Chicago State University. Compliance Audit for the Year Ended June 30, 2011

              STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE EXAMINATION
(In Accordance with the Single Audit Act
and OMB Circular A-133)
FOR THE YEAR ENDED JUNE 30, 2011
Performed as Special Assistant Auditors
for the Auditor General, State of Illinois
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STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE EXAMINATION
(In Accordance With the Single Audit Act and OMB Circular A-133)
FOR THE YEAR ENDED JUNE 30, 2011
TABLE OF CONTENTS
Page No.
Table of Contents 1
Agency Officials 4
Management Assertion Letter 5
Compliance Report
Summary 6
Accountants’ Reports
Independent Accountants’ Report on State Compliance, on Internal Control
Over Compliance, and on Supplementary Information for State Compliance
Purposes 12
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 15
Independent Auditors’ Report on Compliance With Requirements That Could
Have a Direct and Material Effect on Each Major Program, on Internal Control
Over Compliance, and on the Schedule of Expenditures of Federal Awards
in Accordance with OMB Circular A-133 17
Schedule of Findings and Questioned Costs
Summary of Auditors’ Results 20
Current Findings – Government Auditing Standards 22
Current Findings – Federal Compliance and Questioned Costs 29
Current Findings – State Compliance 74
Prior Findings Not Repeated 91
Financial Statement Report
The University’s financial statement report for the year ended June 30, 2011,
which includes the report of independent auditors, management discussion and
analysis, financial statements and notes, supplementary information, and the
independent auditors’ report on internal control over financial reporting and on
compliance and other matters based on an audit of basic financial statements
performed in accordance with Government Auditing Standards has been issued
separately.
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STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE EXAMINATION
(In Accordance With the Single Audit Act and OMB Circular A-133)
FOR THE YEAR ENDED JUNE 30, 2011
TABLE OF CONTENTS
Page No.
Supplementary Information for State Compliance Purposes
Summary 96
Fiscal Schedules and Analysis
Schedule of Expenditures of Federal Awards 97
Notes to the Schedule of Expenditures of Federal Awards 100
Schedule of Appropriations, Expenditures and Lapsed Balances 101
Comparative Schedule of Net Appropriations, Expenditures and
Lapsed Balances 102
Comparative Schedule of Income Fund Revenues and Expenditures 103
Schedule of Changes in State Property 104
Analysis of Significant Variations in Revenues and Expenses 105
Comparative Schedule of Cash, Temporary Cash Investments, and Investments
- at Market Value 106
Analysis of Significant Variations in Asset and Liability Accounts 107
Analysis of Significant Lapse Period Expenditures 108
Analysis of Accounts Receivable 109
Schedule of Sources and Applications of Indirect Cost Recoveries 110
Analysis of Operations
Agency Functions and Planning Program 111
Average Number of Employees (Unaudited) 114
Comparative Enrollment Statistics (Unaudited) 114
Comparative Schedule of Unrestricted Current Fund Expenditures per
Full-time Equivalent Students (Unaudited) 116
Emergency Purchases 117
Illinois First Projects 117
Bookstore Information (Unaudited) 117
Schedule of Federal Expenditures, Nonfederal Expenses and New Loans 118
Schedule of Degrees Conferred (Unaudited) 119
Schedule of Tuition and Fee Waivers (Unaudited) 120
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STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE EXAMINATION
(In Accordance With the Single Audit Act and OMB Circular A-133)
FOR THE YEAR ENDED JUNE 30, 2011
TABLE OF CONTENTS
Page No.
Special Data Requirements for Audits of Universities
University Reporting in Accordance With University Guidelines 122
Schedule of Indirect Cost Funds to be Deposited into the University
Income Fund as Required by 1982 University Guidelines (1997 Amended) 125
Schedule of Excess Funds Calculation by Entity as required by
1982 University Guidelines (1997 Amended) 126
Entities’ Financial Statements
Balance Sheets 127
Statement of Revenues, Expenditures and Transfers –
Current Unrestricted Funds 128
Statement of Changes in Fund Balances – Current Unrestricted Funds 129
Statement of Changes in Fund Balances– Plant Funds 130
Summary of Foundation Cash Support to the University 131
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STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
AGENCY OFFICIALS
President Dr. Wayne Watson
Provost and Senior V.P. of Academic and Student Affairs Dr. Sandra Westbrooks
Vice President of Administration and Finance Mr. Glenn Meeks
Associate V.P. of Administration and Finance Ms. Maricela Aranda
(8/8/11 to Present)
Associate V.P. of Administration and Finance Mr. Larry Pinkelton
(8/16/11 to Present)
Associate V.P. of Finance and Administration/Controller Mr. Edward Lannon
(to 3/31/11)
Director of Accounting/Controller Mr. Edward Lannon
(4/1/11 to Present)
Associate Director of Accounting Ms. Louise Williams
Chief Internal Auditor Mr. Ken Clow
University offices are located at:
9501 South Martin Luther King Drive
Chicago, IL 60628
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Wayne Watson, Ph.D.
President
March 2, 2012
Borschnack, Pelletier & Co.
Certified Public Accountants
200 E. Court St., Suite 608
Kankakee, IL 60901
Ladies and Gentlemen:
9501 S. King Drive I ADM 313
Chicago, Illinois 60628-1598
Telephone: 773 I 995-2400
Fax: 773 I 995·3849
E-mail: wwatson@csu.edu
We are responsible for the identification of, and compliance with, all aspects of laws, regulations, contracts,
or grant agreements that could have a material effect on the operations of Chicago State University. We
are responsible for and we have established and maintained an effective system of, internal controls over
compliance requirements. We have performed an evaluation of Chicago State University's compliance
with the following assertions during the year ended June 30, 2011 . Based on this evaluation, we assert
that during the year ended June 30, 2011, Chicago State University has materially complied with the
assertions below.
A. Chicago State University has obligated, expended, received and used public funds of the State in
accordance with the purpose for which such funds have been appropriated or otherwise authorized by
law.
B. Chicago State University has obligated, expended, received and used public funds of the State in
accordance with any limitations, restrictions, conditions or mandatory directions imposed by law upon
such obligation, expenditure, receipt or use.
C. Chicago State University has complied, in all material respects, with applicable laws and
regulations, including the State uniform accounting system, in its financial and fiscal operations.
D. State revenues and receipts collected by Chicago State University are in accordance with
applicable laws and regulations and the accounting and recordkeeping of such revenues and receipts
is fair, accurate and in accordance with law.
E. Money or negotiable securities or similar assets handled by Chicago State University on behalf of
the State or held in trust by the University have been properly and legally administered, and the
accounting and recordkeeping relating thereto is proper, accurate and in accordance with law.
