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, 1999

Summary of Findings:

Total this audit 16

Total last audit 11

Repeated from last audit 8

Release Date:
March 2, 2000

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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 University of Illinois Hospital needs to improve its procedures in several areas including:
  • the timely and accurate accumulation and reporting of financial information,
  • the billing, monitoring and collecting of patient accounts receivable,
  • the consistent recognition of contractual allowances at the time of service,
  • the control over the movement of medical records,
  • the timely reporting of past due patient accounts to the Comptroller's Offset System, and
  • the maintenance of accurate and reliable operating statistics and patient receivable information.
  • The accounts payable balance at the Urbana Campus contained errors requiring a net adjustment exceeding $6 million.
  • The University's policies and security standards over computer networks were not consistent.

 

 

 

 

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

UNIVERSITY OF ILLINOIS

FINANCIAL AND COMPLIANCE AUDITS

FINANCIAL OPERATIONS (CURRENT FUNDS)

FY 1999

FY 1998

REVENUES

   

State Appropriations

$636,891,000

$611,356,000

Student Tuition and Fees

310,066,000

295,016,000

Federal Grants

385,463,000

349,792,000

Grants and Contracts

220,786,000

197,861,000

Other Sources

458,474,000

434,817,000

Enterprise Sales

199,076,000

187,328,000

Hospital Sales

267,090,000

272,884,000

Total

$2,477,846,000

$2,349,054,000

EXPENDITURES AND MANDATORY TRANSFERS

   

Instruction

$546,070,000

$526,591,000

Research

387,182,000

344,959,000

Public Service

236,857,000

221,065,000

Academic Support

148,780,000

138,284,000

Operation of Plant

137,773,000

134,574,000

Other Expenditures and Mandatory Transfers

540,047,000

516,855,000

Auxiliary Enterprises

182,609,000

176,163,000

Hospital Activities

259,884,000

262,154,000

Total

$2,439,202,000

$2,320,645,000

SELECTED ACCOUNT BALANCES (ALL FUNDS)

June 30, 1999

June 30, 1998

Cash and Investments

$686,427,000

$656,435,000

Campus Plant Facilities

$3,351,532,000

$3,232,799,000

Accrued Compensated Absences

$194,083,000

$195,405,000

Revenue Bonds Payable

$358,475,000

$364,226,000

SUPPLEMENTAL INFORMATION

FY 1999

FY 1998

Employment Statistics –
Chicago


12,308


12,182

Springfield

735

722

Urbana-Champaign

13,288

13,247

Total

26,331

26,151

Enrollment Statistics –
Undergraduate --

Chicago

 


16,384

 


16,298

Springfield

2,373

2,411

Urbana-Champaign

28,645

28,196

Subtotal

47,402

46,905

Graduate –
Chicago


8,415


8,623

Springfield

1,961

2,052

Urbana-Champaign

9,662

9,874

Subtotal

20,038

20,549

Total

67,440

67,454

Cost Per Student –
Undergraduate –

Chicago

 


$5,761

 


$5,509

Springfield

7,678

7,060

Urbana-Champaign

6,245

6,111

Graduate –
Chicago


$12,378


$12,287

Springfield

8,030

6,826

Urbana-Champaign

14,434

13,821

UNIVERSITY PRESIDENT

   

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

 

 

 

 

 

 

 

 

 

Audit adjustments increased loss by $3.3 million

 

 

 

 

 

 

 

 

Patient accounts not all timely billed or adequately monitored

 

 

 

 

Contractual allowances not always recorded at time of service

 

 

 

 

 

Medical records not all located in a timely manner

 

 

 

Reporting to Comptroller's Offset System not timely

 

 

 

 

 

 

Statistics not always accurate and reliable

 

 

 

 

 

Adjustments to accounts payable exceeded $6 million

 

 

 

 

 

 

 

 

 

 

 

 

 

Inconsistencies and weaknesses noted in security controls over computer networks

 

 

 

 

 

 

 

 

 

INTRODUCTION

Our 1999 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 State and Federal Compliance Audit report contains the compliance findings disclosed by our audit tests.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

PROCEDURES AT HOSPITAL NEED IMPROVEMENT

Our review of procedures and records at the University's Hospital identified several weaknesses and areas where improvements are needed to enhance operations as follows:

  • The Hospital's processes for the timely and accurate accumulation and reporting of financial information were not adequate. As a result of the audit, the Hospital recorded adjustments that increased its loss by $3.3 million to $12.6 million. Adjustments were necessary due to a substantial number of unrecorded liabilities, incorrect recording of the liability for anticipated patient refunds, and problems with reconciling the detail of accounts receivable to the reported balance. These situations appear to be due to the lack of formal processes, timeliness, supervision, and training in the general and patient accounting divisions. Additionally, during the audit period, the Hospital contracted with a third party for a detailed study of Hospital operations. Hospital officials indicated that the additional workload caused by the study may have contributed to a lack of attention to existing policies, procedures and processes. (Finding 2, pages 14-15)
  • The Hospital had inadequate procedures for billing and monitoring the collection of patient accounts receivable. Our testing noted: refusal of payment by third-party payers due to untimely billing and lack of pre-authorization; unbilled inpatient charges due to medical record data not being available; and the lack of monitoring and follow-up to ensure collection. Billing and monitoring patient accounts is a complex function that must be performed timely and accurately. (Finding 3, pages 16-17)
  • The Hospital inconsistently calculated contractual allowances. A contractual allowance is that portion of a patient's account that will not be collected due to a contractual agreement with a third-party payer to accept less than the Hospital's standard charge. The effect of a contractual allowance is typically to reduce patient accounts receivable and revenues in the accounting records at the time the service is delivered. Our testing noted that for 9 out of 138 transactions tested, the Hospital did not record the contractual allowance until the time of collection. Untimely recording of contractual allowances misstates the Hospital's periodic operating statements. In these 9 instances the contractual allowance adjustment was approximately $750,000. (Finding 13, page 30)
  • The Hospital did not have adequate control over all medical records. During our testing, we were unable to obtain medical records for all patients selected for testing in a timely manner. Movement of medical records must be carefully controlled so that all records can be located in a timely manner. Accounts cannot be billed until the medical record is reviewed for completeness and coded. The records must then be retained to support the propriety of amounts billed. (Finding 14, pages 31-32)
  • The Hospital did not make timely submissions of past due patient accounts to the State Comptroller's Offset System. As of June 30, 1999, the Hospital submitted all patient accounts greater than $1,000 and one year past due. The State Collection Act of 1986 requires the submission of all such accounts which are more than 90 days past due. Upon the reporting of this finding in our prior audit, the University on behalf of the Hospital, requested relief from the 90 day requirement to allow them to report only those patient accounts greater than one year past due. In September 1999, the University was notified by the State Comptroller that an exception was granted to allow submission of all patient accounts greater than $1,000 and 180 days past due. (Finding 15, page 33)
  • Key operating statistics and patient receivable information used by the Hospital to monitor and analyze operations were estimated for financial analysis since accurate, actual data was not available. Accurate statistics are necessary to enable management to make informed decisions. (Finding 16, page 34)

University officials concurred with the findings related to the Hospital operations. They stated that corrective actions will be implemented during FY 2000 to improve operations.

ACCOUNTS PAYABLE ERRORS

During our testing of the Urbana Campus' June 30, 1999 accounts payable balance, we noted three errors that resulted in a net accounts payable understatement of over $6 million. The University did adjust its financial statements. The errors noted were as follows:

  • Understatement of $6.2 million related to the exclusion of a liability for equipment purchased FOB - Origin which means ownership passed at the time of shipment.
  • Understatement of $1.2 million related to the exclusion of an accrual for utility charges for one operating unit of the University.
  • Overstatement of $1.3 million related to the inclusion of a liability for 16 training aircraft that had been satisfied by wire transfers though the obligation status in the accounting records had not been properly updated.

Generally accepted accounting principles require that the accounts payable balance include items for which the University has a liability based on receipt or occurrence. (Finding 1, pages 12-13)

University officials concurred with our recommendation to amend and emphasize their procedures for evaluating accounts payable.

COMPUTER NETWORKS LACK CONSISTENT SECURITY STANDARDS

The University's baseline policies and security standards for use of the University's administrative and academic computer networks were inadequate to promote consistency among the networks. Responsibility for the academic networks was decentralized among the specific user departments and colleges; thus, security controls in each network could be unique. Administrative Information Technology Services managed the networks used to process information for the administrative areas of business, finance, human resources, etc. We reviewed 25 administrative local area networks (LANs) and identified several inconsistencies and security weaknesses.

University-wide baseline policies, procedures and standards regarding the security, administration, disaster contingency, and use of the LANs should assure the University's computerized assets are properly safeguarded. (Finding 9, pages 24-25)

University officials concurred and stated they will review and strengthen the University network security policies by September 1, 2000.

OTHER FINDINGS

The remaining findings were less significant and are being been given attention by University management. We will review progress toward the implementation of our recommendations in our next audit. University responses were provided by Dr. Craig S. Bazzani, Vice President for Business and Finance, and Comptroller.

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, 1999 financial statements are fairly presented in all material respects.

 

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Olive LLP were our special assistant auditors.