REPORT DIGEST

SOUTHERN ILLINOIS UNIVERSITY EDWARDSVILLE FOUNDATION

FINANCIAL AUDIT

For The Year Ended June 30, 2008

FINANCIAL OPERATIONS (All Funds)	FY 2008	FY 2007
REVENUES
Operating revenues............................................................	$1,028,704	$1,070,360

EXPENSES
Operating expenses...........................................................	4,047,594	3,484,375
Operating loss.............................................................	($3,018,890)	($2,414,015)

NON-OPERATING REVENUES (EXPENSES)
Contributions...........................................................................	$5,149,098	$3,154,425
Net investment income (loss)....................................................	(448,127)	2,101,746
Bad debt.................................................................................	(210,722)	(372)
Increase (decrease) in present value-interest in trusts................	(157,252)	130,825
Bond interest expense..............................................................	(69,231)	(75,281)
Grants to other organizations....................................................	(2,505,172)	(500)
Payments to annuitants............................................................. Gain on sale of assets...............................................................	(52,386) -	(48,986) 343,913
Other ...................................................................................	(2,764)	1,987
Net non-operating revenue.................................................	$1,703,444	$5,607,757
Income (loss) before permanent endowments...........................	($1,315,446)	$3,193,742
Additions to permanent endowments..................................	377,520	841,205
Increase in net assets...................................................	($937,926)	$4,034,947

NET ASSETS
Net Assets – beginning of year.................................................	$33,864,365	$29,829,418
Net Assets – end of year.........................................................	$32,926,439	$33,864,365

OTHER SIGNIFICANT ACCOUNT BALANCES	AT JUNE 30, 2008	AT JUNE 30, 2007
Cash, Deposits, and Investments.................................. Total Assets.............................................................. Note Payable.............................................................. Total Liabilities......................................................... Net Assets – Invested in capital assets......................... Net Assets – Restricted............................................... Net Assets – Unrestricted............................................ Total Net Assets.......................................................	$22,246,438 $34,864,854 $1,100,000 $1,938,415 $1,113,662 $29,931,076 $1,881,701 $32,926,439	$24,713,307 $36,219,499 $1,650,000 $2,355,134 $400,564 $32,119,800 $1,344,001 $33,864,365
CHIEF EXECUTIVE OFFICER
During the audit: Mr. Gary Giamartino Currently: Mr. Patrick Hundley (eff. 7-1-08)

No fraud risk assessment program in place

The Foundation relies on external audits for identification of control weaknesses

Audits are not a substitute for management controls

Inventory spot checks not performed

Museum piece valued at $1,000 could not be located

Investment statements reconciled by person who could initiate investment transactions

Independent reconciliation needed

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FRAUD PREVENTION AND DETECTION PROGRAM

The Foundation does not have a fraud risk assessment program in place. According to Foundation management, the Foundation has established internal controls in order to prevent and detect fraud as well as errors that may occur; however, these controls and associated risks are not monitored on an on-going basis.

The Foundation relies on current internal controls that have been put in place to prevent and detect fraud. Additionally, Foundation management has relied on the external audits for identification of control weaknesses.

Accounting industry trends have increased organizations’ awareness of the prevalence of fraud. Many organizations rely in part on their auditors to uncover any internal fraud, but audits, even those of the highest quality, are not a substitute for management establishing good internal control.

The Foundation is responsible for the development of internal controls and the monitoring of their operating effectiveness. Additionally, it is management’s responsibility to prevent and detect fraud. (Finding No. 1, Page 31)

We recommended that management establish a continuous written fraud prevention, deterrence and detection program, and that the Board of Directors evaluate management's identification of fraud risks and its implementation of anti-fraud measures.

Foundation officials agreed and stated they would initiate the development of a formal assessment program.

REVIEW OF OTHER ASSETS DETAIL

The Foundation owns a large museum collection currently valued at $4.5 million which is maintained in a secure facility and throughout various departments at the University. The Foundation maintains an asset listing for the collection; however, inventory spot checks on the existence and condition of the assets are not performed on a periodic basis, making the historical artifacts vulnerable to misappropriation without the knowledge of the institution.

During our testing of internal controls, we noted that one asset on the listing could not be located. Specifically, a white jade goddess on a green wooden stand with an estimated value of $1,000 could not be located. Failure to perform periodic independent spot checks of these assets could result in the misappropriation of assets. (Finding 2, page 32)

We recommended the Foundation perform periodic spot checks on the existence and condition of museum artifacts.

Foundation officials agreed to further increase controls by implementing a system of periodically inventorying a sample of these assets.

SEGREGATION OF DUTIES OVER INVESTMENTS

During the period of April 2008 through June 2008 duties were not adequately segregated as the Executive Director reconciled the investment statements including the year end reconciliation with no secondary review of the reconciliation process. In addition, the Executive Director had the ability to initiate investment transactions.

Foundation management indicated that one member of the Foundation’s accounting staff was on an extended leave of absence. This resulted in the Executive Director taking over the investment reconciliation process during this time period.

This weakness in the design of the control system over the investment process could result in management override of controls and thus result in an inappropriate investment activity being made by management that is not prevented or detected by the entity. (Finding 3, page 33)

We recommended that investment statements be reconciled to the general ledger by an individual independent of the investment authorization function. Additionally, investment reconciliations should be reviewed and approved by an independent, authorized individual.

Foundation officials agreed and stated they will continue to enforce proper segregation of duties whenever possible and look for opportunities to utilize other staff members to minimize issues that arise due to unusual and unforeseen circumstances.

AUDITORS’ OPINION

Our auditors stated the June 30, 2008 financial statements of the Foundation are fairly presented in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KMA :pp

SPECIAL ASSISTANT AUDITORS

Crowe Horwath LLP were our special assistant auditors for this audit.

SYNOPSIS

REVIEW OF OTHER ASSETS DETAIL

SEGREGATION OF DUTIES OVER INVESTMENTS