Yours very truly,
. W ne Watson, President
-~~;r\es2ident of Adm~inistration a nd Finance
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE REPORT
SUMMARY
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The compliance testing performed in this examination was conducted in accordance with Government
Auditing Standards and in accordance with the Illinois State Auditing Act.
ACCOUNTANTS’ REPORTS
The Independent Accountants’ Report on State Compliance, on Internal Control Over Compliance and on
Supplementary Information for State Compliance Purposes does not contain scope limitations or
disclaimers. However, the Report does include a qualification for compliance.
SUMMARY OF FINDINGS
Number of Current Report Prior Report
Findings 34 41
Repeated findings 22 11
Prior recommendations implemented
or not repeated 19 2
Details of findings are presented in a separately tabbed report section of this report.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FINDINGS (GOVERNMENT AUDITING STANDARDS)
Item No. Page Description Finding Type
11-1 22 Suspended Academic Policy Resulted in Overstated
Liability on the Financial Statements
Significant Deficiency
11-2 25 Inaccurate Accounting for Participation in Public Entity
Risk Pool
Significant Deficiency
11-3 27 Inaccurate Accounting of Accrued Compensated
Absences
Significant Deficiency
FINDINGS (FEDERAL COMPLIANCE)
Item No. Page Description Finding Type
11-4 29 Head Start Subrecipient Material Weakness /
Material Noncompliance
11-5 32 Noncompliance with Requirements Applicable to the
Strengthening Minority-Serving Institutions Program
Material Weakness /
Material Noncompliance
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE REPORT
SUMMARY
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)
FINDINGS (FEDERAL COMPLIANCE) (Continued)
Item No. Page Description Finding Type
11-6 35 Inadequate Controls over Preparation of a Complete and
Accurate Schedule of Expenditures of Federal Awards
Material Weakness /
Noncompliance
11-7 38 Student Financial Aid Awarded to Students at an
Unapproved Location
Material Weakness /
Noncompliance
11-8 39 Student Financial Assistance Not Reconciled on a
Monthly Basis
Material Weakness /
Noncompliance
11-9 41 Return of Title IV Funds Significant Deficiency /
Noncompliance
11-10 43 U.S. Aid Program Significant Deficiency /
Noncompliance
11-11 45 Costs Charged to Research and Development Cluster Significant Deficiency /
Noncompliance
11-12 47 Suspension and Debarment Material Weakness /
Noncompliance
11-13 49 Late Submission of Loan Documents Significant Deficiency /
Noncompliance
11-14 51 Notification of Disbursement Significant Deficiency /
Noncompliance
11-15 53 Financial Aid Awarded to Ineligible Student Significant Deficiency /
Noncompliance
11-16 55 Retention of Perkins Loan Records Significant Deficiency /
Noncompliance
11-17 56 Drug Free Workplace Significant Deficiency /
Noncompliance
11-18 58 Exit Counseling Significant Deficiency /
Noncompliance
11-19 59 Completion and Graduation Rate Disclosures Significant Deficiency /
Noncompliance
11-20 61 Untimely Payment of Student Refunds Significant Deficiency /
Noncompliance
11-21 63 Use of Outdated Promissory Note Significant Deficiency /
Noncompliance
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE REPORT
SUMMARY
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)
FINDINGS (FEDERAL COMPLIANCE) (Continued)
Item No. Page Description Finding Type
11-22 64 Inadequate Controls Over Reporting Significant Deficiency /
Noncompliance
11-23 66 Controls Over Reporting for the Family and Community
Violence Prevention Program
Significant Deficiency /
Noncompliance
11-24 68 Research and Development Cluster Reporting Significant Deficiency /
Noncompliance
11-25 70 Inaccurate Completion of the Fiscal Operations Report Significant Deficiency /
Noncompliance
11-26 72 Noncompliance with Department of Energy Grant
Requirements
Significant Deficiency /
Noncompliance
In addition, the following findings which are reported as current findings relating to Government Auditing
Standards also meet the reporting requirements for Federal Compliance.
11-1 22 Suspended Academic Policy Resulted in Overstated
Liability on the Financial Statements
Significant Deficiency /
Noncompliance
FINDINGS (STATE COMPLIANCE)
Item No. Page Description Finding Type
11-27 74 Inadequate Controls Over Property and
Equipment
Material Weakness /
Material Noncompliance
11-28 77 Inadequate Controls Over Contracting
Procedures
Material Weakness /
Noncompliance
11-29 81 Voucher Processing Errors Significant Deficiency /
Noncompliance
11-30 84 Inadequate Controls Over “Incomplete” Grade Process Significant Deficiency /
Noncompliance
11-31 85 Inadequate Support for Quarterly Summary of
Accounts Receivable
Significant Deficiency /
Noncompliance
11-32 87 Subsidies Between Accounting Entities Significant Deficiency /
Noncompliance
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE REPORT
SUMMARY
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FINDINGS (STATE COMPLIANCE) (Continued)
Item No. Page Description Finding Type
11-33 88 Time Sheets not Maintained in Compliance with State
Officials and Employees Ethics Act
Significant Deficiency /
Noncompliance
11-34 89 Computer Security Weaknesses Significant Deficiency /
Noncompliance
In addition, the following findings which are reported as current findings relating to Government Auditing
Standards also meet the reporting requirements for State Compliance.
