REPORT DIGEST WESTERN ILLINOIS UNIVERSITY SINGLE AUDIT AND STATE COMPLIANCE EXAMINATION For the One Year Ended: June 30, 2013 Release Date: March 26, 2014 Summary of Findings: • Compliance: 6 • Financial Audit (released 1-16-14): 1 Total findings this audit: 7 Total last audit: 9 Repeated from last audit: 3 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 SYNOPSIS This digest covers our Single Audit and compliance examination of the Western Illinois University for the year ended June 30, 2013. A financial audit as of and for the year ending June 30, 2013, was previously released on January 16, 2014. In total, this report contains seven findings, one of which was also reported in the financial audit released on January 16, 2014. • The University’s internal controls over contracts should be enhanced to ensure the agreements contain all necessary provisions and were timely filed. • The University subsidized operations of University activities between accounting entities. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NEED TO IMPROVE CONTROLS OVER CONTRACTS The University had not established adequate internal controls over contracts to ensure they were executed and filed with the Illinois Office of the Comptroller (Comptroller) on a timely basis. During our review of contracts we noted the following: • Ten of 21 (48%) large contracts (over $250,000) tested were filed with the Comptroller 2 to 84 days prior to top management approval. • Four of 21 (19%) large contracts tested were executed 85 to 88 days after the contract start date. • Nine of 40 (23%) Contract Obligation Documents (CODs) filed with the Comptroller were not properly completed. • One architectural and engineering contract tested did not include the required certificate of compliance. • One of four (25%) multi-year contracts tested did not include a certificate of eligibility. (Finding 5, pages 24-27) This finding was first reported in 2010. We recommended the University establish appropriate procedures to ensure all contracts, CODs, and related vendor certifications are properly completed, approved, and executed prior to the start of the services. University officials agreed with the finding and stated written procedures will be instituted to ensure compliance. (For the previous University response, see Digest footnote #1.) SUBSIDIES BETWEEN ACCOUNTING ENTITIES The University subsidized operations of University activities between accounting entities. Activities are functions which are self-supporting in whole or in part which are directly related to institutional, research or serviced units. During our testing of compliance with the Legislative Audit Commission’s University Guidelines, we noted the University Stores and Service Centers accounting entity had negative cash balances at the beginning and the end of the fiscal year totaling $1.7 million and $1.5 million, respectively. A negative cash balance is, in effect, an unrecorded interfund payable/receivable, thereby causing a subsidy between funds to occur. (Finding 6, pages 28-29) The University Guidelines of 1982, as amended in 1997 (Chapter 3, Section D, Part 1) states “There shall be no subsidies between accounting entities. Subsidies include cash advances and inter fund payables/receivables outstanding for more than one year”. We recommended the University annually review the activities of each accounting entity and ensure that fees charged for services are sufficient to cover expenditures and prevent subsidies. University officials agreed with the finding and stated they plan to contract with a consultant for an operations analysis. OTHER FINDINGS The remaining findings are reportedly being given attention by the University. We will review the University’s progress towards the implementation of our recommendations in our next audit. AUDITORS' OPINION The financial audit report was previously released. Our special assistant auditors stated the June 30, 2013 financial statements are fairly presented in all material respects. WILLIAM G. HOLLAND Auditor General WGH:lkw AUDITORS ASSIGNED Our special assistant auditors were E. C. Ortiz & Co., LLP. DIGEST FOOTNOTES #1 CONTRACTING NONCOMPLIANCE - Previous University Response The University agrees with the finding and will establish appropriate procedures to ensure that all contracts and related forms are properly completed, approved, and timely filed with the Comptroller. Further, the University will review the current contract bidding procedures to ensure that satisfactory evidence from contractors is collected and that only qualified bidders are awarded contracts.