REPORT DIGEST

UNIVERSITY OF ILLINOIS

FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the Single Audit Act and OMB Circular A-133)

For the Year Ended:
June 30, 2002

Summary of Findings:

Total this audit 6
Total last audit 12
Repeated from last audit 3

Release Date:
March 27, 2003

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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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

 

 

 

 

 

 

 

SYNOPSIS

 

 

 

 

  • The Hospital's accounts receivable subsidiary ledger and general ledger were not appropriately reconciled. Hospital personnel were unable to determine the cause of a difference of approximately $710,000 at June 30, 2002.
  • The Urbana and Chicago campuses overstated their accounts receivable balances by $600,000 and $1,074,261, respectively, at June 30, 2002.
  • The Student Accounts Receivable Information System at the Urbana campus is antiquated and should be replaced.
  • The Urbana campus is the beneficiary of charitable remainder trusts that were not recorded in the financial statements at June 30, 2002.

 

 

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

UNIVERSITY OF ILLINOIS
FINANCIAL AND COMPLIANCE AUDITS

FINANCIAL OPERATIONS

FY 2002

FY 2001*

REVENUES

State Appropriations
Tuition and Fees
Federal Grants, Contracts and Appropriations
State and Private Gifts, Grants and Contracts
Hospital and Medical Activities
Auxiliary Enterprises, Net
On Behalf Payments for Fringe Benefits
Educational Activities
Other
Total

$811,252,000
337,127,000
480,760,000
347,255,000
377,449,000
231,461,000
256,038,000
163,199,000
130,849,000
$3,135,390,000

$703,879,000
352,694,000
437,066,000
267,038,000
310,000,000
222,964,000
248,687,000
144,946,000
152,139,000
$2,839,413,000

EXPENSES

Instruction
Research
Public Service
Academic Support
Hospital and Medical Activities
Auxiliary Enterprises
On Behalf Payments for Fringe Benefits
Operation of Plant
Institutional Support
Depreciation
Scholarships and Fellowships
Other
Total

$610,799,000
472,278,000
282,293,000
223,902,000
292,171,000
177,645,000
256,038,000
162,432,000
144,190,000
132,969,000
125,378,000
180,195,000
$3,060,290,000

$590,985,000
459,391,000
266,716,000
182,789,000
294,040,000
203,826,000
248,687,000
156,797,000
137,800,000
-
164,080,000
93,931,000
$2,799,042,000

SELECTED ACCOUNT BALANCES

June 30, 2002

June 30, 2001*

Cash and Investments
Campus Plant Facilities
Accrued Compensated Absences
Revenue Bonds Payable

$928,234,000
$2,328,565,000
$199,163,000
$628,337,000

$852,244,000
$3,930,236,000
$194,746,000
$546,674,000

*The FY 2001 figures have not been restated to reflect the implementation of GASB Statements #35, 37 and 38.

SUPPLEMENTAL INFORMATION

FY 2002

FY 2001

Employment Statistics –
Chicago
Springfield
Urbana-Champaign
Total


13,105
827
14,505
28,437


12,946
815
14,244
28,005

Enrollment Statistics –
Undergraduate --
Chicago
Springfield
Urbana-Champaign
Subtotal

 

15,887
2,300
28,746
46,933

 

16,140
2,118
28,414
46,672

Graduate –
Chicago
Springfield
Urbana-Champaign
Subtotal
Total


9,068
1,988
10,545
21,601
68,534


8,802
1,824
10,051
20,677
67,349

UNIVERSITY PRESIDENT

During Audit Period: Dr. James Stukel
Currently: Dr. James Stukel

 

 

 

 

 

 

 

 

 

 

Subsidiary ledger and general ledger were not appropriately reconciled at June 30, 2002

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables were overstated $1,674,261 at June 30, 2002

 

 

 

 

 

 

 

 

 

 

 

 

Student accounts receivable system is antiquated and should be replaced

 

 

 

 

 

 

 

 

 

 

 

Certain trusts not recorded in the financial statements at June 30, 2002

 

 

INTRODUCTION

Our 2002 audit of the University of Illinois is presented in three reports. The financial part consists of two reports which include the various financial statements of the University and other supplementary information. The Compliance Audit report contains the compliance findings disclosed by our audit tests.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

HOSPITAL'S ACCOUNTS RECEIVABLE

The University Hospital's reconciliation between the total accounts receivable per the subsidiary ledger and the total accounts receivable per the University Financial Accounting System (general ledger) contained an unlocated system variance of approximately $710,000 at June 30, 2002. An accounts receivable reconciliation of all detail components of the overall accounts receivable must be accumulated and manually prepared in order to tie to the general ledger at the end of each month. The underlying detail components are supported by various reports that were tested during audit procedures.

Hospital personnel identified the difference during the reconciliation process, but were unable to determine the cause for the difference. Unreconciled variances have occurred in the monthly closing and reconciliation process throughout the year. Gross accounts receivable for the University Hospital totaled approximately $198 million at June 30, 2002. The detailed reports were overstated by the approximately $710,000 unlocated difference. Several individuals use the detailed reports to perform various tasks, such as the estimation of the contractual and bad debt allowances. (Finding 1, page 12)

University officials concurred with our finding and stated they are currently reconciling the accounts receivable subsidiary ledger and general ledger monthly and making appropriate adjustments for any differences.