11-1 22 Suspended Academic Policy Resulted in Overstated
Liability on the Financial Statements
Significant Deficiency /
Noncompliance
11-2 25 Inaccurate Accounting for Participation in Public Entity
Risk Pool
Significant Deficiency /
Noncompliance
11-3 27 Inaccurate Accounting of Accrued Compensated
Absences
Significant Deficiency /
Noncompliance
PRIOR FINDINGS NOT REPEATED
A 91 Financial Statement Adjustments
B 91 Noncompliance with the Unclaimed Property Act and
Write-Off of Accounting Errors
C 91 Inaccurate Financial Reporting for the University
Auxiliary Facilities System Revenue Bond Fund
D 91 Purchasing Card Procedures
E 92 Documentation of Student Eligibility
F 92 Inadequate Cash Management Procedures
G 92 Student Financial Aid Credited to Student’s Accounts
Early
H 92 Disbursement to Ineligible Student
I 93 Disclosure regarding Lobbying Activities
J 93 Research and Development Cluster Subrecipient
Monitoring
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE REPORT
SUMMARY
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)
PRIOR FINDINGS NOT REPEATED (Continued)
Item No. Page Description
K 93 Inadequate Control Procedures to Notify Pass-Through
Grantors of Audit Results
L 93 Data Collection Form
M 94 Inadequate Controls Over Convocation Center
Expenditures
N 94 Procurement and Contract Documentation
O 94 Inadequate Controls Over Student Registration and
Billing
P 94 Invoices Submitted for Reimbursement from State
Appropriations
Q 95 Noncompliance with Campus Security Enhancement Act
R 95 Noncompliance with the Public University Tuition
Statement Act
S 95 Elective Course in Physical Education Not Required for
all Teachers
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
COMPLIANCE REPORT
SUMMARY
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EXIT CONFERENCE
The findings and recommendations appearing in this report were discussed with University personnel at
an exit conference on February 22, 2012. Attending were:
Representing Chicago State University
Chairman, Board of Trustees Mr. Gary L. Rozier
Vice-Chairman, Board of Trustees Ms. Zaldwaynaka Scott
President Dr. Wayne Watson
Vice President of Administration and Finance Mr. Glenn Meeks
Provost and Senior Vice President Academic &
Student Affairs Dr. Sandra Westbrooks
Interim Associate Vice President Sponsored Programs Dr. Yvonne Harris
Chief Internal Auditor Mr. Ken Clow
Director of Accounting / Controller Mr. Edward Lannon
Director of Compliance Ms. Carla Davis
Vice President of Enrollment Management Ms. Angela M. Henderson
Chief of Police and University Services Mr. Ronnie Watson
Associate Vice President of Administration & Finance Mr. Lawrence Pinkelton
Representing Borschnack, Pelletier & Co.
Partner Mr. Paul A. Pelletier, CPA
Manager Mr. Robert Sikma, CPA
Representing the Office of the Auditor General
Audit Manager Mr. Thomas L. Kizziah, CPA
Responses to the recommendations were provided by Mr. Glenn Meeks in a correspondence dated
February 29, 2012.
Certified Public Accou11tants & C 011sulm11ts
200 East Court Street • Suite 6o8 • Kankakee, IL 60901
815.933.1771 • fax: 815.933.1163
INDEPENDENT ACCOUNTANTS' REPORT ON STATE COMPLIANCE. ON INTERNAL CONTROL OVER
COMPLIANCE. AND ON SUPPLEMENTARY INFORMATION FOR STATE COMPLIANCE PURPOSES
Honorable William G. Holland
Auditor General
State of Illinois
and
Board of Trustees
Chicago State University
Compliance
As Special Assistant Auditors for the Auditor General, we have examined Chicago State University's
compliance with the requirements listed below, as more fully described in the Audit Guide for Financial
Audits and Compliance Attestation Engagements of Illinois State Agencies (Audit Guide) as adopted by
the Auditor General, during the year ended June 30, 2011 . The management of Chicago State University
is responsible for compliance with these requirements. Our responsibility is to express an opinion on
Chicago State University's compliance based on our examination.
A. Chicago State University has obligated, expended, received, and used public funds oflhe State
in accordance with the purpose for which such funds have been appropriated or otherwise
authorized by law.
B. Chicago State University has obligated. expended, received, and used public funds of the State
in accordance with any limitations, restrictions, conditions or mandatory directions imposed by law
upon such obligation, expenditure, receipt or use.
C. Chicago State University has complied, in all material respects, with applicable laws and
regulations, including the State uniform accounting system, in its financial and fiscal operations.
D. The State revenues and receipts collected by Chicago State University are in accordance with
applicable laws and regulations and the accounting and recordkeeping of such revenues and receipts
is fair, accurate and in accordance with law.
E. Money or negotiable securities or similar assets handled by Chicago State University on behalf of
the State or held in trust by Chicago State University have been properly and legally administered
and the accounting and recordkeeping relating thereto is proper, accurate, and in accordance with
law.
We conducted our examination in accordance with attestation standards established by the American
Institute of Certified Public Accountants; the standards applicable to attestation engagements contained in
Government Auditing Standards issued by the Comptroller General of the United States; the Illinois State
Auditing Act (Act); and the Audit Guide as adopted by the Auditor General pursuant to the Act; and,
accordingly, included examining, on a test basis, evidence about Chicago State University's compliance with
those requirements listed in the first paragraph of this report and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination provides a reasona~le basis
for our opinion. Our examination does not provide a legal determination on Chicago State University's
compliance with specified requirements.
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As described in finding 11-27 in the accompanying schedule of findings and questioned costs, Chicago
State University did not comply with requirements of the State Property Control Act. Compliance with such
requirements is necessary, in our opinion, for the Chicago State University to comply with the requirements
listed in the first paragraph of this report.
In our opinion, except for the noncompliance described in the preceding paragraph, Chicago State
University complied, in all material respects, with the compliance requirements listed in the first paragraph
of this report during the year ended June 30, 2011. However, the results of our procedures disclosed
instances of noncompliance, which are required to be reported in accordance with criteria established by
the Audit Guide, issued by the Illinois Office of the Auditor General and which are described in the
accompanying schedule of findings and questioned costs as findings 11-1 through 11-3 and 11-28
through 11-34.
Internal Control
The management of Chicago State University is responsible for establishing and maintaining effective
internal control over compliance with the requirements listed in the first paragraph of this report. In
planning and performing our examination, we considered Chicago State University’s internal control over
compliance with the requirements listed in the first paragraph of this report as a basis for designing our
examination procedures for the purpose of expressing our opinion on compliance and to test and report
on internal control over compliance in accordance with the Audit Guide issued by the Illinois Office of the
Auditor General, but not for the purpose of expressing an opinion on the effectiveness of internal control
over compliance. Accordingly, we do not express an opinion on the effectiveness of Chicago State
University’s internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over compliance
that might be significant deficiencies or material weaknesses and therefore, there can be no assurance
that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as
described in the accompanying schedule of findings and questioned costs we identified certain
deficiencies in internal control over compliance that we consider to be material weaknesses and other
deficiencies that we consider to be significant deficiencies.
A deficiency in an entity’s internal control over compliance exists when the design or operation of a
control over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct noncompliance with the requirements listed in
the first paragraph of this report on a timely basis. A material weakness over compliance is a deficiency,
or combination of deficiencies, in internal control over compliance such that there is a reasonable
possibility that material noncompliance with a requirement listed in the first paragraph of this report will
not be prevented, or detected and corrected on a timely basis. We consider the deficiencies in internal
control over compliance as described in the accompanying schedule of findings and questioned costs as
findings 11-27 and 11-28 to be material weaknesses.
A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies,
in internal control that is less severe than a material weakness, yet important enough to merit attention by
those charged with governance. We consider the deficiencies in internal control over compliance
described in the accompanying schedule of findings and questioned costs as findings 11-1 through 11-3,
11-29 through 11-34 to be significant deficiencies.
