State of Colorado University of Northern Colorado
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State of Colorado University of Northern Colorado Financial and Compliance Audit Fiscal Years Ended June 30, 2004 and 2003 LEGISLATIVE AUDIT COMMITTEE 2004 MEMBERS (Effective August 2, 2004) Representative Val Vigil Vice-Chairman Senator Norma Anderson Representative Fran Coleman Representative Pamela Rhodes Representative Lola Spradley Senator Stephanie Takis Senator Jack Taylor Senator Ron Tupa Office of the State Auditor Staff Joanne Hill State Auditor Sally Symanski Deputy State Auditor Mary Pearce Legislative Auditor BKD, LLP Contract Auditor State of Colorado University of Northern Colorado June 30, 2004 and 2003 Contents Report Summary .................................................................................................................... 1 Recommendation Locator..................................................................................................... 4 Description of the University of Northern Colorado ........................................................... 5 Auditor’s Findings and Recommendations ......................................................................... 6 Disposition of Prior Year Audit Recommendations.......................................................... 10 Independent Accountants’ Report on Financial Statements and Supplementary Information ............................................................................................. 11 Management’s Discussion and Analysis........................................................................... 13 Financial Statements Statements of Net Assets .............................................................................................................22-23 Statements of Revenues, Expenses and Changes in Net Assets..................................................24-25 Statements of Cash Flows ................................................................................................................ 26 Notes to Financial Statements .......................................................................................................... 28 Independent Accountants’ Report on Compliance and Internal Control Over Financial Reporting Based on the Audit of the Financial Statements in Accordance with Government Auditing Standards .................................................. 45 Independent Accountants’ Audit Committee Communication ........................................ 46 Independent Accountants’ Report on the Statement of Appropriations, Expenditures, Transfers and Reversions of the State-Funded Student Assistance Programs ....................................................................................................... 48 Statement of Appropriations, Expenditures, Transfers and Reversions of the State-Funded Student Assistance Programs................................................................. 49 Notes to the Statement of Appropriations, Expenditures, Transfers and Reversions of the State-Funded Student Assistance Programs.................................. 50 Audit Report Distribution Summary................................................................................... 51 State of Colorado University of Northern Colorado Report Summary June 30, 2004 and 2003 Purposes and Scope of Audit The purposes and scope of this audit were to: • Express an opinion on the financial statements of the University of Northern Colorado (the University) as of and for the year ended June 30, 2004, including consideration of internal control over financial reporting as required by auditing standards generally accepted in the United States of America and Government Auditing Standards. • Express an opinion on the financial statements of the Student Media Corporation as of and for the year ended June 30, 2004, issued under separate cover. • Evaluate compliance with certain provisions of laws, regulations, contracts and grants governing the expenditure of federal and state funds for the year ended June 30, 2004. • Issue a report on the University’s compliance with certain provisions of laws, regulations, contracts and grants and on internal control over financial reporting based on our audit of the financial statements performed in accordance with Government Auditing Standards. • Express an opinion on the Statement of Appropriations, Expenditures, Transfers and Reversions of State-Funded Student Assistance Programs of the University for the year ended June 30, 2004. • Evaluate progress in implementing prior year audit recommendations. 1 State of Colorado University of Northern Colorado Report Summary (continued) June 30, 2004 and 2003 Summary of Major Audit Comments Audit Findings and Financial Statement Audit Report Section The Auditor’s Findings and Recommendations Section contains the following: • The University’s management has not re-evaluated the formulas and percentages used in the calculation of allowances for doubtful accounts, which were established several years ago. • The University charges internal departments an estimated amount for expected fringe benefit costs using a fixed rate. When these charges are made, the University establishes a liability account equal to the amounts charged to the individual departments. The University did not reconcile and eliminate any differences between the amounts charged to the departments and the actual benefit costs when ultimately paid. • The University does not capitalize interest in situations involving qualifying construction projects that are financed with other than tax-exempt borrowings. Financial Accounting Standards Board Statement No. 34, Capitalization of Interest, requires interest cost to be capitalized as part of the historical cost of acquiring certain qualifying assets. • The University has not had an arbitrage calculation performed on the 1998A bond issue to determine if any tax liability exists and if any funds should be reimbursed to the Federal Government. Arbitrage calculations should be performed every fifth anniversary date of tax- exempt bond issues and upon final retirement. 2 State of Colorado University of Northern Colorado Report Summary (continued) June 30, 2004 and 2003 Summary of Progress in Implementing Prior Audit Recommendations The report for the year ended June 30, 2003 was audited by Anderson & Whitney, P.C. whose report is dated September 26, 2003, included two recommendations. These recommendations were implemented. Audit Opinions and Reports The independent accountants’ reports included herein expressed unqualified opinions on the University’s financial statements, financial statements of the Student Media Corporation (under a separate cover) and the Statement of Appropriations, Expenditures, Transfers and Reversions of the State-Funded Student Assistance Programs as of and for the year ended June 30, 2004. No reportable conditions or material weaknesses in internal controls over financial reporting were identified. No instances of noncompliance considered material to the financial statements were disclosed by the audit. We did note certain areas in which the University could improve its internal controls and other procedures. These areas are discussed in the Auditor’s Findings and Recommendations section of this report. Significant Audit Adjustments Areas in which uncorrected misstatements were aggregated during the current engagement and pertaining to the latest period presented were determined by management to be immaterial, both individually and in the aggregate, to the financial statements as a whole, including accounting for fringe benefit and other internal charge allocations to University departments and programs, and capitalization and depreciation of capital assets. The effect of the uncorrected misstatements, had they been recorded, would have been to increase the change in net assets by $136,550 for the year ended June 30, 2004, and decrease current assets by $136,550. 3 State of Colorado University of Northern Colorado Recommendation Locator June 30, 2004 and 2003 Recommendation Page Recommendation Implementation Number Number Summary Response Date 1 6 Re-evaluate formulas used in Agree June 2005 calculating allowances for doubtful accounts. 2 7 Ensure proper accounting for fringe Agree June 2005 benefit allocations to other University departments. 3 8 Capitalize interest on construction Agree November 2004 in progress financed with other than tax-exempt borrowings. 4 9 Perform bond arbitrage Agree June 2005 calculations. 4 State of Colorado University of Northern Colorado Description of the University of Northern Colorado June 30, 2004 and 2003 Eighteen years after the City of Greeley was founded, a movement was started to establish a “normal” school to supply teachers for the community and the State. The law creating the State Normal School, as the University of Northern Colorado (the University) was first known, was signed April 1, 1889. In 1911, the name was changed to Colorado State Teachers College. The University retained that name until 1935 when it was renamed Colorado State College of Education. In 1957, another name change occurred making it the Colorado State College. The Act changing the name to the University of Northern Colorado became law May 1, 1970, thus making official the University-level work which it has offered since 1929. The Board of Trustees is the governing body of the University and is comprised of seven members appointed by the Governor, with consent of the Senate, for four-year terms (effective for terms beginning July 1, 1987); one faculty member elected by the faculty and one student