REPORT DIGEST

 

NORTHERN ILLINOIS UNIVERSITY

 

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

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

For the Year Ended:

June 30, 2005

 

Summary of Findings:

Total this audit                          8

Total last audit                          0

Repeated from last audit           0

 

Release Date:

February 22, 2006 

 

 

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

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

 

 

 

SYNOPSIS

 

 

·        The University did not require and had not obtained a weekly certified payroll from a construction contractor who was being paid from federal funds.

 

·        When entering into a covered transaction as part of a federally funded project the University failed to properly verify that the party with which they were contracting was not suspended or disqualified.

 

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

 

·        Contracts and leases were not filed timely with the State of Illinois, Office of the Comptroller, and one was not approved timely.

 

·        The University did not provide ethics training within six months of initial employment for individuals hired during fiscal year 2005.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Expenditures and Activity Measures are summarized on the next page.}

 


 

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Year Ended June 30, 2005 (in Thousands)

 

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FY 2005

FY 2004

OPERATING REVENUES

  Student tuition and fees, net.........................................................................

  Grants, contracts, and gifts...........................................................................

  Sales and services of educational departments...........................................

  Auxiliary enterprises.......................................................................................

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

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

OPERATING EXPENSES

  Instruction........................................................................................................

  Research...........................................................................................................

  Public service...................................................................................................

  Academic support...........................................................................................

  Student services..............................................................................................

  Operation and maintenance of plant............................................................

  Institutional support.......................................................................................

  Depreciation......................................................................................................

  Staff benefits....................................................................................................

  Student aid.......................................................................................................

  Auxiliary enterprises.......................................................................................

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

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

NONOPERATING REVENUES (EXPENSES)

  State appropriations........................................................................................

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

  Interest expense.................................................................................................

  Gifts......................................................................................................................

  Net decrease in fair value of investments

Total Nonoperating Revenues...........................................................................

INCREASE IN NET ASSETS............................................................................

Net Assets, beginning of the year....................................................................

Prior Period Adjustment......................................................................................

Net Assets, end of the year................................................................................

* The University has recorded a prior period adjustment to the FY 04 beginning net assets.

 

$92,823

53,057

18,927

81,928

      1,817

$248,552

 

$108,826

14,402

25,738

27,571

11,615

23,607

27,015

26,221

53,945

10,648

    67,066

$396,654

($148,102)

 

$157,612

1,732

(8,627)

350

       37

$151,104

$3,002

186,855

0

$189,857

 

$84,541

48,541

18,457

81,552

      1,866

$234,957

 

$106,198

12,966

22,421

25,287

11,016

20,514

22,569

25,348

126,255

10,250

    66,561

$449,385

($214,428)

 

$225,792

729

(8,281)

0

       (192)

$218,048

$3,620

185,028

* (1,793)

$186,855

ACCOUNT BALANCES (ALL FUNDS)

FY 2005

FY 2004

Cash and cash equivalents..............................................................................

Investments and marketable securities..........................................................

Capital assets, net.............................................................................................

Accrued compensated absences....................................................................

Revenue bonds payable..................................................................................

$7,100

$66,483

$301,629

$23,864

$111,891

$10,364

$50,059

$314,274

$23,666

$118,620

SUPPLEMENTARY INFORMATION (In whole numbers)

FY 2005

FY 2004

Employment Statistics

Appropriated and Nonappropriated funds:

  Faculty/administrative....................................................................................

  Civil service......................................................................................................

  Student employees.........................................................................................

  Miscellaneous contracts................................................................................

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

Selected Activity Measures

Fall semester enrollment – Undergraduate....................................................

Fall semester enrollment – Graduate..............................................................

Fall semester enrollment – Professional........................................................

 

 

2,161

1,455

515

   132  

4,263

 

16,338

3,119

400

 

 

2,135

1,456

541

   130  

4,262

 

16,533

3,177

416

UNIVERSITY PRESIDENT

 

 

During Audit Period and Currently:  Dr. John G. Peters

 

 


 


 

 

 

 


               

 

 

 

 

 

 

Noncompliance with the Department of Labor Regulations

 

 

 

 

Monthly payroll certifications were not obtained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The University did not properly verify that a party is excluded or disqualified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Noncompliance with State Officials and Employees Ethics Act

 

 

Requirements of the law

 

 

 

 

 

 

 

 

 

Use of negative time keeping system used by some employees

 

 

 

 

 

 

 

 

University officials do not concur

 

 

 

 

Auditor comment

 

 

 

 

 

 

State law requires employees to submit time sheets documenting time spent on official state business

 

 

 

 

 

 

 

 

 

 

 

 

 


Auditors believe positive time keeping system required by law

 

 

 

 

 


Contracts were not filed with the Office of the Comptroller

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2 of 25 employees did not receive the ethics training

 

 

 

 

 

 

 

 

 

University officials do not concur

 

 

 

Auditor comment

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

NONCOMPLIANCE WITH DAVIS-BACON ACT

 

      The University did not require and had not obtained a weekly certified payroll from a construction contractor who was being paid from federal funds.  The agreement with the contractor also indicated that the contract was subject to the State of Illinois Prevailing Wage Act; however, the University did not obtain monthly payroll certifications from this contractor as required by the State of Illinois Prevailing Wage Act.

     

      During our testing of the Healthcare and Other Facilities (CFDA # 93.887), a major program for purposes of the Single Audit, we noted that the University did not comply with Department of Labor regulations which require the University obtain, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) from the contractors and subcontractors for projects subject to the Davis-Bacon Act.  The agreement with this contractor also indicated that the contract was subject to the State of Illinois Prevailing Wage Act, which requires monthly payroll certifications.  However, the University did not obtain these monthly certifications.  (Finding 3, pages 13-14)

 

      We recommended the University establish and implement procedures to ensure all required payroll certifications are contractually required by the University in its contracts, and that they are obtained once the project has begun.