As required by the Audit Guide, immaterial findings excluded from this report have been reported in a
separate letter to your office.
Chicago State University’s responses to the findings identified in our examination are described in the
accompanying schedule of findings and questioned costs. We did not examine Chicago State University’s
responses and, accordingly, we express no opinion on the responses.
Supplementary Information for State Compliance Purposes
As Special Assistant Auditors for the Auditor General, we have audited the financial statements of the
business-type activities of Chicago State University and its discretely presented component unit, a
component unit of the State of Illinois, as of and for the year ended June 30, 2011, which collectively
comprise Chicago State University's basic financial statements, and have issued our report thereon dated
March 2, 2012. Our report was modified to include reference to other auditors. The accompanying
supplementary information, as listed in the table of contents as Supplementary Information for State
Compliance Purposes, is presented for purposes of additional analysis and is not a required part of the
basic financial statements of Chicago State University. The 2011 Supplementary Information for State
Compliance Purposes, except for that portion marked "unaudited" on which we express no opinion, has
been subjected to the auditing procedures applied in the audit of the basic financial statements and, in
our opinion, is fairly stated in all material respects in relation to the basic financial statements for the year
ended June 30, 2011 taken as a whole.
We have also previously audited, in accordance with auditing standards generally accepted in the United
States, Chicago State University's basic financial statements for the year ended June 30, 2010. In our
report dated March 10, 2011, we expressed unqualified opinions on the respective financial statements of
the business-type activities of Chicago State University and its discretely presented component unit. In
our opinion, the 2010 Supplementary Information for State Compliance Purposes, except for the portion
marked "unaudited" is fairly stated in all material respects in relation to the basic financial statements for
the year ended June 30, 2010, taken as a whole.
This report is intended solely for the information and use of the Auditor General, the General Assembly,
the Legislative Audit Commission, the Governor, the Board of Trustees, University management, and
federal awarding agencies and pass through entities and is not intended to be and should not be used by
anyone other than these specified parties.
March 2, 2012
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nack
Certified Public Accountants & Consultants
200 East Court Street • Suite 6o8 • Kankakee, IL 60901
815.933.1771 • fax: 815.933.1163
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
Honorable William G. Holland
Auditor General
State of Illinois
and
Board of Trustees
Chicago State University
As Special Assistant Auditors for the Auditor General, we have audited the financial statements of the
business-type activities of Chicago State University and its discretely presented component unit, collectively
a component unit of the State of Illinois, as of and for the year ended June 30, 201 1, which collectively
comprise Chicago State University's basic financial statements and have issued our report thereon dated
March 2, 2012. Our report was modified to include a reference to other auditors. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards issued by the Comptroller
General of the United States. Other auditors audited the financial statements of the University's discretely
presented component unit, as described in our report on the University's financial statements. This report
does not include the results of the other auditors' testing of internal control over financial reporting or
compliance and other matters that are reported on separately by those auditors.
Internal Control Over Financial Reporting
Management of the Chicago State University is responsible for establishing and maintaining effective
internal control over financial reporting. In planning and performing our audit, we considered Chicago State
University's internal control over financial reporting as a basis for designing our auditing procedures for the
purpose of expressing our opinions on the financial statements and not for the purpose of expressing an
opinion on the effectiveness of Chicago State University's internal control over financial reporting.
Accordingly, we do not express an opinion on the effectiveness of the Chicago State University's internal
control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not a II ow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control such that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the first
paragraph and was not designed to identify all deficiencies in the internal control over financial reporting that
might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies
in internal control over financial reporting that we consider to be material weaknesses, as defined above.
However, we identified certain deficiencies in internal control over financial reporting, described in findings
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11-1, 11-2, and 11-3 in the accompanying schedule of findings that we consider to be significant
deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important
enough to merit attention by those charged with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Chicago State University's financial
statements are free of material misstatement, we performed tests of its compliance with certain provisions of
laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express such
an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards.
Chicago State University's responses to the findings identified in our audit are described in the
accompanying schedule of findings. We did not audit Chicago State University's responses and,
accordingly, we express no opinion on the responses.
This report is intended solely for the information and use of the Auditor General, the General Assembly, the
Legislative Audit Commission, the Governor, the Board of Trustees, University management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used by anyone
other than these specified parties.
March 2, 2012
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hnack
Certified Public Accounlllnts & Ccmntltants
200 East Court Street • Suite 608 • Kankakee, IL 60901
815.933.1771 • fax: 815.933.1163
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD
HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM. ON INTERNAL
CONTROL OVER COMPLIANCE, AND ON THE SCHEDULE OF EXPENDITURES OF FEDERAL
AWARDS IN ACCORDANCE WITH OMB CIRCULAR A-133
Honorable William G. Holland
Auditor General
State of Illinois
and
Board of Trustees
Chicago State University
Compliance
As Special Assistant Auditors for the Auditor General, we have audited Chicago State University's
compliance with the types of compliance requirements described in the U.S. Office of Management and
Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each
of Chicago State University's major federal programs for the year ended June 30, 2011. Chicago State
University's major federal programs are identified in the summary of auditor's results section of the
accompanying schedule of findings and questioned costs. Compliance with the requirements of laws,
regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of
Chicago State University's management. Our responsibility is to express an opinion on Chicago State
University's compliance based on our audit.
The schedule of expenditures of federal awards and our audit described below does not include
expenditures of federal awards for those agencies determined to be component units of Chicago State
University for financial statement purposes.
We did not audit Chicago State University's compliance with the requirements governing the student loan
repayments special tests and provisions compliance requirement in accordance with the Student Financial
Assistance Cluster: Federal Perkins Loan program as described in the Compliance Supplement. We also
did not test Chicago State University's compliance with the requirements governing the enrollment reporting
special tests and provisions compliance requirement in accordance with the Student Financial Assistance
Cluster: Federal Direct Student Loan and Federal Family Education Loan programs as described in the
Compliance Supplement. Those requirements govern functions performed by University Accounting Service,
LLC (UAS) and National Student Clearinghouse (NSC). Since we did not apply auditing procedures to
satisfy ourselves as to compliance with those requirements, the scope of work was not sufficient to enable
us to express, and we do not express, an opinion on compliance with those requirements. UAS's
compliance with the requirements governing the functions that it performed for Chicago State University for
the year ended June 30, 2011 was examined by the accountants for the servicer in accordance with the U.S.
