1. MnSCU Institution Audits Presentation to the MnSCU Audit Committee September 18, 2002 by Jim Riebe, Audit Manager Office of the Legislative Auditor

2. Today’s Agenda Discuss 12 college and university audit reports performed under MnSCU contract –Overview by institution of the number of findings and internal audit classification –Generally discuss types of findings Discuss OLA assurance work to support MnSCU individual college and university and system-wide financial statements

3. Audit Scope and Objectives Audit Objectives –Internal control –Legal compliance Audit Scope –Generally for the three years ended June 30, 2001 –Material financial activities Financial management, tuition and fees, payroll, bookstore operations, administrative expenditures

4. Today’s Audit Reports Central Lakes College Century College Hennepin Technical College Itasca Community College Mesabi Range Community and Technical College Metropolitan State University

5. Today’s Audit Reports (Cont.) Minneapolis Community and Technical College Minnesota West Community and Technical College Normandale Community College Northeast Services Unit Office of the Chancellor Vermilion Community College

6. Comparison of Audit Results

7. Century College

8. Central Lakes College

9. Hennepin Technical College

10. Itasca Community College

11. Mesabi Range C &TC

12. Vermilion Community College

13. Metropolitan State University

14. Minneapolis C&TC

15. Minnesota West C&TC

16. Northeast Services Unit

17. Normandale Community College

18. Office of the Chancellor

19. Financial Mgmt. Concerns (1) Unnecessary or incompatible access to computer systems (7 institutions) Untimely bank reconciliations and/or unused bank accounts (4 institutions) Insufficient collateral for bank balances (4 institutions) Lack of procedures and controls to manage shared databases and financial reporting between two institutions

20. Financial Mgmt. Concerns (2) Not calculating the indirect costs of operating the bookstore, and not analyzing inventory usage (2 institutions) Foundations –Foundation administered certain grants –Part-time faculty/administrators serve on board as voting members

21. Receipt Processing Concerns Inadequate control over tuition waivers, backdated registration cancellations, voided transactions (6 institutions) Inadequate separation of duties over tuition, food service receipts, or unsecured receipts Untimely tuition, bookstore, or computer store deposits (3 institutions)

22. Payroll Concerns (1) Not adjusting payroll clearing account to reduce inflated cash and revenue (4 institutions) Erroneous severance payments ($110,000, recovered $82,000) Lack of reconciliation of state’s payroll system to MnSCU’s payroll system, or lack of independent review of payroll transactions (2 institutions)

23. Payroll Concerns (2) Inadequate monitoring of faculty and excluded administrator leave

24. Expenditure Concerns (1) Expenditure Concerns (1) Inadequate separation of duties for bookstore or other administrative expenses (3 institutions) Lack of formal contracts for business arrangements, not encumbering funds, paying vendors in advance, not monitoring contract terms (3 institutions) Incorrect recording of liabilities (occurrence dates) (2 institutions)

25. Expenditure Concerns (2) Employee’s relative compensated for lodging Inadequate documentation (2 institutions) –that expenditures were authorized –that expenditures complied with legal provisions evidence of required bids

26. Financial St. Assurances (1) Work performed to support MnSCU’s institution and system-wide financial statement audits OLA Report on State’s Payroll System –Adequate controls to ensure classified employees are paid at proper rates –Adequate controls to ensure payroll is accurately processed and recorded in the state’s accounting system –Controls protect the integrity of payroll and personnel data

27. Financial St. Assurances (2) State’s payroll system (Cont.) –Some information technology professionals had excess security clearances –Some interface files not secured MnSCU cash, investments, investment income, and securities lending detail –MnSCU state treasurer’s cash –Revenue Bond Fund –Winona State University –Supplemental Retirement Fund

28. Financial St. Assurances (3) Workers compensation – Dollar amount of liability by institution Compensated absences –Dollar amount of liability for classified employees by institution