

7%

0%

0%

0%

$39,285,022

$34,646,679

$2,114,756

CASH RECEIPTS

FY 2003

FY 2002

FY 2001

! 9; Federal Grants Fund- 983 …………………….

                Total …………………….……………

$4,818,138

$17,321,091

$5,171,153

EXECUTIVE DIRECTOR

Currently: Dr. Daniel J. LaVista

Universities' waiver programs not yet evaluated

The Illinois Century Network (ICN), a division of the Illinois Board of Higher Education (IBHE), did not identify excess equipment and make it available for transfer as required by the Illinois Procurement Code.

The Illinois Procurement Code (30 ILCS 500/50-55) states that every State agency shall inventory or stock no more than a twelve month need of equipment, supplies, commodities, articles and other items, except as otherwise authorized by the State agency’s regulations. Every State agency shall periodically review its inventory to ensure compliance with this Section. If, upon review, an agency determines it has more than a 12-month supply of any equipment, supplies, commodities, or other items, the agency shall undertake transfers of the oversupplied items or other action necessary to maintain compliance with this Section.

• Telecommunication equipment purchased in Fiscal Year 2000 for the Illinois Century Network by the Illinois State Board of Education in the amount of $2,735,000 was still in storage as of June 30, 2003.

• The equipment noted above had never been placed into service. The stored equipment accounted for $13,716 in annual rental costs and approximately $100,000 in annual maintenance agreements and insurance.

• In February 2003, ICN used a portion of the stored equipment as a trade-in on a pending order. ICN received a trade-in allowance of approximately $228,000 on equipment originally costing $900,000. Although the equipment had never been put into service, depreciation had been taken on the equipment of approximately $484,500, resulting in an accounting loss of approximately $187,500.

By purchasing a stock of equipment beyond a year’s supply, the ICN is paying unnecessary storage, maintenance, and insurance costs. Due to the nature of the equipment, the ICN is facing a likely loss on trade-in due to the equipment becoming obsolete or outdated before being put into service.

We recommended that ICN personnel identify and transfer excess equipment timely as required by the Illinois Procurement Code. (Finding 1, pages 10-12)

IBHE officials agreed with our finding and are in the process of implementing the recommendation.

The Illinois Board of Higher Education (IBHE) has fully implemented one of the three recommendations made in the Management Audit of Tuition and Fee Waivers (April 1998) and partially implemented the other two recommendations identified below:

• The second recommendation in the management audit to the IBHE stated that the IBHE should update its regulations to reflect its current three percent waiver limit. The IBHE had not established the three percent limit on undergraduate institutional tuition waivers in regulations, as required by State law; rather, IBHE regulations contained an outdated (1988) policy which limits tuition waivers to two percent of fall full-time enrollment.

• The third management audit recommendation was that the IBHE provide more guidance to universities and evaluate waiver programs. The IBHE has provided more guidance to universities in its 1999 Guidelines but has not evaluated waiver programs. (Finding 2, pages 13-15)

We recommended the IBHE fully implement all the recommendations made three years ago in the Management Audit of Tuition and Fee Waivers.

IBHE officials agreed with our recommendation and stated that the staff work plan for this year has been adjusted to ensure revisions to administrative rules are filed to change the tuition waiver limit, and the evaluation of waiver programs is completed.

Responses were provided by Peggy Podlasek, Board Fiscal Officer.

____________________________________

WILLIAM G. HOLLAND, Auditor General

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