REPORT DIGEST

 

NORTHEASTERN ILLINOIS UNIVERSITY

 

 COMPLIANCE EXAMINATION

(In accordance with the
Single Audit Act and OMB Circular A-133)

For the Year Ended:

June 30, 2006

 

Summary of Findings:

 

Total this audit                        7

Total last audit                        6

Repeated from last audit         3

 

Release Date:

February 15, 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.state.il.us/auditor

 

 

 

 

 

SYNOPSIS

 

 

¨      The University did not properly record several transactions and, as a result, did not properly apply the appropriate generally accepted accounting principles.

¨      The University did not have adequate controls over its property and equipment.

¨      The University did not require all employees to submit time sheets as required by the State Officials and Employees Ethics Act.

¨      The University did not comply with certain required contracting procedures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Financial Information is summarized on the reverse page.}


 

 

NORTHEASTERN ILLINOIS UNIVERSITY

COMPLIANCE EXAMINATION

For The Year Ended June 30, 2006

 

COMPARATIVE SCHEDULE OF INCOME FUND REVENUES AND EXPENDITURES

FY 2006

FY 2005

 

 Fund balance, beginning of year................................................................

 

    Income fund revenues:

Tuition..............................................................................................

Rental income..................................................................................

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

Miscellaneous.................................................................................

           Total income fund revenues  

    Income fund expenditures:........................................................................

Personal services (including change in accrued compensated

                           absences) .............................................................................

Social security, Medicare, health and life insurance.................

Contractual services......................................................................

Travel...............................................................................................

Commodities....................................................................................

Equipment and library books........................................................

Telecommunications......................................................................

Operation of automotive...............................................................

Awards, grants and matching funds...........................................

Permanent improvements..............................................................

Tuition and fee waivers.................................................................

           Total income expenditures.................................................

Fund balance, end of year.............................................................................

 

 

($8,250,073)

 

 

34,510,585

29,159

379,121

2,033,254

36,952,119

 

 

24,439,203

427,699

5,953,605

163,948

816,350

1,366,926

515,493

16,197

263,408

698,477

2,555,402

37,216,708

($8,514,662)

 

($2,736,772)

 

 

29,810,831

30,333

343,421

501,355

30,685,940

 

 

22,475,453

289,787

7,085,465

153,217

787,216

1,415,550

720,141

9,782

143,576

1,102,729

2,016,325

36,199,241

($8,250,073)

SUPPLEMENTARY INFORMATION (UNAUDITED)

FY 2006

FY 2005

Employment Statistics

        Administration........................................................................................

        Faculty......................................................................................................

        Civil Service.............................................................................................

        Students...................................................................................................

                Total Employees..............................................................................

Selected Activity Measures

Average annual full-time equivalent students...........................................

Full-time equivalent cost per student – Undergraduate...........................

Full-time equivalent cost per student – Graduate.....................................

 

268

431

467

369

1,535

 

8,669

$7,525

$10,340

 

257

436

469

399

1,561

 

8,546

$7,318

$10,214

UNIVERSITY PRESIDENT

        During Audit Period and Currently  Dr. Salme H. Steinberg

 

 



 

 

 

 


               

 

 

 

 

 

 

 

 

 

Original Issue Discount of $94,315 was not deducted from the liability balance

 

 

 

 

 

 

 

Interfund transactions were not eliminated

 

 

 

 

 

 

 

 

 

$62,243 was expensed instead of being recorded to a prepaid expense account

 

 

 

 

 

 

 

 

 

Restoration costs were not capitalized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Equipment items were not tagged

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some items were not included in the Property Listing

 

 

High theft items valued at under $500 were not reported to DCMS

 

 

 

 

 

Items transferred to another agency without required information

 

 

 

 

 

 

 

 

 

Lack of supporting documents

 

 

 

 

 

 

 

 

 


Missing information on off-campus equipment use forms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Computers not found

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Non compliance with State Officials and Employees Ethics Act

 

 

 

 

 

 

 

 

 

 

 

Use of negative time keeping system used by some employees

 

 

 

 

 


Procedures do not require preparation of time sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contracts were not filed with the Comptroller

 

 

 

 

 

Contracts were filed 197 to 539 days late

 

 

 

 

 

 

 

 

Contracts were not approved prior to performance of services

 

 

 

 


Payments to a vendor totaling $130,931 were not advertised in the Illinois Procurement Bulletin

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

FAILURE TO APPLY APPROPRIATE ACCOUNTING PRINCIPLES

 

      The University did not properly record several transactions and, as a result, did not properly apply the appropriate generally accepted accounting principles (GAAP).

