REPORT DIGEST

UNIVERSITY PARK,

SOUTHERN ILLINOIS UNIVERSITY EDWARDSVILLE, INC

FINANCIAL AUDIT

For the Year Ended:

June 30, 2008

Release Date:

January 29, 2009

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

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Office of the Auditor General

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740 E. Ash Street

Springfield, IL 62703

782-6046 or TTY (888) 261-2887

This Report Digest and the Full Report are also available on

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www.auditor.illinois.gov

SYNOPSIS

· University Park did not have a fraud risk assessment program in place.

· University Park did not effectively implement controls requiring approval of journal entries.

· University Park did not have adequate control over wire transfers.

UNIVERSITY PARK, SOUTHERN ILLINOIS UNIVERSITY EDWARDSVILLE, INC

FINANCIAL AUDIT

For The Year Ended June 30, 2008

FINANCIAL OPERATIONS (ALL FUNDS)	FY2008	FY2007
OPERATING REVENUES
Payments from SIUE for University Park facility.................	$37,268	$37,268
Management fees...............................................................	32,758	29,628
Budget allocation from SIUE..............................................	316,094	291,646
Ground rents and common area maintenance......................	78,654	58,148
Total operating revenues........................................	$464,774	$416,690
OPERATING EXPENSES
Budget expended at SIUE.................................................	$316,094	$291,646
Contractual services...........................................................	174,864	100,120
All other expenses.............................................................	65,490	30,750
Total operating expenses........................................	$556,448	$422,516
Operating expenses in excess of revenue............................	($91,674)	($5,826)
NONOPERATING REVENUES (EXPENSES)
Grant funds returned.......................................................... Interest income..................................................................	$0 20,335	$(23,070) 12,563
Other revenue....................................................................	1,927	1,261
Total nonoperating revenues (expenses).................	$22,262	($9,246)
Decrease in net assets............................................	($69,412)	($15,072)
NET ASSETS
Net assets – beginning of the year......................................	$1,921,558	$1,936,630
Net assets – end of the year...............................................	$1,852,146	$1,921,558

OTHER SIGNIFICANT ACCOUNT BALANCES	JUNE 30, 2008	JUNE 30, 2007
Cash.................................................................................	$1,163,527	$496,500
Capital assets....................................................................	$1,544,960	$1,599,529
Total assets.....................................................................	$2,733,004	$2,121,686
Accounts payable..............................................................	$37,765	$86,747
Deferred revenue...............................................................	$843,093	$113,381
Total liabilities................................................................	$880,858	$200,128
Net assets invested in capital assets, net of related debt......	$1,544,960	$1,599,529
Net Assets – unrestricted...................................................	$307,186	$322,029
Total net assets...............................................................	$1,852,146	$1,921,558
EXECUTIVE DIRECTOR
During Audit Period: Mr. James R. Pennekamp Currently: Mr. James R. Pennekamp

No fraud risk assessment program in place

University Park relies on external audits for identification of control weaknesses

Audits are not a substitute for management controls

Approval of journal entries is needed

Override of controls is possible

Only one signature required for wire transfers

Number of authorized signers should be limited

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FRAUD PREVENTION AND DETECTION PROGRAM

The University Park does not have a fraud risk assessment program in place. According to University Park management, the University Park has established internal controls in order to prevent and detect fraud as well as errors that may occur; however, these controls and associated risks are not monitored on an on-going basis.

The University Park relies on current internal controls that have been put in place to prevent and detect fraud. Additionally, University Park management has relied on the external audits for identification of control weaknesses.

Accounting industry trends have increased organizations’ awareness of the prevalence of fraud. Many organizations rely in part on their auditors to uncover any internal fraud, but audits, even those of the highest quality, are not a substitute for management establishing good internal control.

The University Park is responsible for the development of internal controls and the monitoring of their operating effectiveness. Additionally, it is management’s responsibility to prevent and detect fraud. (Finding 1, Page 24)

We recommended that management establish a continuous written fraud prevention, deterrence and detection program, and that the Board of Directors evaluate management's identification of fraud risks and its implementation of anti-fraud measures.

University Park officials responded that throughout fiscal year 2008 they have worked on the development of a fraud prevention and detection program and expect to complete and implement the program in FY 2009.

OPERATING EFFECTIVENESS OF CONTROLS OVER JOURNAL ENTRIES

Although we noted that the University Park’s controls over journal entries are designed properly, we noted that the controls were not operating effectively at year end. Specifically, the outside CPA is responsible for preparing the journal entries and explaining them to the Operations Manager. The Operations Manager is required to approve these in writing and forward them to the Office Coordinator for posting to QuickBooks. Before the issuance of the financial statements to the auditors, approval in writing had not yet taken place.

Strong internal controls require that in order for an entity to have effective control over a process, the control structure should be properly designed and control activities should be implemented. This weakness could result in inappropriate entries or entries not properly approved by Park management to be recorded in the Park’s financial statements and thus allowing the external CPA to override the controls designed by management. (Finding 2, page 25)

We recommended that the Park implement their procedures as designed to ensure that entries made by the outside CPA are properly reviewed prior to the issuance of the financial statements to the auditors.

University Park officials agreed with our recommendation.

CONTROL OVER WIRE TRANSFERS

During the year ended June 30, 2008 the Park did not have adequate control over wire transfers. Specifically, we noted that there was only a one-signature requirement at the bank for wire transfers, and all signatories on the bank accounts were authorized to make wire transfers. In addition, individually each signatory had the authorization to open bank accounts in the name of the Park.

Strong internal controls require that electronic funds transfers including wire transfers include a dual approval process whereas the same individual that initiates a transfer cannot approve a wire transfer. Furthermore, strong internal controls dictate that the number of signers authorized to make wire transfers should be limited.

As of June 30, 2008, the Park implemented procedures to require two signatures on wire transfers for all deposit accounts. (Finding 3, page 26)

We recommended that the Park adopt formal policies and controls over wire transfers including the written requirements for authorization over banking activity including opening and closing bank accounts and wire transfers. In addition, we recommended that the Park modify their current bank agreements to require at least two signatories to open or close an account.

University Park officials responded that the Board of Directors adopted a formal policy regarding wire transfers.

AUDITORS’ OPINION

Our auditors stated the June 30, 2008 financial statements of the University Park are fairly presented in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Crowe Horwath LLP were our special assistant auditors for this audit.