Radford University report on Audit for the year ended June 30, 2007
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RADFORD UNIVERSITYREPORT ON AUDITFOR THE YEAR ENDEDJUNE 30, 2007 AUDIT SUMMARY Our audit of Radford University for the year ended June 30, 2007, found: • the financial statements are presented fairly, in accordance with generally accepted accounting principles; • three internal control matters that we consider to be significant deficiencies; however, we do not consider these to be material weaknesses; • one instance of noncompliance required to be reported; under Government Auditing Standards; and • the University has taken adequate corrective action with respect to the audit findings reported in the prior year. -TABLE OF CONTENTS- Pages AUDIT SUMMARY INTERNAL CONTROL AND COMPLIANCE FINDINGS AND RECOMMENDATIONS 1-2 MANAGEMENT’S DISCUSSION AND ANALYSIS 3-12 FINANCIAL STATEMENTS: 13 Statement of Net Assets 14 Statement of Revenues, Expenses, and Changes in Net Assets 15 Statement of Cash Flows 16 Notes to Financial Statements 17-31 INDEPENDENT AUDITOR’S REPORT Report on Financial Statements 32-33 Report on Internal Control over Financial Reporting and 33-34 on Compliance and Other Matters UNIVERSITY RESPONSE 35-36 Y OFFICIALS 37 INTERNAL CONTROL AND COMPLIANCE FINDINGS AND RECOMMENDATIONS Strengthen Controls for Reporting Capital Assets We noted the following control deficiencies in our review of capital asset reporting: • The ...
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| Publié par | Ustue |
| Nombre de lectures | 27 |
| Langue | English |
Extrait
RADFORD UNIVERSITY
REPORT ON AUDIT
FOR THE YEAR ENDED
JUNE 30, 2007
AUDIT SUMMARY Our audit of Radford University for the year ended June 30, 2007, found: • presented fairly, in accordance with generallythe financial statements are accepted accounting principles; • three internal control matters that we consider to be significant deficiencies; however, we do not consider these to be material weaknesses; • of noncompliance required to be reported; underone instance Government Auditing Standards; and • the University has taken adequate corrective action with respect to the audit findings reported in the prior year.
-TABLE OF CONTENTS-
AUDIT SUMMARY INTERNAL CONTROL AND COMPLIANCE FINDINGS AND RECOMMENDATIONS MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL STATEMENTS: Statement of Net Assets Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows Notes to Financial Statements INDEPENDENT AUDITOR’S REPORT Report on Financial Statements Report on Internal Control over Financial Reporting and on Compliance and Other Matters UNIVERSITY RESPONSE UNIVERSITY OFFICIALS
Pages 1-2 3-12
13 14 15 16 17-31
32-33 33-34 35-36 37
INTERNAL CONTROL AND COMPLIANCE FINDINGS AND RECOMMENDATIONS Strengthen Controls for Reporting Capital Assets We noted the following control deficiencies in our review of capital asset reporting: • projects (Track and Soccer Field Phase IThe University did not remove two completed and Fairfax, Howe, Adams Land Acquisition) totaling $1.75 million from Construction in Progress. • overstatement wasThe University overstated equipment additions by $327,393. The comprised of an asset retagging error of $203,615, a prior period restatement of $110,781, and an erroneous addition of $12,997. • reviewing a sample of eight equipment disposals, we found five exceptions. Two ofAfter the errors were included in the retagging error listed above and three were assets that were no longer under the control of the University in fiscal year 2006 but the University did not delete the items until fiscal year 2007. As a result of these errors, the University had to revise the Management Discussion and Analysis, Statement of Net Assets, Statement of Revenues, Expenses and Changes in Net Assets, Cash Flow Statement and three footnotes in the annual financial statements. The University also had to identify changes in the annual financial statement attachments required by Departments of Accounts (DOA). Management should perform a stringent review of policies and procedures in the capital asset reporting process. Management should identify potential weaknesses and strengthen internal controls to prevent future material misstatements in the annual financial statements. Perform a Stringent Review of Existing Operations in the Athletic Department Our review of the University’s Athletic Department revealed several areas that require management’s attention to ensure there are proper controls in place. Receipts: The Department did not deposit receipts timely. We tested revenue sharing, game guarantees and ticket sales and found delays in all three areas. One of three revenue sharing deposits, seven of ten game guarantee deposits, and 25 of 25 ticket sale deposits tested were untimely. In addition, staff did not consistently document the date of receipt. There is also a lack of separation of duties in the handling of receipts and the review process. For game guarantees, staff did not mark the contracts “paid or otherwise ensure the receipt of the proper payment. Two contracts were more than three months late, and for one, the opposing college had to bring the issue to the attention of the Department. In another instance, it took more than nine months before the Department took action to collect the amount due for one game guarantee. In addition, there is a lack of separation of duties in the collecting, depositing, and reviewing of game guarantees.