Department of Education's Audit Guide, Audits of Federal Student Assistance Programs at Participating
Institutions and Institution Servicers. NSC's compliance with the requirements governing the functions that it
performed for Chicago State University for the year ended June 30, 2011 was examined by the accountants
for the servicer in accordance with the U.S. Department of Education's Audit Guide, Audits of Federal
Student Assistance Programs at Participating Institutions and Institution Servicers. Our report does not
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include the results of the accountants for the servicer examinations of UAS’s and NSCs compliance with
such requirements.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133
require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance
with the types of compliance requirements referred to above that could have a direct and material effect on a
major federal program occurred. An audit includes examining, on a test basis, evidence about Chicago State
University’s compliance with those requirements and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our
audit does not provide a legal determination of Chicago State University’s compliance with those
requirements.
Qualifications (Noncompliance)
As described in Finding 11-4 in the accompanying schedule of findings and questioned costs, Chicago State
University did not have appropriate internal controls and did not monitor the subrecipient of its Head Start
Cluster program. Compliance with such requirement is necessary, in our opinion, for the Chicago State
University to comply with the requirements applicable to the identified major program.
As described in Finding 11-5 in the accompanying schedule of findings and questioned costs, Chicago State
University did not comply with requirements regarding activities allowed or unallowed, allowable costs / cost
principles, and period of availability that are applicable to its Strengthening Minority-Serving Institutions
program. Compliance with such requirements is necessary, in our opinion, for the Chicago State University
to comply with the requirements applicable to the identified major program.
In our opinion, except for the noncompliance described in the preceding paragraphs, Chicago State
University complied, in all material respects, with the requirements referred to above that could have a direct
and material effect on each of its major federal programs for the year ended June 30, 2011. The results of
our auditing procedures also disclosed other instances of noncompliance with those requirements, which are
required to be reported in accordance with OMB Circular A-133 and which are described in the
accompanying schedule of findings and questioned costs as findings 11-1, and 11-6 through 11-26.
Internal Control Over Compliance
The management of Chicago State University is responsible for establishing and maintaining effective
internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable
to federal programs. In planning and performing our audit, we considered Chicago State University’s internal
control over compliance with requirements that could have a direct and material effect on a major federal
program in order to determine our auditing procedures for the purpose of expressing our opinion on
compliance and to test and report on internal control over compliance in accordance with OMB Circular A-
133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of Chicago State University’s internal control
over compliance.
Requirements governing the student loan repayments special tests and provisions compliance requirement
of the Student Financial Assistance Cluster: Federal Perkins Loan program as described in the Compliance
Supplement are performed by UAS. Requirements governing the enrollment reporting special tests and
provisions compliance requirement of the Student Financial Assistance Cluster: Federal Direct Student Loan
and Federal Family Education Loan programs as described in the Compliance Supplement are performed by
NSC. Internal control over compliance related to such functions for the year ended June 30, 2011 was
reported on by accountants for the servicers in accordance with the U.S. Department of Education’s Audit
Guide, Audits of Federal Student Assistance Programs at Participating Institutions and Institution Servicers.
Our report does not include the results of the accountants’ for the servicers testing of UAS’ and NSC’ internal
control over compliance related to such functions.
Our consideration of internal control over compliance was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control over compliance that might be
significant deficiencies or material weaknesses and therefore, there can be no assurance that all
deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed
below, we identified certain deficiencies in internal control over compliance that we consider to be material
weaknesses and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely
basis. A material weakness in internal control over compliance is a deficiency, or combination of
deficiencies, in internal control over q:>mpliance, such that there is a reasonable possibility that material
noncompliance with a type of compliance requirement of a federal program will not be prevented, or
detected and corrected, on a timely basis. We consider the deficiencies in internal control over compliance
described in the accompanying schedule of findings and questioned costs as findings 11-4, 11-5, 11-6, 11-
7, 11-8, and 11-12 to be material weaknesses.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies in
internal over compliance with a type of compliance requirement of a federal program that is less severe than
a material weakness in internal control over compliance, yet important enough to merit attention by those
charged with governance. We consider the deficiencies in internal control over compliance described in the
accompanying schedule of findings and questioned costs as findings 11-1, 11-9 through 11-11 and 11-13
through 11-26 to be significant deficiencies.
Schedule of Expenditures of Federal Awards
We have audited the financial statements of the business-type activities of Chicago State University and its
discretely presented component unit, collectively a component unit of the State of Illinois, as of and for the
year ended June 30, 2011, which collectively comprise Chicago State University's basic financial statements
and have issued our report thereon dated March 2, 2012. Our report was modified to include a reference to
other auditors. Our audit was performed for the purpose offorming our opinions on the financial statements
that collectively comprise Chicago State University's basic financial statements. The accompanying
schedule of expenditures of federal awards is presented for purposes of additional analysis as required by
OM B Circular A-133 and is not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
Chicago State University's responses to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. We did not audit Chicago State University's
responses and, accordingly, we express no opinion on the responses.
This report is intended solely for the information and use of the Auditor General, the General Assembly, the
Legislative Audit Commission, the Governor, the Board of Trustees, University management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used by anyone
other than these specified parties.
