Creation or Revision Date Fiscal Control and Internal Auditing Act (FCIAA): Importance and Impact to University Units Course Creation or Revision Date

In the News Alabama - Thirteen people have been charged with theft at Bishop State Community College, and state auditors concluded that more than $290,000 in federal financial aid was misused or stolen. North Carolina – An audit of N.C. A&T State found $500,000 in questionable expenses by the former manager of a fellowship program, the misuse of $100,000 by a former administrative assistant in the university's department of natural resources and environmental design, and the misappropriation of $87,000 by a former vice chancellor. Illinois - Two University of Illinois faculty members misspent federal grant and university money on hotel rooms and other luxury items and double-billed for expenses as part of nearly $82,000 in questionable charges.

What is the Fiscal Control and Internal Auditing Act (FCIAA)? FCIAA is a State-mandated program developed to aid Illinois State agencies in conducting reviews of their fiscal and administrative systems of internal control. Requires agencies to report material control weaknesses to the State. Our presentation today is to increase awareness of our collective responsibilities under FCIAA, and to foster effective communications at the University during our annual review process.

Example: Material Control Weakness Several departments within the College of XYZ at one of our campuses are not conducting an adequate biennial physical inventory of fixed assets according to University policy. As a result of this control weakness in the College of XYZ, significant differences between the University’s fixed asset records and actual inventory on hand at the College could go undetected. Adequate internal controls over fixed assets are critical for tracking and safeguarding fixed assets, as well as ensuring that the financial statements properly reflect the value of assets held by the University. Typically, such a control weakness isolated to a few departments in a single college would not be considered a material control weakness for the University. In the event that such conditions were widespread across multiple colleges, this control weakness could be material to the overall University and reportable to the State under FCIAA requirements.

How does my unit benefit from having strong fiscal and administrative controls? Helps protect the good reputations of unit administrators and staff. Demonstrates good stewardship to state, granting agencies, donors and taxpayers Helps ensure efficient/effective use of your unit resources Helps protect against misuse of resources, adverse audit findings and negative media coverage

Message from the President “There is nothing more important to the University of Illinois than our reputation for honesty and good management. That is why all of us in the University community must protect and advance the good name the University has earned over its long and distinguished lifetime. Our obligation as employees is clear: we must be careful guardians of the University’s assets – its money, its equipment, its buildings and books – on behalf of the people of Illinois. In short, integrity is the bedrock of our institutional behavior.” B. Joseph White – Office of University Audits Web Site

Who’s Responsible? University Policy establishes some responsibility for the internal control system to all University employees. Deans, Department Heads & Administrative Unit Heads are ultimately responsible for Fiscal Transactions. Fiscal Officers and Business Managers are responsible for ensuring the effectiveness of internal controls and addressing weaknesses “Internal control gets us where we want to go, without surprises along the way. Internal control is everyone’s responsibility…Internal control is me.” - From Cargill Corporations’ Internal Control Statement

What are administrative and fiscal systems of internal controls? Processes within an organization designed to provide reasonable assurance that: Information is reliable, accurate, and timely Policies, plans, procedures, laws, regulations, and contracts are followed Assets (including people) are safeguarded. Resources are used in an economical/efficient manner Established objectives and goals are met They help the organization prevent errors or irregularities, identify problems and ensure that corrective action is taken.

Administrative and Fiscal Systems of Internal Controls - Examples Cash Receipts Control Gift Control Sponsored Program Control Budget Control Information Technology Control

Examples: Cash Receipts Control Environment Issuance and accounting for a pre-numbered receipt Independent reconciliation of receipts to cash deposited Safeguarding of cash and checks Timeliness of deposits Petty cash and change funds access, disbursement, and reconciliation procedures comply with policies. Eliminate where ever possible Adequate segregation of duties between custody and record keeping

Examples: Gift Control Environment Classification and support (gift vs. grant and restricted vs. unrestricted) Gift Transmittal Forms and reporting to the Foundation Policies for acknowledgement letters by the Department Reviews of FACTS weekly gift reports On-going procedures to ensure compliance with donor intent Monitoring of deficits and accumulations Preventing commingling of gift funds Managing conflict of interests involving gift funds