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Expenses: We tested 25 purchase orders and found that one did not have supporting documentation, one was mathematically incorrect and seven had untimely payment. The Department has a contract with Abbott for team travel. However, the Department paid invoices without obtaining a copy of the bill computation to determine if the amounts paid were reasonable. Reporting: The Department omitted $6,205 in scholarship payments from the Radford University Foundation to NCAA athletes from the NCAA Schedule. The University omitted the Dedmon Center Roof Repair from the 2006 capital asset footnote. As a result, the fiscal year 2007 beginning balances reflect a difference of $235,078 for construction in progress and total capital assets. Management should perform a stringent review of Athletic Department operations and strengthen internal controls to prevent future occurrences. Management should ensure that Athletic Department personnel understand and adhere to the University’s policies and procedures and state regulations. Properly Complete Employment Eligibility Forms Radford University personnel are not properly completing Employment Eligibility Verification forms (I-9) in accordance with guidance issued by the US Citizenship and Immigration Services of the US Department of Homeland Security in its Handbook for Employers (M-274). In our sample of twelve I-9 forms, we only found three I-9 forms correctly completed by Radford University. In the remaining nine, we observed the following error rates: • The University did not properly complete Section 2 Employer Review and Verification on four forms. • The University did not properly complete Section 3 Updating and Re-verification on four forms. • five forms before or within three business days of the employmentThe employer did not sign start date. • The employees did not sign four forms before or on the employment start date. • documents used for verification on three forms.The University did not maintain copies of • One employee did not initial/date the correction. We recommend that management develop a training program for all applicable employees on the requirements of completing the I-9 form. Management should also implement a process for monitoring accuracy in the I-9 process. The federal government has stepped up its enforcement efforts related to hiring illegal immigrants, which makes having a good I-9 process in place more important than ever before. Weaknesses in the I-9 process could result in fines and penalties against the institution.
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MANAGEMENT’S DISCUSSION AND ANALYSIS (“unaudited) Introduction The following unaudited Management’s Discussion and Analysis (MD&A) provides an overview of the financial activities of Radford University in an objective, easily readable format for the year ending June 30, 2007. Since this analysis includes highly summarized data, it should be read in conjunction with the accompanying financial statements and footnotes. The University’s management is responsible for all the financial information presented, including the discussion and analysis. The three required financial statements are the Statement of Net Assets; Statement of Revenues, Expenses, and Changes in Net Assets; and Statement of Cash Flows. These statements are summarized and analyzed in the following paragraphs. The Radford University Foundation, Inc. is included in the accompanying financial statements in a separate column as a component unit. However, the following discussion and analysis does not include the Foundation’s financial condition and activities. University Overview Radford University is a coeducational, comprehensive public university that is student centered and focused on providing outstanding academic programs with 153 program options for its 9,220 (Fall 2006 headcount) undergraduate and graduate students. Well known for its strong faculty/student bonds, innovative use of technology in the learning environment, and vibrant student life on a beautiful campus, the University offers many opportunities to get involved and succeed in and out of the classroom. The University atmosphere is residential with most students living in residence halls or in private accommodations within walking distance of the campus. In its 2006Guide to America’s Best Colleges, U.S. News and World Report listed Radford University as one of the top 25 public master’s universities in the south for the second consecutive year. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The purpose of the statement is to present a snapshot of the University’s financial position to the readers of the financial statements. The data presented in the Statement of Net Assets aids readers in determining the assets available to continue the operations of the University. It also allows readers to determine how much the University owes. Finally, the Statement of Net Assets provides a picture of net assets available for expenditure by the University. Sustained increases in net assets over time are one indicator of the financial stability of an organization. Net assets are classified into three major categories: invested in capital assets, restricted net assets -expendable, and unrestricted net assets. Invested in capital assets Invested in capital assets, net of related debt, represents the University’s total investment in capital assets net of accumulated depreciation and outstanding debt obligations related to those capital assets. Debt incurred, but not yet expended for capital assets, is not included as a component of invested in capital assets, net of related debt.