March 2, 2012
-19-
- 20 -
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
I. SUMMARY OF AUDITORS’ RESULTS
Financial Statements
Type of auditors’ report issued: unqualified opinions
Internal control over financial reporting:
 Material weakness(es) identified? yes X no
 Significant deficiency (ies) identified that are not
considered to be material weaknesses? X yes none reported
Noncompliance material to financial statements noted? yes X no
Federal Awards
Internal control over major programs:
 Material weakness(es) identified? X yes no
 Significant deficiency (ies) identified that are not
considered to be material weakness(es)? X yes none reported
Type of auditors’ report issued on compliance for major programs: see below
Any audit findings disclosed that are required to be
reported in accordance with section 510(a) of Circular A-133? X yes no
Identification of major programs:
Type of Auditors’ Report
Name of Federal Program or Cluster CFDA No. on Compliance
Student Financial Assistance Cluster Unqualified
Federal Supplemental Educational Opportunity Grants 84.007
Federal Work Study Program 84.033
Federal Perkins Loan Program 84.038
Federal Pell Grant Program 84.063
Federal Direct Student Loans Program 84.268
Academic Competitiveness Grants 84.375
National Science and Mathematics Access to Retain 84.376
Talent (SMART) Grants
Teacher Education Assistance for College and Higher 84.379
Education Grants (TEACH Grants)
Scholarships for Health Professions Students from 93.925
Disadvantaged Backgrounds
ARRA - Scholarships for Disadvantage Students 93.407
Head Start Cluster Qualified
Head Start 93.600
ARRA – Head Start 93.708
Research & Development Cluster Unqualified
Basic Scientific Research 12.431
Development of Fuel Cells for Mobile
Robotics Systems 12.XXX
Development of Solar Cell I Systems 12.XXX
Mathematical and Physical Sciences 47.049
Biological Sciences 47.074
- 21 -
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
I. SUMMARY OF AUDITORS’ RESULTS (Continued)
Type of Auditors’ Report
Name of Federal Program or Cluster CFDA No. on Compliance
Education and Human Resources 47.076
ARRA - Trans- NSF Recovery Act Research Support 47.082
Child Health and Human Development
Extramural Research 93.865
ARRA - Trans NIH Recovery Act Research Support 93.701
Biomedical Research and Research Training 93.859
Strengthening Minority- Serving Institutions 84.382 Qualified
TANF Cluster
Temporary Assistance for Needy Families 93.558 Unqualified
U.S. Agency For International Development
USAID Foreign Assistance for Programs Overseas 98.XXX Unqualified
U.S. Department of Health & Human Services
Family and Community Violence Prevention Program 93.910 Unqualified
Dollar threshold used to distinguish between type A and type B programs: $ 443,067
Auditee qualified as low-risk auditee? yes x no
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – GOVERNMENT AUDITING STANDARDS
- 22 -
11-1 FINDING: SUSPENDED ACADEMIC POLICY RESULTED IN OVERSTATED LIABILITY ON THE
FINANCIAL STATEMENTS
Federal Department: U.S. Department of Education
CFDA Numbers: 84.063, 84.268
Program Name: Student Financial Assistance Cluster
(Federal Pell Grant Program)
(Federal Direct Loan Program)
Questioned Cost: $21,668 (known)
Chicago State University (University) had multiple policies addressing the requirement for a student’s
Satisfactory Academic Progress. As a result of a misapplication of the academic policy that had
been suspended, the University determined that there were overawards made to students totaling
$740,030. The University recorded this as an adjustment to their financial statements. These
adjustments included a $134,836 reduction in receivables, a $605,194 increase in liabilities, and
revenue and expenses adjustments netting to $740,030.
In August 2011, the Department of Education (ED) requested the University to look into and report
back to ED, as to whether the University improperly awarded Federal aid to students during the past
four years.
The University’s enrollment management department was assigned responsibility to address possible
overawards made to students and report back on the issue. Based on an academic standing policy
in the University’s 2008 – 2010 Undergraduate Catalog (a similar policy was in place in the
University’s on-line 2010 – 2012 Undergraduate Catalog until it was amended in July, 2011) which
could lead to a student’s dismissal from the University for poor scholarship, the University calculated
Federal and Illinois MAP overawards to 126 unduplicated students from fiscal years 2008 through
2011 of $740,030. The University’s internal audit department was asked to verify the results
determined by enrollment management.
In October 2011, the University reported the results of this analysis back to ED and recorded various
entries on the University financial statements to record these results. In December of 2011, it was
determined that the policy used for this analysis had in fact been suspended by previous
administrations of the University since June 2008. We were provided various memos and
communications that support that this policy had been suspended and that students were no longer
being dismissed from the University for poor scholarship.
In order to satisfy ourselves with the University’s compliance relative to its Student Financial
Assistance Cluster and the accuracy of the entries recorded on the University’s financial statements,
we performed the following procedures:
 On December 22, 2011, we contacted ED to discuss the inquiry and the University’s response
noted above. ED confirmed that they had received the University’s initial submission noted
above but had not received any further communications from the University regarding the
matter. ED also verified that there are no Federal requirements that require the University to
dismiss students for poor scholarship, so if the University suspended their policy, it is
acceptable as long as the University was complying with the satisfactory academic progress
requirements governing the awarding of Federal student financial aid noted in Code of
Federal Regulations (34 CFR 668.34, 668.32(f), and 668.16(e)).
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – GOVERNMENT AUDITING STANDARDS
- 23 -
11-1 FINDING: SUSPENDED ACADEMIC POLICY RESULTED IN OVERSTATED LIABILITY ON THE
FINANCIAL STATEMENTS (Continued)
 We verified that the University’s policy governing satisfactory academic progress for the
awarding Federal student financial aid complied with the requirements of the Code of Federal
Regulations that were in place during fiscal year 2011.
 We selected a sample of 20 students from the 126 students identified by the University above
as students who improperly received aid. Based on the suspension of the policy requiring
dismissal for poor scholarship and application of the policy for awarding of Federal student
financial aid alone, we noted two students who received a total of $28,992 (of which $21,668
was aid awarded in fiscal year 2011) of Federal student financial aid and $4,160 of Illinois
MAP awards when they were not eligible. Extrapolation of the improper aid noted in our
sample to the population identified by the University resulted in an estimated total improper
aid awarded of $103,685. We proposed adjustments totaling $636,345 to correct the
adjustments that were made by the University on its financial statements.
 As part of our single audit testing and financial audit testing, we tested 65 students at random
that received Federal student financial aid during fiscal year 2011, noting no students who
would be ineligible for aid due to lack of satisfactory academic progress.
Generally accepted accounting principles requires the University to record assets, liabilities, revenue
and expenses when they occur.
The Fiscal Control and Internal Auditing Act (Act) (30 ILCS 10/3001) requires all State agencies to
establish and maintain a system of internal fiscal and administrative controls, which shall provide
assurance that revenues, expenditures, and transfers of assets, resources, or funds applicable to
operations are properly recorded and accounted for to permit the preparation of accounts and reliable
financial and statistical reports and to maintain accountability over the State's resources.
Prudent business practices would require the University to establish, publish and enforce policies that
have a bearing on the students attending (or considering attending) the University.
University officials stated the new University administration discovered that students were not being
dismissed according to the academic standing policy. Upon review of what was thought to be the
current academic standing policy, the President gave a directive that effective spring 2011, the policy
was to be enforced and students dismissed accordingly. The University’s enrollment management
and internal audit departments reviewed student data from July, 2007 through June, 2011. The
result of the analysis was that $740,030 had been awarded to students who did not meet the
guidelines of the academic policy. That review was based on the perception that the academic
standing policy noted above had not been properly executed. The University administration later
discovered that the academic standing policy had actually been suspended years earlier. At this
point it was too late to revise the financial statements.
Failure to effectively communicate policies to employees hinders the ability of University employees
to properly perform their tasks, resulted in inaccurate financial reporting, and miscommunications
with Federal awarding agencies that could lead to a loss in Federal funding. (Finding Code No. 11-1)
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – GOVERNMENT AUDITING STANDARDS
- 24 -
11-1 FINDING: SUSPENDED ACADEMIC POLICY RESULTED IN OVERSTATED LIABILITY ON THE
FINANCIAL STATEMENTS (Continued)
RECOMMENDATION
We recommend the University improve its administrative controls to ensure that policies are clearly
stated, communicated and enforced. We further recommend the University report accurate amounts
on their financial statements and submit a revised analysis to ED.
