STATE OF ILLINOIS UNIVERSITY OF ILLINOIS Compliance Examination (In Accordance With the Single Audit Act and OMB Circular A-133) June 30, 2014 Performed as Special Assistant Auditors for the Auditor General, State of Illinois STATE OF ILLINOIS UNIVERSITY OF ILLINOIS Compliance Examination Year ended June 30, 2014 Table of Contents Page University Officials 1 Management Assertion Letter 2 Compliance Examination: Compliance Report Summary 4 Accountants’/Auditors’ Reports: Independent Accountants’ Report on State Compliance and on Internal Control over Compliance for State Compliance Purposes 10 Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 13 Independent Auditors’ Report on Compliance for Each Major Program; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations 15 Schedule of Findings and Questioned Costs: Summary of Auditors’ Results 18 Current Findings: Government Auditing Standards 20 Federal Compliance 27 State Compliance 82 Prior Findings Not Repeated 110 Table of Award Numbers Referenced in the Federal Compliance Findings 112 Financial Related Information: Financial Related Information Summary 124 Financial Related Schedules: Schedule of Expenditures of Federal Awards 125 Attachments to Schedule of Expenditures of Federal Awards: Non Cash Federal Awards - Federal Loans Disbursed and Capital Contributions 195 Schedule of Loans Issued and Outstanding Balances - Student Loan Disclosure 196 Details for Pass-Through Federal Funding 197 Notes to Schedule of Expenditures of Federal Awards 316 Related Reports Published Under Separate Cover: Annual Financial Report of the University of Illinois for the Year ended June 30, 2014, which is incorporated herein by reference Supplemental Financial Information Report for the Year ended June 30, 2014, which is incorporated herein by reference Annual Financial Report of the University of Illinois Auxiliary Facilities System for the Year ended June 30, 2014, which is incorporated herein by reference Annual Financial Report of the University of Illinois Health Services Facilities System for the Year ended June 30, 2014, which is incorporated herein by reference Report Required Under Government Auditing Standards for the Year ended June 30, 2014, which is incorporated herein by reference STATE OF ILLINOIS UNIVERSITY OF ILLINOIS University Officials Year ended June 30, 2014 Robert A. Easter President Walter K. Knorr Vice President / Chief Financial Officer and Comptroller Michael B. Bass Senior Associate Vice President for Business and Finance Patrick M. Patterson Controller and Senior Assistant Vice President for Business and Finance Julie A. Zemaitis Executive Director of University Audits Phyllis M. Wise Chancellor and Vice President, University of Illinois, Urbana-Champaign Campus Ginger Velazquez Interim Assistant Vice President for Business and Finance, Urbana-Champaign Campus Paula Allen-Meares Chancellor and Vice President, University of Illinois, Chicago Campus Heather J. Haberaecker Executive Assistant Vice President for Business and Finance, Chicago Campus Susan J. Koch Chancellor and Vice President, University of Illinois, Springfield Campus Michael E. Bloechle Director of Business Services, Springfield Campus Administrative offices are located at: Central Administration Springfield Campus 238 Henry Administration Building Business Services Building 506 South Wright Street Room 59 Urbana, Illinois 61801 Springfield, Illinois 62794 Chicago Campus Urbana-Champaign Campus 809 South Marshfield 104 Coble Hall Room 608 801 South Wright Street Chicago, Illinois 60612 Champaign, Illinois 61820 1 2 3 STATE OF ILLINOIS UNIVERSITY OF ILLINOIS Compliance Report Summary Year ended June 30, 2014 The compliance testing performed during this examination was conducted in accordance with Government Auditing Standards and in accordance with the Illinois State Auditing Act. Accountants’ Report The Independent Accountants’ Report on State Compliance and on Internal Control over Compliance for State Compliance Purposes does not contain scope limitations, disclaimers, or other significant nonstandard language. Summary of Findings Current Prior Number of report report Findings 39 29 Repeated findings 20 18 Prior recommendations implemented or not repeated 9 12 Details of findings are presented in the separately tabbed report section of this report. Schedule of Findings and Questioned Costs Findings (Government Auditing Standards) Item No. Page Description Finding Type 2014-001 20 Inadequate Procedures over Expense Deferrals Significant deficiency and Other Cut-off Related Issues 2014-002 23 Inadequate Controls over University