REPORT DIGEST UNIVERSITY OF ILLINOIS FINANCIAL AUDIT FOR THE YEAR ENDED: JUNE 30, 2012 Release Date: January 10, 2013 Summary of Findings: Total this audit: 2 Total last audit: 3 Repeated from last audit: 2 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 www.auditor.illinois.gov INTRODUCTION The University’s financial audit report consists of three sets of financial statements as follows – The financial statements of the University, and the revenue bond financial statements of the Auxiliary Facilities System and the Health Services Facilities System. This report contains only findings pertaining to the Financial Statement Audit. The State Compliance Examination and Federal Single Audit Reports will be issued at a later date. SYNOPSIS • The University has not established adequate internal controls over accurately identifying and recording period end accounts payable and accounts receivable transactions for financial reporting purposes. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE YEAR END RECEIVABLE AND PAYABLE ACCRUALS PROCESS The University has not established adequate internal controls over accurately identifying and recording period end accounts payable and accounts receivable transactions for financial reporting purposes. During the current year audit we reviewed 34 revenue transactions recorded during the fiscal year totaling $6,460,641. In relation to our testwork on expense transactions, we reviewed 251 expense transactions recorded during the fiscal year totaling $57,718,985 and 27 cash disbursements subsequent to year end totaling $30,284,259. Additionally, we separately reviewed 214 journal transactions recorded during the fiscal year totaling approximately $1.8 billion and 64 capital asset additions recorded during the fiscal year totaling $168,542,428. Some of the transactions that were not recorded in the proper accounting period follow: • One capital asset addition transaction totaling $701,209 was improperly over-accrued by $604,086 as of June 30, 2012 because of an inaccurate percentage of completion estimate. Upon further review, the University identified a total of 41 capital additions that were over-accrued by $4,713,029 from the inaccurate percentage of completion estimate. • Three supplies and services expense transactions totaling $12,222 which pertained to fiscal year 2011 but were recognized as expense in 2012. • Six travel expense transactions totaling $63,203 which pertained to fiscal year 2011 but were recognized as expense in fiscal year 2012. • Two contractual service expense transactions totaling $59,267 which pertained to fiscal year 2013 but were recognized as expense in fiscal year 2012. • One educational activity revenue transaction for a summer youth music camp totaling $28,001 which pertained to fiscal year 2012 but was recognized as revenue in fiscal year 2013. (Finding 1, Pages 5-6) This finding was first reported in 2009. We recommended that the University review its current process to assess the completeness of its expense and revenue accruals at year end and consider changes necessary to ensure all period end accounts payable and accounts receivable are accurately identified and recorded. University officials accepted the recommendation and stated that they will work to develop and implement corrective actions to further improve the year-end process. (For the previous University response, see Digest Footnote #1.) OTHER FINDING The remaining finding is reportedly being given attention by the University. We will review the University’s progress towards the implementation of our recommendations in our next engagement. AUDITORS’ OPINION Our auditors state the June 30, 2012 financial statements are fairly presented in all material respects. WILLIAM G. HOLLAND Auditor General WGH:TLK:rt SPECIAL ASSISTANT AUDITORS KPMG were our special assistant auditors. DIGEST FOOTNOTES #1 –Inadequate Year End Accruals Process – Previous University Response Accepted. The University will review existing procedures in these areas and take corrective action to address the recommendation in this finding.