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Restricted net assets - expendable Restricted expendable assets include resources the University is legally or contractually obligated to expend in accordance with restrictions imposed by external third parties. Unrestricted net assets Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, indirect costs, and sales and services of auxiliary enterprises and educational departments. These resources are used for transactions related to academic departments and general operations and may be used at the discretion of the University to meet current expenses for any lawful purpose in support of its primary mission of instruction. These resources also include auxiliary enterprises that provide services for students, faculty, and staff. Examples of the University’s auxiliary enterprises include residence halls, dining services, and intercollegiate athletics. The schedule below shows trends in assets, liabilities, and net assets over the past two fiscal years. Statement of Net Assets - Summary Schedule ($ shown in thousands) Increase/(Decrease) 2006 2007 (restated) Amount Percent Assets: Current assets $ 93,284 $ 67,070 $ 26,214 39.1 Capital assets, net 117,595 110,392 7,203 6.5 Other noncurrent assets 3,284 3,142 142 4.5 Total assets 214,163 180,604 33,559 18.6 Liabilities: Current liabilities 36,367 26,989 9,378 34.8 Non-current liabilities 4,257 4,308 (51) (1.2) Total liabilities 40,624 31,297 9,327 29.8 Net Assets: Invested in capital assets, net of related debt 117,595 110,392 7,203 6.5 Restricted expendable 40,453 32,679 7,774 23.8 Unrestricted 15,491 6,236 9,255 148.4 Total net assets $173,539 $149,307 $ 24,232 16.2 The total net assets of the University increased by $24,232,173 (16.2 percent) during fiscal year 2007 bringing total net assets to $173,539,452 at year-end. This growth was primarily due to increased receipt of cash appropriated for current and future capital projects, which include the construction of the Fine Arts Center and building renovations of several academic buildings (i.e., Russell, Davis, Porterfield, Powell, Young, and Whitt Halls). The chart below illustrates the categories that comprise the University’s assets, liabilities and net assets for the past two fiscal years. 4
37.14%
61.12%
2006
Statement of Net Assets - Comparative Chart 2007 2006
43.56%
54.91%
14.95% 2.39%
61.12%
16.98% 1.99%
54.91%
2007
100% 90% 80% 70% 60% 50% 40% 30% 20% 18.89% 18.09% 10% 7.23% 0%1.74% 1.53%3.45% Assets ** Assets ** Liabilities and Net Assets Liabilities and Net Assets Other noncurrent assets ** Cap ital assets, net ** Current assets ** Unrestricted net assets** in cap Invested assets, net of related debt** tialRestricted, exp net assets** endable CurrentNoncurrent liabilities liabilities Capital Asset and Debt Administration One of the primary objectives of the University is the development and renewal of capital assets. The University continues to implement long-range plans to modernize older facilities, balanced with new construction. Investments in renovation and new construction serve to facilitate the University’s high-quality instructional programs, residential lifestyles, and student quality of life. Note 4 of the Notes to Financial Statements describe the University’s investment in capital assets with total additions of $27,732,200 (excluding depreciation) during fiscal year 2007. The renovation of Peters Hall contributed to the additions to buildings while the construction of the Fine Arts Center and the Russell Hall renovation were the primary components of the additions to construction in progress. Current year depreciation expense totaled $7,608,166. Overall, the value of the University’s capital assets totaled $117,595,105 at the end of fiscal year 2007, a $7,202,860 (6.5 percent) increase over fiscal year 2006. Commitments to construction contractors, architects, and engineers for capital projects totaled $13,080,878 at June 30, 2007. Capital construction costs for the Fine Arts Center constituted most of this total.
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Statement of Revenues, Expenses and Changes in Net Assets The Statement of Revenues, Expenses, and Changes in Net Assets presents the University’s operating and nonoperating activities, which creates the changes in total net assets. The purpose of the statement is to present all revenues received and accrued, all expenses paid and accrued, and gains or losses from investments and capital assets. Generally, operating revenues are received for providing goods and services to students and various customers and constituencies of the University. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for operating revenues and to carry out the mission of the University. Salaries and fringe benefits for faculty and staff are the largest category of operating expense. Nonoperating revenues are revenues received for goods and services that are not directly provided. State appropriations are included in this category and provide substantial support for paying the operating expenses of the University. Therefore, the University, like most public institutions, will show an operating loss. Statement of Revenues, Expenses, and Changes in Net Assets - Summary Schedule ($ shown in thousands) Increase/(Decrease) Percent 2007 2006 Amount Operating revenues $ 86,034 $ 83,950 $ 2,084 2.5 Less: Operating expenses 136,551 125,872 10,679 8.5 Operating loss (50,517) (41,922) 8,595 20.5 Nonoperating revenues and expenses 55,792 48,353 7,439 15.4 Income before other revenues, expenses, gains, or losses 5,275 6,431 (1,156) (17.9) Other revenue, expenses, gains, or losses 18,957 4,068 14,889 366.0 Increase in net assets 24,232 10,499 13,733 130.8 Net assets - beginning of year, restated 149,307 138,808 10,499 7.6 Net assets - end of year $173,539 $149,307 $24,232 16.2 Operating Revenues Operating revenues primarily include tuition, fees, and auxiliary enterprises. Overall, the University’s operating revenues increased to $86,033,805 in fiscal year 2007, compared to $83,950,592 in fiscal year 2006, an increase of $2,083,213 (2.5 percent). This overall increase included an increase of $289,264 (0.9 percent) in student tuition and fees, net of scholarship allowances, and an increase of $1,514,998 (3.9 percent) in auxiliary enterprises revenue, which is funded primarily from student fees. The operating revenue increase in 2007 would have been slightly higher if the University had not used almost $1 million in deferred tuition and fee revenue to cover the nongeneral fund portion of an additional salary payroll in fiscal year 2006. This salary payroll would normally have been paid in fiscal year 2007. Instead, it was paid in fiscal year 2006 because the Appropriations Act for 2007-08 was not approved until very late in the fiscal year. Most of the growth in operating revenues can be attributed to rate increases in tuition, fees, room, and board for in-state and out-of-state students.