URBANA AND CHICAGO RECEIVABLES OVERSTATED

The Urbana and Chicago campuses had errors in their June 30, 2002 unrestricted accounts receivable balances. At the Urbana campus, a miscommunication and a duplicate entry posting caused a $600,000 overstatement of unrestricted accounts receivable. At the Chicago campus, a lack of understanding caused a $1,074,261 overstatement of unrestricted accounts receivables and revenues. The dental accounts receivable at June 30, 2002 were reported gross, rather than net of credit balances, as historically had been done. (Finding 4, page 15)

We recommended the University implement procedures to facilitate proper recording of receivables and ensure that the procedures are clearly understood by responsible personnel.

University officials concurred. They stated the Urbana Accounting Division will continue to refine closing interactions and communications with units to assure correct entries are recorded. They stated the Chicago College of Dentistry staff has been retrained on the procedures for determining the net receivable amount and the proper classification of deferred revenues.

OUTDATED STUDENT ACCOUNTS RECEIVABLE INFORMATION SYSTEM

The Student Accounts Receivable System (SAR) at the Urbana Campus is antiquated, complicating adherence to good data processing practices, and should be replaced before it disrupts operations. There is very little documentation as to how the system is structured and operates, and because of the age of the system, proposed updates and enhancements by users are limited. While the SAR is currently operative, the lack of documentation and age of the system puts continued maintenance at the mercy of the few programmers who have gained an understanding of how it works. Good data processing practices prescribe that system documentation exist so any experienced member of the Information Technology staff can understand the system and correct problems in a timely fashion. (Finding 6, page 19)

We recommended the University continue its efforts towards replacing the current Urbana Campus SAR with a modern receivable system within a reasonable time frame.

University officials concurred with our recommendation and stated that replacement of the Urbana Campus SAR is planned as part of the implementation of an Enterprise Resource Planning (ERP) system for support of university-wide administrative systems. The University selected SCT as their ERP vendor in September 2000, and the project timeline indicates this module will be live in the summer of 2003. This finding has been repeated since 1998. (For previous University responses, see Digest footnote 1.)

CHARITABLE REMAINDER TRUSTS

The Urbana campus is the beneficiary of charitable remainder trusts that were not recorded in the financial statements. During our review of the University's beneficial interest trusts, we identified five trusts that have charitable remainder interests that will revert to the University at a future date. Beneficial interest trusts are properly not recorded in the financial statements. However, generally accepted accounting principles require recording a pledge receivable for charitable remainder amounts that will be received at a future date. University personnel were not aware that charitable remainder trusts are to be recorded in the financial statements. The gross value of the University's interest in these five trusts was approximately $4,600,000 at June 30, 2002. The University should record the present value of estimated future cash flows. (Finding 3, page 14)

University officials concurred with our finding and stated that beginning in Fiscal Year 2003 the Office of Cash Management and Investments will alter year-end accounting procedures to include the recording of the net present value of pledge receivables related to charitable remainder trusts.

OTHER FINDINGS

The remaining findings are reportedly being addressed by University management. We will review progress toward the implementation of our recommendations in our next audit. University responses were provided by Michael B. Bass, Assistant Vice President for Business and Finance.

AUDITORS’ OPINION

The financial audit report contains five sets of financial statements in the Annual Financial Report; and the revenue bond financial statements of the Auxiliary Facilities System, the Willard Airport Facility, the Construction Engineering Research Laboratory, and the Health Services Facilities System.

Our auditors state the June 30, 2002 financial statements are fairly presented in all material respects.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KMA:pp

SPECIAL ASSISTANT AUDITORS

BKD LLP were our special assistant auditors.

DIGEST FOOTNOTES

#1 OUTDATED STUDENT ACCOUNTS RECEIVABLE INFORMATION SYSTEM - Previous University Responses

2001: "We concur. Replacement of the UIUC student accounts receivable (SAR) system is planned as part of the implementation of an ERP system for support of university-wide administrative systems. Support and enhancement limitations of the SAR system have been noted and will be a consideration in determining the order of implementation of the various components of the ERP. The University selected SCT as our ERP vendor in September of 2000. SCT includes a student accounts receivable system. Our current draft timeline indicates that this module will be live in July of 2003."

2000: "We concur. Replacement of the UIUC student accounts receivable (SAR) system is planned as part of the implementation of an ERP system for support of university-wide administrative systems. Support and enhancement limitations of the SAR system have been noted and will be a consideration in determining the order of implementation of the various components of the ERP. The University selected SCT as our ERP vendor in September of 2000. SCT includes a student accounts receivable system and planning is underway to determine the implementation date for this module."

1999: "We concur. We believe the documentation on the system is adequate for maintenance. A new Student Accounts Receivable (SAR) system will be a part of a larger enterprise-wide resource planing system (ERP) currently in the procurement process at the University. The University will be establishing an implementation date for the ERP including the Student Accounts Receivable system."

1998: "We believe the documentation on the system is adequate for maintenance. We have changed the staff assigned to the system without any disruption. In addition, we have been able to modify the system to be Year 2000 compliant based on the existing documentation since the University does not plan to obtain a new system by January 1, 2000. We concur with the remainder of the finding."