REPORT DIGEST

GOVERNORS STATE UNIVERSITY

FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the Single Audit Act and OMB Circular A-133)
For the Year Ended:
June 30, 1997

Summary of Findings:

Release Date:
April 23, 1998

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

SYNOPSIS

• Our auditors' opinion on the University's financial statements was qualified due to inadequate detailed equipment records to support the balance for equipment in the Plant Funds.

• The University did not properly account for equipment and maintain adequate property control records. Many equipment items tested could not be located, or were not recorded on property control records, and fixed asset reports were inaccurate and not submitted as required. This finding has existed since 1995.

• The University did not enforce its telecommunications policy, which resulted in inadequate controls over telephone usage and reimbursement. This finding has existed since 1994.

• The University has not established adequate controls over its computer system.

• Federal Direct Loan Program costs of $4.9 million were questioned due to lack of required monthly reconciliations of records.

• The University failed to complete all internal audits required by statute.

{Financial Information is summarized on the reverse page.}

FY 1997

FY 1996

$ 20,831,700
10,465,634
7,713,507
1,312,674
4,349,349
9,200,454
$ 53,873,318

$ 17,033,012
20,003
1,397,539
1,938,774
7,234,015
14,741,643
4,017,224
4,876,722
357,694
1,015,742
39,409
$ 52,671,777

$ 19,345,312
11,494,094
8,301,495
609,214
3,724,165
5,336,363
$ 48,810,643

$ 17,098,952
28,686
1,056,515
1,704,332
6,559,731
13,241,040
3,862,459
4,379,734
348,098
993,831
66,102
$ 49,339,480

JUNE 30, 1997

JUNE 30, 1996

$2,215,874
8,481,634
64,765,217
7,967,636

(4,233,840)
29,923
2,976,893
72,706,740
(870,105)

$ 1,817,914
7,994,441
64,070,666
7,502,435

(5,435,381)
30,656
2,846,655
71,160,887
(828,094)

FY 1997

FY 1996

327.2
239.9
44.2

99.5
56.6
38.7
806.1

2,031
1,900
$11,039

312.9
261.8
32.5

56.2
35.1
59.2
757.7

1,970
1,738
$10,643

Inaccurate equipment and property control records

Internal controls over telecommunications not enforced

Weaknesses in the security of the University's computer system

No monthly reconciliations of Federal Direct Loan Program

Not all internal audits were completed as required

FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS

INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT

The University did not properly account for equipment and maintain accurate property control records. Equipment items tested totaling $26,720 could not be located; another item was not in the location indicated on records; and several could not be traced to property control records.

The University's fixed asset reports submitted to the Comptroller were inaccurate. The Cooperative Computer Center (CCC) and the Educational Computing Network (ECN) were unable to provide complete property records and failed to submit some fixed asset reports to the Comptroller as required. Also, their records were not merged with the University's. (Finding 1, pages 18-19) This finding has been repeated since 1995.

We recommended the University adjust property control records to the physical inventory and implement procedures to ensure accurate property control records.

University officials agreed with our recommendation and stated that procedures are in place to implement our recommendations. (For the previous agency responses, see Digest Footnote 1.)

INEFFECTIVE TELECOMMUNICATIONS CONTROLS

The University has a formal telecommunications policy governing usage and review of phone bills; however, this policy has not been enforced.

University department heads have the responsibility to review the propriety of calls charged to their departments and take appropriate action. We found that calls in excess of five dollars, and out-of-state or international calls did not have explanations. Also, we found that some calls were not reimbursed as required by the Dept. of Central Management Services policy. (Finding 7, pages 28-29) This finding has been repeated since 1994.

We recommended the University improve internal controls over telecommunication expenditures by enforcing its policy requirements and procure reimbursement for personal calls.

University officials agreed with our recommendation and stated they will strictly enforce the policy regarding department review. (For previous agency responses, see Digest Footnote 2.)

INADEQUATE CONTROLS OVER THE COMPUTERIZED LOCAL AREA NETWORK (LAN)

The University has not established adequate logical and physical controls over its computer system local area network (LAN). The University relies on critical applications accessed through the system such as the Comprehensive Accounting Reporting System (CARS) to conduct business. The University did not have adequate procedures in place to ensure that control of the LAN was sufficient.

Weaknesses noted included: (1) the password change interval of 187 days is too long, (2) some users are circumventing normal password security, and (3) some users have excessive access. (Finding 2, pages 20-22)

We recommended the University develop standard security guidelines to ensure LAN security. University officials agreed with our recommendation and stated they have begun to review various security controls and will implement appropriate changes.

FEDERAL DIRECT LOAN PROGRAM QUESTIONED COSTS

The University's procedures for the Federal Direct Loan Program were inadequate. Two disbursements exceeded the promissory notes by $1,828 and one disbursement of $5,621 was not reported to the U.S. Dept. of Education. Also, no monthly reconciliations of the entire Federal Direct Loan Program records were performed. Due to these deficiencies, program costs of $4,985,864 were classified as questioned costs. (Finding 9, page 31)

We recommended the University implement procedures to ensure compliance with federal regulations. University officials agreed with our finding and stated they will implement our recommendation. (For previous agency responses, see Digest Footnote 3)

FAILURE TO COMPLETE INTERNAL AUDITS

The University did not complete internal audits for three of its major control areas within two years as required by statute. Although audits of two of these three major areas had been started, they were not completed. The three areas which had not been completed were: Grant Administration, Revenues and Receivables, and Contractual Services.

The Fiscal Control and Internal Audit Act requires all major systems be reviewed at least once every two years.

University officials stated that due to the installation of their new Comprehensive Accounting Reporting System and changes in procedures used with the new system, the internal audit staff has found it difficult to gather information needed for reviews in a timely manner.

Failure to complete audits for major audit areas could lead to undetected deficiencies in internal controls, errors, and irregularities. (Finding 6, page 27)

We recommended the University complete internal audits for all major audit areas as required by statute, and the University agreed.

OTHER FINDINGS

The remaining findings and recommendations were less significant and are being given appropriate attention by University management. We will review progress toward implementation of our recommendations during our next audit. University responses were provided by Mr. James Alexander, Vice President of Administration and Planning.

AUDITORS' OPINION

Our auditors' opinion on the financial statements of Governors State University for the year ended June 30, 1997 was qualified because of inadequate equipment records to support the amounts recorded for equipment in the plant funds. Equipment represented $16,592,155, or 23%, of the total plant funds assets at June 30, 1997. (See Finding 1 above.)

_____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:ROQ:ak

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were Nykiel, Carlin, Lemna & Co.

DIGEST FOOTNOTES

#1 INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT

 

1996: "The University agrees with the finding and will implement the recommendation. Procedures are in place to complete the plant fund reconciliation by early 1997."

1995: "The University is aware of the problem and will take appropriate corrective action during this fiscal year."

 

#2 INEFFECTIVE TELECOMMUNICATION CONTROLS

1996: "The University agrees with the finding and is moving to more strictly enforce its policy regarding department head review."

1995: "The University agrees with the finding and will take action to improve and enforce internal controls over telecommunication expenses."

1994: "The University accepts the finding and will take action to assure that department heads effectively comply with the telecommunications policy."

 

# 3 FEDERAL DIRECT LOAN PROGRAM QUESTIONED COSTS

1996: "The University agrees with the finding and has implemented the recommendation.

The Financial Aid Office is now sufficiently staffed to minimize federal noncompliance. As of November 1996, work with the U.S. Department of Education and its direct loan servicer has rectified 90 percent of the data problems."