REPORT DIGEST

ILLINOIS STATE UNIVERSITY FOUNDATION

COMPLIANCE EXAMINATION

For the Two Years Ended

June 30, 2006

Summary of Findings:

Total this audit                       1

Total last audit                       2

Repeated from last audit        1

Release Date:

 March 29, 2007

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 and Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

·        The Foundation and University Athletic Department did not properly control pre-numbered raffle tickets.

FINANCIAL OPERATIONS

FY2006

FY2005

OPERATING REVENUES

Service contract with University.....................................

$260,000

$260,000

    Other Operating Revenues.............................................

60,836

47,090

         Total Operating Revenues.........................................

320,836

307,090

OPERATING EXPENSES

Student Aid, scholarships and awards............................

$1,844,541

$1,396,026

     Expenditures on behalf of ISU departments and programs

3,355,438

3,385,697

Other Operating Expenses.............................................

925,716

862,439

        Total Operating Expenses..........................................

6,125,695

5,644,162

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

($5,804,859)

($5,337,072)

NONOPERATING REVENUES (EXPENSES)

Contributions – gifts and donations................................

$11,169,963

$5,717,834

Interest on capital related debt.......................................

(17,509)

(39,970)

Investment income (loss)...............................................

5,464,006

4,301,005

Expenditures for ISU capital projects.............................

(3,636,069)

(7,296,582)

Other............................................................................

776,942

752,524

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

$13,757,333

$3,434,811

     Income (loss) before additions to permanent endowments.............................................................................

$7,952,474

($1,902,261)

Additions to permanent endowments.............................

$2,112,453

$3,900,171

Increase in net assets...............................................

$10,064,927

$1,997,910

NET ASSETS

Net Assets-beginning of year ........................................

$68,024,475

$66,026,565

Net Assets-end of year.................................................

$78,089,402

$68,024,475

OTHER SIGNIFICANT ACCOUNT BALANCES

AT JUNE 30, 2006

AT JUNE 30, 2005

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

$72,849,633

$61,264,675

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

$79,377,672

$69,224,808

Long-Term liabilities..........................................................

$551,946

$697,040

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

$1,288,270

$1,200,333

Net Assets – Restricted-Nonexpendable............................

$47,640,533

$41,025,261

Net Assets – Restricted-Expendable..................................

$27,419,289

$24,311,808

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

$78,089,402

$68,024,475

MANAGING DIRECTOR

During Audit Period: Dr. Susan Kern (July 1, 2004 to June 30, 2005) Dr. Dianne Ashby (current)

Currently:  Dr. Dianne Ashby

Potential revenue for tickets not accounted for was estimated to be $19,000 and $25,000 for fiscal years 2006 and 2005, respectively

INTRODUCTION

      Our report covers the compliance examination for the two years ended June 30, 2006.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

NEED TO IMPROVE CONTROLS OVER RAFFLE TICKETS

The Foundation and University Athletic Department did not properly control pre-numbered raffle tickets.  The proceeds of the raffle went to the Foundation.

During our testing we noted the Athletic Department held a raffle to benefit athletics during both fiscal year 2006 and 2005.  Approximately 20,100 and 17,600 tickets were distributed for sale for fiscal years 2006 and 2005, respectively.  The individuals selling the tickets were asked to return unsold tickets.  Tickets not accounted for approximated 4,300 and 5,400 for 2006 and 2005, respectively.  The potential revenue for tickets not accounted for was estimated to be $19,000 and $25,000 for fiscal years 2006 and 2005, respectively.  The events generated $34,000 and $38,200 of revenue for the Foundation in fiscal years 2006 and 2005, respectively. 

Failure to adequately control raffle tickets and receipts does not promote accountability.  In addition, purchased tickets could be excluded from the raffle drawing.  (Finding 1, page 10) This finding was first reported in 1998.

We recommended that the Foundation work with the Athletic Department to improve procedures to track and account for pre-numbered raffle tickets.  Further, the Athletic Department should account for all unsold tickets to ensure all funds raised have been properly turned over to the Foundation and included in the raffle drawing.

      Foundation officials stated the raffle is not a function of the Foundation and the Foundation does not run or manage any part of the raffle.  However, since the proceeds of the Athletic Department raffle are deposited with the Foundation, the Foundation will work with Athletics with the goal of Athletics adopting appropriate internal controls associated with the current raffle.  Whether or not a raffle that results in funds deposited to the Foundation will continue beyond fiscal year 2007 will be determined once the current raffle has been completed and evaluated. (For previous Foundation response, see Digest Footnote)

AUDITORS' OPINION

      Our auditors stated the financial statements of the Illinois State University Foundation as of June 30, 2006, and for the year then ended, are fairly presented in all material respects. 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:CML:pp

SPECIAL ASSISTANT AUDITORS

      Our special assistant auditors for this engagement were Nykiel, Carlin & Co.

DIGEST FOOTNOTE

LACK OF CONTROLS OVER PRE-NUMBERED RAFFLE TICKETS – Previous Foundation Response

2004: Accepted.  Foundation officials agreed with our recommendation and stated they will work with the Athletic Department to develop and implement procedures to track pre-numbered raffle tickets including a reconciliation of funds received and unsold tickets.