UNIVERSITY RESPONSE
The University had two policies addressing satisfactory academic progress: academic standing and
financial assistance. The academic standing policy had been suspended by previous University
administrations since academic year 2007/2008 and it resulted in no students being dismissed for
poor scholarship. The current administration moved immediately (Spring 2011) to reinstate the
academic standing policy requiring the dismissal of students for poor scholarship. An estimation
regarding the number of students who may have been over-awarded in the four academic years was
reported on the financial statements. The University’s internal investigation led to the discovery of the
suspended academic standing policy and another review of student records was completed. As a
result, a revised analysis was submitted to the Department of Education in January 2012 showing
that twenty students had been over-awarded over the four academic years totaling $122,852 and
thirteen students had been over-awarded MAP awards from the Illinois Student Assistance
Commission totaling $20,151. The University accepts the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – GOVERNMENT AUDITING STANDARDS
- 25 -
11-2 FINDING: INACCURATE ACCOUNTING FOR PARTICIPATION IN PUBLIC ENTITY RISK POOL
Chicago State University (University) did not properly account for its participation in the State
Universities Risk Management Association (SURMA) in accordance with accounting principles
generally accepted in the United States of America (GAAP).
The University has been a member of SURMA since its inception on February 1, 1996. SURMA was
created as a successor to the Board of Governors’ Self-Insurance Liability Program. SURMA was
initially funded by the surplus of the Board of Governors’ Self-Insurance Liability Program upon its
termination (treated as capital contributions of the original participants), as well as additional
contributions which were assessed to the members. The SURMA members are Chicago State
University, Eastern Illinois University, Governors State University, Northeastern Illinois University,
and Western Illinois University. Each university has an employee appointed as a member to the
SURMA Board.
While all past payments made by the University to SURMA have been recorded to prepaid insurance
and amortized over the term of the current insurance policies, the capital contributions to SURMA
have not been recorded as an asset on the books of the University. The University’s share of the
excess capital contributions to SURMA was $268,783 and $265,475 as of June 30, 2011 and June
30, 2010, respectively. SURMA’s bylaws state that in the event of termination, if there are surplus
funds available, such surplus shall be distributed to the then-existing members in the same
proportion that each existing member’s contributions over the immediately previous five years were in
proportion to the contributions of all members. Similar provisions also apply to members who elect to
withdraw (if approved by the remaining participants) prior to the termination of SURMA. An adjusting
entry was proposed to the University to correct this error, which the University did not record.
Further, we noted the University did not adequately monitor SURMA to ensure SURMA underwent a
timely annual audit of fiscal year 2010 to provide assurance as to the accuracy of financial
information required to be reported by the University.
Governmental Accounting Standards Board (GASB) Interpretation No. 4 - Accounting and Financial
Reporting for Capitalization Contributions to Public Entity Risk Pools was issued in February 1996
with an effective date of periods beginning after June 15, 1996. It states, “A capitalization
contribution to a public entity risk pool with transfer or pooling of risk should be reported as a deposit
if it is probable that the contribution will be returned to the entity upon either the dissolution of or
approved withdrawal from the pool. An entity’s determination that a return of the contribution is
probable should be based on the provisions of the pooling agreement and an evaluation of the pool’s
financial capacity to return the contribution.”
Further, the Fiscal Control and Internal Auditing Act (30 ILCS 10/3001) requires the University to
establish and maintain a system of fiscal and administrative controls to ensure resources are properly
recorded and accounted for to permit the preparation of accounts, reliable financial and statistical
reports, and to maintain accountability over the State's resources.
University officials stated the SURMA By-Laws were adopted cooperatively by the five universities
formerly under the Board of Governors and SURMA. The member universities have been operating
under those By-Laws since 1995, prior to the issuance of GASB Interpretation No. 4. The condition
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – GOVERNMENT AUDITING STANDARDS
- 26 -
11-2 FINDING: INACCURATE ACCOUNTING FOR PARTICIPATION IN PUBLIC ENTITY RISK POOL
(Continued)
found is the result of SURMA's failure to review and revise the By-Laws and the member institutions’
interpretation that the return of the funds is not probable and hence the failure to record the related
accounting entries, as pointed out in the new audit finding this year.
Failure to adequately monitor SURMA’s activities and properly account for the University’s
participation in SURMA resulted in an understatement of assets on the University’s financial
statements. (Finding Code No. 11-2)
RECOMMENDATION
We recommend the University implement controls to monitor the activities of SURMA and properly
account for its participation in SURMA in accordance with GAAP.
UNIVERSITY RESPONSE
The University agrees with the finding and will implement controls to monitor the activities of SURMA
and properly account for its participation in SURMA in accordance with GAAP.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – GOVERNMENT AUDITING STANDARDS
- 27 -
11-3 FINDING: INACCURATE ACCOUNTING OF ACCRUED COMPENSATED ABSENCES
Chicago State University (University) did not properly account for vested sick time absences of
employees and did not properly calculate the accrued leave liability of the University.
We compared 100% of the employees’ accrued sick leave days/hours as of June 30, 2011 to June
30, 2010 in order to ensure that there were not any increases in accrued vested sick days/hours for
any employees. Since January 1, 1998, sick time no longer vests and should not be accrued as a
compensated absence by the University. We noted 17 employees in which the accrued sick leave
days/hours payable at June 30, 2010 was zero but a balance was present at June 30, 2011. The
University had inadvertently left the employees off of the 2010 listing. We also noted another
employee in which the number of days had been transposed in the schedule. The schedule included
the following:
Sick time payable Sick time payable
at June 30, 2010 at June 30, 2011
103.40 days (correct amount) 130.40 days (incorrect amount)
These understatements of vested sick time at June 30, 2010 understated the accrued leave liability
for the year ending June 30, 2010 and overstated the fiscal year 2011 expenses by approximately
$159,473. The overstatement of the June 30, 2011 accrual overstated the liability and expense by
$8,591. An adjusting entry was proposed to correct the misstatement.
We also tested a sample of 30 employees to determine if the University was properly accounting for
leave time earned and used. The University maintains manual records to track employee leave
days/hours. We noted one employee was shorted 8 hours of sick time. Once brought to the
University’s attention, the records were corrected.
The State Finance Act (30 ILCS 105/14a(f) states that sick leave accumulated on or after January 1,
1998 is not compensable at the time of the employee’s death, retirement, resignation, or other
termination of service.
