1. Office of the Legislative Auditor Report #06-28 Minnesota State Colleges and Universities System Internal Control and Compliance Audits of Selected Colleges Brad A. White, Audit Manager

2. Office of the Legislative Auditor Colleges Examined: Alexandria Technical College Anoka Technical College Dakota County Technical College North Hennepin Community College Northland Community & Technical College South Central College Saint Paul College

3. Offi ce of the Legislative Auditor Audit Period –3 Fiscal Years ending June 30, 2005 Financial Cycles –Security Access to Financial Applications –Tuition, Fees, & 3 rd Party Billings –Personnel/Payroll Expenses –Administrative & Operating Expenses –Bookstore Operations (3 Colleges)

4. Office of the Legislative Auditor Internal Control Elements –Separation of Duties –Safeguarding of Assets –Authorization –Recording Transactions –Physical Verification –Financial Monitoring Legal Compliance Areas –Statues and Laws –MnSCU Policies & Procedures

5. Office of the Legislative Auditor Key Conclusions Generally…… Internal controls were adequate College transactions complied However, 17 Findings specified areas of –internal control weaknesses –instances of noncompliance

6. Office of the Legislative Auditor Findings by College 4 - Alexandria Technical College 10 - Anoka Technical College 3 - Dakota County Technical College 4 - North Hennepin Technical College 4 - Northland Community & Technical College 6 - South Central College 3 - Saint Paul College

7. Office of the Legislative Auditor Findings by Financial Cycle 1 – Security Access 8 – Tuition, Fees, and 3 rd Party Billings 5 – Personnel Expenses 3 – Administrative and Operating Expenses

8. Office of the Legislative Auditor Security Access to Financial Functions Preventive Control (1 employee cannot access incompatible functions) versus Detective Control (1 employee can access all functions, but their work is reviewed after-the-fact) GOAL  avoid exclusive control of a transaction from beginning to end

9. Office of the Legislative Auditor Finding - Security Access 5 of 7 colleges provided incompatible access (College financial staff size can be an issue) detective controls not defined –no written guidelines –no documented evidence of the control –no process for reporting exceptions

10. Office of the Legislative Auditor Findings - Tuition, Fees, and 3 rd Party Billings unapproved tuition rates uncontrolled waivers & registration changes no referral of delinquent receivables late deposits or recording of transactions voiding of erroneous college-issued checks no evidence supporting negative receipts no customized training agreements with clients

11. Office of the Legislative Auditor Findings – Personnel/Payroll costs no written or untimely assignments for customized training faculty untaxed income for late employee reimbursements inaccurate faculty severance and leave accruals no independent monitoring of payroll transactions

12. Office of the Legislative Auditor Findings – Admin & Operating Expenses concerns with procurements, authorizations, and transaction coding no written agreement as fiscal agent no monitoring of frequent flyer miles

13. Office of the Legislative Auditor Findings – Bookstore Operations Control weaknesses at one college No findings due to closure of bookstore (transition to an on-line bookstore vendor)

14. Office of the Legislative Auditor Overall Conclusions The 7 MnSCU colleges examined…….. (except for the 17 finding areas) had internal controls ensuring –safeguarding of assets & public funds –accurate recording & control of transactions complied with MnSCU policies and management authorization

15. Office of the Legislative Auditor Audit Report #06-28 http://www.auditor.leg.state.mn.us Questions ???