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Non-operating Revenues Non-operating revenues increased by $7,439,741 (15.4 percent) from the previous year’s total. This increase represents new state general fund appropriations for educational and general programs and student financial assistance plus appropriation transfers from the state central accounts for increases in salaries, health insurance premiums, and fringe benefits. Note 10 of the Notes to Financial Statements outlines the state appropriations received by the University during fiscal year 2007. Other Revenues Other revenues increased by $14,889,239 (336.0 percent) over the prior fiscal year. This increase is attributed to new general fund capital appropriations received for the renovation of Russell Hall, construction of the Fine Arts Center, as well as appropriations for future renovations of several academic buildings. Total Revenues Total revenues increased by $24,412,193 (17.9 percent) over the prior fiscal year due primarily to the increases in nonoperating and other revenues as explained above. Total revenues increased at a rate greater than total expenses primarily due to having received new general fund appropriations for current and future capital projects for which expenditures had not been incurred at June 30, 2007. As a result, the University experienced a substantial increase to net assets, which strengthened its financial position. The schedule below shows revenue trends over the past two fiscal years. Revenues Summary Schedule ($ shown in thousands) 2006 Increase/(Decrease) 2007 (Restated) Amount Percent Operating revenues: Student tuition and fees, net of scholarship allowance $ 33,645 $ 33,355 $ 290 .9 Federal, state, and nongovernmental grants and contracts 10,859 10,700 159 1.5 Auxiliary enterprises, net of scholarship allowance 40,431 38,916 1,515 3.9 Other operating revenue 1,099 979 120 12.3 Total operating revenues 86,034 83,950 2,084 2.5 Non-operating revenues: State appropriations 52,404 47,027 5,377 11.4 Investment income, interest on capital assets-related debt, loss on disposal of plant assets, and other non-operating revenues 3,388 1,326 2,062 155.5 Total non-operating revenues 55,792 48,353 7,439 15.4 Capital revenues and gains: Capital appropriations 18,272 2,455 15,817 644.3 Capital gifts 685 1,613 (928) (57.5) Total capital revenues and gains 18,957 4,068 14,889 366.0 Total revenues $160,783 $136,371 $ 24,412 17.9 7
Federal, State, Local, and Private Contracts Auxiliary Enterprises Other Operating $10,859 $40,431 $1,099 7% 25% 1%
The following chart illustrates revenues by source (both operating and nonoperating) used to fund the University’s activities for the year ended June 30, 2007. Critical recurring sources of the University’s revenues are considered nonoperating as defined by GASB Statement 35. These sources are presented as state appropriations and capital appropriations and gifts on the chart below. Revenues by Source ($ shown in thousands) Capital Appropriations and Gifts Tuition and$18,957 Student pp AtetaS12%404 5$,2nFoe essaiitorrp 32% $33,645 21% Other Nonoperating $3,388 2% Total Operating Expenses Operating expenses for fiscal year 2007 totaled $136,551,270 up 8.5 percent over fiscal year 2006. There were several factors impacting expenditures across all programs: • to more adequately fund basic operatingIncreased general fund appropriations from the state costs. • An average salary increase of 3.29 percent for all faculty (teaching and administrative) and 4.0 percent for all classified staff during fiscal year 2007. • Establishment of new positions and filling vacant positions. • Increased plant operation costs due to increased utility rates and increased gasoline costs. • Renovations of facilities, purchase of equipment, and hiring of new staff for the clinical simulation centers. • for enhancing technology resources and purchase of a newOngoing purchases of equipment University administrative computer system. The schedule below shows expenditure trends over the past two fiscal years.
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