Significant deficiency Procurement Card Transactions 2014-003 25 Inadequate Procedures over Financial Reporting Significant deficiency of Investment Activity 4 (Continued) STATE OF ILLINOIS UNIVERSITY OF ILLINOIS Compliance Report Summary Year ended June 30, 2014 Findings (Federal Compliance) Item No. Page Description Finding Type 2014-004 27 Incomplete Documentation in Client Eligibility Noncompliance and Files material weakness 2014-005 31 Inadequate Procedures for Closing Federal Noncompliance and Projects material weakness 2014-006 35 Incomplete Cost Transfer Information Noncompliance and material weakness 2014-007 40 Expenditures Reported in the Incorrect Noncompliance and Accounting Period material weakness 2014-008 43 Inadequate Documentation for Payroll and Noncompliance and Fringe Benefit Expenditures material weakness 2014-009 47 Inadequate Process for Updating Property Noncompliance and Management Records material weakness 2014-010 51 Inadequate Support for Cash Requests Noncompliance and material weakness 2014-011 55 Improper Reporting of Amounts in Financial Noncompliance and Status Reports material weakness 2014-012 58 Inadequate Approval Controls over Financial Noncompliance and Reporting material weakness 2014-013 61 Improper Reconciliation of Borrower Data Noncompliance and significant deficiency 2014-014 63 Improper Subsidized Federal Direct Loan Noncompliance and Amount significant deficiency 2014-015 65 Failure to Timely and Accurately Report Noncompliance and Student Status Changes significant deficiency 2014-016 67 Improper Indirect Cost Rate Noncompliance and significant deficiency 5 (Continued) STATE OF ILLINOIS UNIVERSITY OF ILLINOIS Compliance Report Summary Year ended June 30, 2014 Findings (Federal Compliance, continued) Item No. Page Description Finding Type 2014-017 69 Inadequate Monitoring of Subrecipient OMB Noncompliance and Circular A-133 Audit Reports significant deficiency 2014-018 72 Inaccurate Award Records Noncompliance and significant deficiency 2014-019 74 Failure to Report Subaward Information Noncompliance and Required by FFATA significant deficiency 2014-020 77 Failure to Communicate Required Information Noncompliance and to Subrecipients significant deficiency 2014-021 80 Failure to Obtain Suspension and Debarment Noncompliance and Certifications from Vendors significant deficiency Findings (State Compliance) Item No. Page Description Finding Type 2014-022 82 Contracts and Real Estate Leases Not Properly Noncompliance and Executed significant deficiency 2014-023 85 Failure to Follow Time Reporting Requirements Noncompliance and significant deficiency 2014-024 86 Inadequate Controls over User Access to Noncompliance and Information Systems significant deficiency 2014-025 88 Pre-employment References not Documented in Noncompliance and Accordance with University Policies and significant deficiency Procedures 2014-026 89 Noncompliance with University Guidelines of Noncompliance and the Illinois Legislative Audit Commission significant deficiency 2014-027 90 Inadequate Procedures to Appropriately Noncompliance and Identify and Record Capital Expenditures in significant deficiency a Timely Manner 2014-028 92 Statutory Mandates – Noncompliance with the Noncompliance and School Code significant deficiency 6 (Continued) STATE OF ILLINOIS UNIVERSITY OF ILLINOIS Compliance Report Summary Year ended June 30, 2014 Findings (State Compliance, continued) Item No. Page Description Finding Type 2014-029 93 Sabbatical Reports Not Submitted in Noncompliance and Accordance with University Policies and significant deficiency Procedures 2014-030 94 Statutory Mandates – County Cooperative Noncompliance and Extension Law significant deficiency 2014-031 95 Noncompliance with State Vehicle Use Act Noncompliance and significant deficiency 2014-032 97 Noncompliance with the Illinois Vehicle Code Noncompliance and significant deficiency 2014-033 98 Statutory Mandates – Pension Code Noncompliance and significant deficiency 2014-034 99 Inadequate Procedures to Remove Inactive Noncompliance and Employees from Payroll System significant deficiency 2014-035 101 Noncompliance with the University of Illinois Noncompliance and Act Regarding Proficiency in the English significant deficiency Language 2014-036 103 Uncollateralized Deposit Accounts Noncompliance and significant deficiency 2014-037 104 Improper Classification and Approval of Noncompliance and General Ledger Expenditures significant deficiency 2014-038 106 Inadequate Review of an Accounting Noncompliance and Adjustment Made at Period End significant deficiency 2014-039 107 Performance Audit Follow-up