     

We noted the following in our audit of the financial statements originally submitted by the University to the Office of the State Comptroller:

 

·        The University issued Certificates of Participation (COP) Series 2006 in the amount of $15,060,000 to finance the acquisition, development and implementation of an Enterprise Resource Planning (ERP) System.  The original issue discount of $94,315 was included as part of debt issuance costs and presented as “deferred charges” instead of a direct deduction from the COP liability balance.

 

·        In fiscal year 2005, the University paid consulting fess of $673,800 for the ERP system from the Income Fund.  The University reimbursed the Income Fund upon receipt of the COP proceeds during the current year by recognizing other operating revenues in the Income Fund and recording other operating expenses in the ERP Project Fund.  In the Statement of Activities, this interfund transaction was not eliminated.

 

·        During the current year, the University paid the maintenance fee for the ERP system totaling $93,365 for the period March 2006 to February 2007.  A portion of the maintenance fee for fiscal year 2007 amounting to $62,243 was expensed during the current year instead of being recorded to a prepaid expense account.  Also, the University made payments subsequent to the fiscal year totaling $347,532 for fixed fee services from July to September 2006 relating to the ERP system and accrued and recorded these as expenses during the current year.

 

·        The University incurred about $2 million of expenses related to the Library fire which included restoration costs totaling $563,004 and demolition and clean-up costs of $1.4 million.  The restoration costs were not capitalized as building costs.

 

      The University subsequently revised the financial statements and submitted revised accounting reports to the Office of the State Comptroller to include the adjustments necessary to apply the appropriate generally accepted accounting principles. (Finding 1, Pages 18-20)

 

      We recommended that the University establish procedures to ensure that transactions which include special terms and reporting be carefully reviewed for proper accounting and recognition of related transactions. 

 

      University officials agreed with the finding and stated they will continue to commit significant staff effort to strengthen its procedures to ensure that proper generally accepted accounting principles are adhered to.

 

INADEQUATE CONTROLS OVER UNIVERSITY PROPERTY AND EQUIPMENT

 

The University did not have adequate controls over its property and equipment.

 

During our physical identification of 110 items in the property records we noted 32 equipment items, with a total value of $73,389, were not tagged with the University decal.

 

In addition, information in the property records for fifty (50) equipment items tested were not updated as follows:

 

·        The tag number affixed for thirty-six (36) items, with a total value of $31,676, did not match the tag number in the property listing.

 

·        Thirteen (13) items, with a total value of $24,570, were found in a different location.

 

·        A projector amounting to $146 was no longer in use but not reported as surplus.

 

During our tracing to the Property Listing of items physically identified, we noted that 20 items were not included in the Property Listing. 

 

In our review of the Property Listing submitted by the University to the Department of Central Management Services (DCMS) on August 1, 2006, we noted that equipment valued under $500 considered as high theft items were not reported.

 

During our review of deletions made during the fiscal year, we also noted the following:

 

·        Some items were transferred to another State agency without reporting the required necessary information.

 

·        Some items were deleted in the property listing before a Property Change Notice was completed.

 

·        A laptop computer was erroneously deleted from the Property Listing.

 

In our detailed testing of 60 equipment vouchers, we noted the following:

 

·        Ten (10) items, with a total value of $11,548, were donated to grant participants, however, no supporting documents were available to evidence the transfer of the items.

 

·        Fifty-nine (59) items with a total value of $52,208, included in the Property Listing were not included in the Inventory of Equipment submitted to DCMS.

 

During our review of University controls over off-campus use of equipment and physical verification of the 30 laptops personally assigned, we noted the following:

 

·        A third of the off-campus equipment use forms had missing information such as signature of actual user, the justification for being off-campus, and the Fiscal Agent’s approval.

 

·        The user name for twelve (12) laptops was not indicated or did not match the username in the Property Listing.

 

·        The tag number affixed on a laptop did not match the tag number in the Property Listing.

 

·        The serial number of a laptop did not match the serial number in the Property Listing. 

 

·        Two (2) laptops tested were not tagged with the University decal.

 

·        Two (2) laptops were not found.

 

·        A laptop was defective and no longer in use but not reported as surplus.

 

·        Off-campus equipment use forms were not prepared for 6 laptops assigned to employees. (Finding 4, Pages 26-30) (This finding was first reported in 2004)

 

We recommended the University: a) Adhere to its procedures to ensure that the property and equipment records are accurately maintained and updated; b) Improve its controls over off-campus use of property and equipment by reviewing the forms submitted by employees for completeness and accuracy; c) Conduct periodic physical inventories and update property records with the results of the inventory; d) Ensure submission of a complete Inventory of Equipment with DCMS and establish and maintain internal control records over items valued less than $500; and e) Ensure that staffing is adequate to accomplish the other recommendations.