 

      University officials agreed with the finding and recommendation and stated that they have implemented procedures to ensure that all required payroll certifications are contractually required by the University in its contracts, and that they are obtained and reviewed once the project has begun.

 

 

NONCOMPLIANCE WITH GOVERNMENT-WIDE NONPROCUREMENT DEBARMENT AND SUSPENSION COMMON RULE

 

When entering into a covered transaction as part of a federally funded project the University failed to properly verify that the party with which they were contracting was not suspended or disqualified.

 

During our testing of the Healthcare and Other Facilities (CFDA # 93.887) and the Teacher Quality Enhancement Grants (CFDA # 84.336), major programs for purposes of the Single Audit, we noted three covered transactions that are subject to the Government-wide Debarment and Suspension Common Rule.  The University did not comply with this rule’s requirement that they properly verify that a party is not excluded or disqualified. (Finding 4, Page 15)

 

We recommended that the University establish and implement procedures to ensure all required debarment verifications are performed prior to entering into covered transactions as part of a federally funded program.

 

University officials concurred with the finding and stated that they have established and implemented procedures that will ensure verifications are performed prior to entering into covered transactions.

 

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 requires the University to adopt personnel policies consistent with the Act.  The Act (5 ILCS 430/5-5 (c)) further 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.”

 

      We noted certain categories of the University’s employees did not submit time sheets in compliance with the Act. We tested a sample of 25 University employees during the year.  The sample included 7 hourly employees and 18 salaried employees which included faculty and administrative staff. Except for hourly employees who do use timecards, employees’ time is tracked using the University’s payroll system, which is a “negative” timekeeping system whereby the employee is assumed to be working unless noted otherwise.  No time sheets documenting the time spent each day on official State business to the nearest quarter hour are maintained for these employees.  (Finding 6, Pages 17-19)

 

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

 

      The University did not accept this finding.  The University assumed compliance with the statute based upon guidance from the Executive Inspector General.  University officials stated that their policy takes into account the necessity of recording all time accountable for State service to the nearest quarter hour. 

 

      In an auditor comment we noted that the State Officials and Employees Ethics Act defines “State Agency” to include “public institutions of higher learning…” 5 ILCS 430/1-5.  Northern Illinois University is defined as a “public institution of higher learning” in Section 2 of the Higher Education Cooperation Act…” 110 ILCS 220/2.  Further, the State Officials and Ethics Act defines “State employee” to be “any employee of a State agency.”  5 ILCS 430/1-5.

 

      As noted in the finding, the State Officials and Employees Ethics Act requires “State employees to periodically submit time sheets documenting the time spent each day on official State business to the nearest quarter hour…” 5 ILCS 430/5-5 (c).  This timekeeping requirement went into effect March 1, 2004.  The negative timekeeping system used for several categories of University employees requires those employees to report only time away from State business, not the time spent each day on State business. Further, it is logical to assume that, by adopting this language, the legislature meant to effect a change in the method used by State employees to record their time – that is, to adopt a positive timekeeping system.  Finally, the May 24, 2004, memorandum from the Office of Executive Inspector General upon which the University relied in maintaining its customary negative timekeeping system for several categories of its employees clearly states that it “is not a legal opinion.”

 

      We continue to believe that a positive timekeeping system for State employees is required by the State Officials and Employees Ethics Act.  If the University disagrees with this conclusion, we further recommend that it seek a formal, written opinion from the Attorney General’s Office on the requirements of this statutory provision.

 

CONTRACT(S) NOT APPROVED AND FILED TIMELY

 

Contracts and leases were not timely filed with the State of Illinois, Office of the Comptroller, and one was not approved timely.

 

During our testing of five contracts, we noted that four contracts were not filed with the Office of the Comptroller. We also tested five leases and noted that one was not filed timely with the Office of the Comptroller. In addition, we noted one contract for services was not signed until after the services had begun. (Finding 7, page 20)

 

We recommended the University implement procedures to ensure all contracts and leases over the required amounts are filed timely with the Office of the State Comptroller in accordance with State statutes and guidelines.  We further recommended that all contracts and leases be signed prior to the start of the contract period.

 

The University agreed with the finding and stated that they have implemented procedures to ensure compliance in the future.

 

FAILURE TO COMPLETE ETHICS TRAINING WITHIN SIX MONTHS OF EMPLOYMENT

 

The University did not provide ethics training within six months of initial employment for individuals hired during fiscal year 2005.

 

We selected 25 people hired during fiscal year 2005 for testing for proper ethics training. Two employees did not complete ethics training within six months of their initial hire date and for two additional employees, the University could not provide verification that the employees had completed the training in an alternative format. (Finding 8, pages 21-22)

 

We recommended that the University develop and implement procedures to ensure that employees complete ethics training within six months of their initial date of employment.

 

The University did not accept this finding.  University officials stated that no alternatives were authorized by the Office of Executive Inspector General other than to include new hires in the next regularly scheduled annual training process in 2005.

 

In an auditor comment, we stated that it was still the responsibility of the University to determine another means of providing the necessary Ethics Training in accordance with the Act.

 

 

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.

 

University responses were provided by Keith R. Jackson, Controller.                                                       

 

 

 

 

AUDITORS' OPINION

 

      Our auditors stated the University’s financial statements at June 30, 2005 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 Clifton Gunderson LLP.