Examples: Sponsored Program Control Environment Restricted funds are used only for the intended purpose – documentation for all expenditures are adequate to support that assertion Expenditures are reviewed for allowability, classification and adequate funding prior to payment Sub-grantee monitoring Deficit monitoring and follow-up Unusual transactions are identified, questioned and adequately explained Individuals have received training required (grant, IRB, safety, ICUC, etc…)

Examples: Budget Control Environment Unit business policies are established and communicated Identification and resolution of inappropriate or inaccurate transactions Financial reconciliations are performed timely and reviewed by an individuals with adequate knowledge of the business unit Financial reporting is prepared comparing budgets to actual on a level detailed enough to provide adequate oversight and is reviewed by the unit leadership and individual responsible parties Significant variations between actual expenditures and budget are identified and investigated in a consistent manner Procedures are established over validation of reporting out of the data warehouse

Examples: Information Technology Control Environment Procedures and communications ensure passwords are not shared Data backup and storage is held offsite Disaster recovery plan is documented and tested Data has been evaluated against the University’s security policy and confidential data is restricted Adequate security (firewall, intrusion detection) exists for servers with confidential data Adequate documentation exists for unique systems or programs Physical IT areas are secure and protected from elements

Annual Evaluation Process Questionnaire distributed to all colleges and administrative units to determine the strength of each unit’s fiscal and administrative controls: Surveys the major fiscal and administrative controls Deans and Administrative Unit Heads are responsible for the accuracy and completeness of their organization’s responses – as denoted by signing the questionnaire. Identifying and reporting potential deficiencies helps units to improve their controls – protecting unit resources and reputations. Typically, reported items will not generate a need for the University to report to the State under FCIAA Resources are available to assist units in evaluating and improving their controls. Ask early, ask often We are developing training materials to assist unit business officers in their participation with the questionnaires.

Annual Evaluation Timeline Dec. 1 – Questionnaires distributed to Deans and Administrative Unit Heads Jan. 15 – Units complete questionnaires and return to Provost (campuses) and University Controller (UA) Mid Jan. to Feb. 15th - Provosts and Chancellors and Controller review responses, and document deficiencies (or absence of deficiencies) in a letter. Letters are routed to the respective EAVP/AVP (campuses) and the SAVP (UA). Mid Feb to March 28th - Campus EAVPs/AVP and SAVP review responses and provide letter to Executive Director of University Audits. April 14th - Chief Financial Officer, SAVP and Executive Director of University Audits document the University's actions for compliance in a recommended certification letter to the President. April 21st - President certifies University's compliance with FCIAA by signing the certification letter and transmitting to Office of the Auditor General before the May 1 deadline.

Your role in the process… Take a critical look at your fiscal and administrative controls View the questionnaire as a useful tool to help you inventory the condition/effectiveness of your unit’s control environment Be candid in your questionnaire responses. If you find a weakness, you can include a note that you are addressing it or need assistance. Don’t hesitate to use resources available to assist units in improving their controls By regularly addressing and improving our control environments, everyone benefits! Let’s work together to foster a culture of strong fiscal and administrative controls

Resource Tools Through Office of University Audits Website Internal Control Tools – access tools to assist you in ensuring internal controls are in place www.audits.uillinois.edu/internal_controls/index.html Internal Control Training Classes http://training.obfs.uillinois.edu/index.cfm?campus=U http://training.obfs.uillinois.edu/index.cfm?campus=C http://training.obfs.uillinois.edu/index.cfm?campus=S Self-Assessment Questionnaire www.audits.uillinois.edu/Welcome/SelfAssessment%20Survey.html

OBFS Groups Available to Assist Your Unit University Accounting and Financial Reporting Accounting Consultants Group, 312-996-4013 Provides individual analysis and consultation to assist in the successful management of your business operations An added resource for resolving accounting and financial issues and problems Accounting Information Mgmt, 217- 333-0487 Provides specialized training for individual units on accounting and reporting issues Provides assistance in creating management reports from Banner finance

Questions?