 

University officials concurred with the finding and stated that they believe the University has improved property control since this finding was first reported.  (For previous University response, see Digest Footnote #1.)

 

 

 

 

TIME SHEETS NOT REQUIRED

 

      The University did not require all employees to submit time sheets as required by the State Officials and Employees Ethics Act.

 

      The Act required the Illinois Board of Higher Education (IBHE), with respect to State employees of public universities, to adopt and implement personnel policies.  The Act (5 ILCS 430/5-5(c) states, “The policies shall require State employees to periodically submit time sheets documenting the time spent each day on official State business to the nearest quarter hour.”  The IBHE adopted personnel policies for public universities on February 3, 2004 in accordance with the Act.  The University has not incorporated these policies into the University’s policies.

 

      During our review of time sheets for 60 employees during the year, we noted that 22 employees documented time to the nearest quarter hour and 38 employees were using the “negative” timekeeping system whereby the employee is assumed to be working unless noted otherwise.  Of the 22 employees required to submit time sheets, 2 employees did not submit their time sheets for one pay period.

 

      University procedures do not require time reports documenting the time spent each day on official State business to the nearest quarter hour to be submitted for faculty, administrative and professional, exempt civil service, student aide, and graduate assistants. The employees documenting time to the nearest quarter hour were only non-exempt civil service, work study, temporary help, and hourly professional. (Finding 5, Pages 31-32)

 

      We recommended the University amend its policies to require all employees to submit time sheets in compliance with the Act.

 

      University officials concurred with the finding and stated that they have begun implementation of an electronic timekeeping system.

 

 

 

NONCOMPLIANCE WITH REQUIRED CONTRACTING PROCEDURES

 

      The University did not comply with certain required contracting procedures.

 

      During our tests of contractual service expenditures, we noted the following:

 

·        Nine of 30 contracts (30%) were not filed with the Office of the State Comptroller as of fiscal year end.  The University filed the Contract Obligation Documents with attachments other than the contracts.  All of the 9 contracts were executed in the current fiscal year and were incurred against locally held funds.

 

·        Four of 30 contracts (13%) were not filed within 15 days of execution.  The contracts were filed 197 to 539 days late.  Late filing affidavits were not on file.

 

·        Amendments to the amount in the purchase orders totaling $174,754 covering 2 contracts were not supported by revised contracts.

 

·        Amendments to 2 other contracts for an increase of $401,105 were executed during the fiscal year but were not filed with the Office of the State Comptroller.

 

·        Two contracts totaling $14,811 were not approved prior to performance of services.

 

In our detailed testing of vouchers, we also noted the following:

 

  • Payments for computer purchases to a single vendor totaling $130,931 were not advertised in the Illinois Procurement Bulletin as sole source since they were not competitively bid.  Further, no contract was formally executed for the purchases.

 

  • Maintenance renewal services for the fiscal year amounting to $23,006 and purchase of uniforms amounting to $15,543 were not covered by written contracts.

 

  • Purchases of books, journals, art materials, catering and bus services ($3,000 and above) from 15 different vendors totaling $89,063 did not show whether vendor quotes or competitive quotes were obtained.

 

  • A printing services contract amounting to $31,223 was executed 90 days after delivery of the printed materials. (Finding 6, Pages 33-35)

 

      We recommended the University adhere to its procedures to ensure all contracts over $10,000 are filed with the Office of the State Comptroller in accordance with State statutes and regulations.  We also recommended that an Affidavit for Late Filing should be completed for any contract liability not filed within thirty (30) days of execution and that required vendor quotations, competitive solicitation procedures and advertisements must be observed in all instances.

 

      University officials concurred with the recommendation and stated that the University Purchasing Department will review its internal bidding procedures and revise where appropriate to meet the requirements of the State of Illinois Procurement Code.

 

OTHER FINDINGS

 

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

 

AUDITORS' OPINION

 

      Our financial audit for the year ended June 30, 2006 was previously issued.  Our auditors stated the University’s financial statements at June 30, 2006 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 were E.C. Ortiz & Co., LLP.

 

DIGEST FOOTNOTE

 

#1  INADEQUATE CONTROLS OVER UNIVERSITY PROPERTY AND EQUIPMENT – (Previous University Response)

 

2005:  “The University concurs with the finding and feels it has made significant progress in improving controls over property control since the report finding last year….”