Good business practices require the University to ensure controls are in place to properly record and
summarize data correctly. This data is used for calculating compensation due to employees and
determining compensated absence balances for financial reporting.
University officials stated that the current process utilizes a paper card system. The errors noted
were clerical errors inherent to this manual system.
Failure to properly accumulate accrued leave records and calculate liabilities related to accrued
compensated absences may cause errors in compensation to employees and results in inaccurate
financial statements. (Finding Code No. 11-3)
RECOMMENDATION
We recommend that the University improve its system for accumulating and calculating compensated
absences to ensure records and reporting are accurate.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – GOVERNMENT AUDITING STANDARDS
- 28 -
11-3 FINDING: INACCURATE ACCOUNTING OF ACCRUED COMPENSATED ABSENCES (Continued)
UNIVERSITY RESPONSE
The current process is manual and paper based. The corrective action will include employee re-training
and the acquisition of an automated platform that will calculate and track these balances
going forward. The manual process has been modified to include additional oversight and review until
the implementation of an automated process. The automated process is scheduled to be in effect
July 1, 2012.
Chicago State University’s new administrative leadership is committed to achieving operational
excellence through an enhanced commitment to process improvement, systems automation and a
strengthened infrastructure. The University accepts the recommendation as stated.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 29 -
11-4 FINDING: HEAD START SUBRECIPIENT
Federal Department: Department of Health and Human Services
CFDA Numbers: 93.600
Program Name: Head Start Cluster
Questioned Cost: $119,336 (includes $110,309 in payments to the subrecipient and
$9,027 in indirect costs charged on those payments)
Passthrough Entity: City of Chicago
Award Number: 18396
Chicago State University (University) did not have appropriate internal controls to monitor the
compliance of the subrecipient of its Head Start Cluster program. We noted the following:
 We requested the University to describe how it monitors the activities and compliance of the
subrecipient of its Head Start Cluster program. We were informed that when the invoice of
the subrecipient is received, it is approved by the program director and is paid. No other
monitoring procedures (such as obtaining audit reports, performing site visits to review
financial and programmatic records and observe operations, or reviewing subrecipient
reports) are performed.
 We examined the subrecipient award and contract and noted that there was no evidence that
the following information was communicated to the subrecipient:
o CFDA number and program title
o Award name
o Name of the Federal Awarding Agency
o Determination if the award was for research and development
o Requirements imposed on subrecipient by Federal laws, regulations, and the
provisions of contracts or grant agreements as well as any supplemental requirements
imposed by the pass-through entity.
 We noted that the contract did not include any required Federal certifications.
 The University did not have adequate procedures to ensure that in-kind matching amounts
reported were adequately substantiated by supporting documentation. The University
reported the following in-kind matching on its report to the grantor:
Line Item Amount Reported
Contractual/Professional $43,000
Rental Space $10,000
We noted that the subrecipient’s monthly invoices to the University all say the following:
o “In-kind services, Catholic Charities, Chicago State University, Henry Booth House,
Ada S. McKinley, Chicago Youth Centers, and Church of God ($17,666)”
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 30 -
11-4 FINDING: HEAD START SUBRECIPIENT (Continued)
When we requested documentation supporting the amounts reported by the University, we
were provided a large report consisting of numerous “In-kind Monthly Service Forms” of 5
individuals which made up the Contractual/Professional. All 5 of these individuals appear to
be employees of the subrecipient or related entities. There was also no documentation to
support the $10,000 reported as rental space.
OMB Circular A-133 Section 400(d)(1)) requires each pass through entity to inform the subrecipient
of the CFDA title and number, award name and number, award year, if the award is R&D, and the
name of the Federal awarding entity. Section 400(d)(2) requires the pass through entity to advise
subrecipients of requirements imposed on them by Federal laws, regulations, and the provisions of
contracts or grant agreements as well as any supplemental requirements imposed by the pass-through
entity. Section 400(d)(3) requires the pass through entity to monitor the activities of
subrecipients as necessary to ensure that Federal awards are used for authorized purposes in
compliance with laws, regulations, and the provisions of contracts or grant agreements and that
performance goals were achieved. OMB Circular A-110 Section 48 (e) requires the University to
include specific procurement provisions in their subaward agreements.
OMB Circular A-110 section 53 requires the University to retain financial records, supporting
documents, statistical records and all other records pertinent to an award for a period of three years
from the date of submission of the final expenditure report.
In addition, the University’s internal controls over the approval of expenditures did not operate as
designed for the invoices received from the subrecipient of its Head Start Cluster program. The
University’s internal controls over activities allowed/unallowed and allowable costs/cost principles
include the review and approval by the fiscal officer of all program charges prior to payment. During
our testing, we noted:
 One expenditure ($48,128) was not approved by the fiscal officer until 10 days after the
check was prepared and the check cleared the bank two days before it was ever approved
for payment.
OMB Circular A-133 Section 300(b) requires the University to “Maintain internal control over Federal
programs that provides reasonable assurance that the auditee is managing Federal awards in
compliance with laws, regulations, and the provisions of contracts or grant agreements that could
have a material effect on each of its Federal programs.”
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that 1) subrecipents are properly informed of all requirements and that compliance with those
requirements are properly monitored, 2) that appropriate documentation is retained and reported
accurately, 3) that invoices are approved prior to payment.
University officials stated the subcontractor noted was appointed by the City of Chicago and not
chosen by Chicago State University. The previous Associate Vice President of Sponsored
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 31 -
11-4 FINDING: HEAD START SUBRECIPIENT (Continued)
Programs, who was still employed by the University as a consultant for the Office of Grants and
Research Administration through March 31, 2011, stated that all that was required by the University
was signatures approving the invoices and that all supporting documentation required for
subrecipient monitoring was sent directly to the City of Chicago by the subcontractor.
Failure to comply with Federal requirements may result in disallowed program costs and could
jeopardize future Federal funding. Failure to adhere to proper internal controls may result in
inappropriate charges to the program. (Finding Code No. 11-4)
RECOMMENDATION
We recommend the University comply with the Federal regulations and improve its controls to ensure
that appropriate information is provided to all subrecipients, that all subrecipients are properly
monitored, and all relevant documentation is obtained and retained.
UNIVERSITY RESPONSE
Sponsored Programs has worked closely with Legal and Labor Affairs to improve policies and
procedures for reviewing and approving contracts and amendments. As part of those improvements,
Sponsored Programs has hired a Post-Grants and Compliance administrator who will provide
oversight and work with fiscal officers and principle investigators on active Federal and State funded
contracts and subcontracts. Oversight will involve staff training on relevant grant processes. In
addition, the administrator will provide a review and evaluation of the scope of work and obtaining
relevant documentation to support and validate the subcontractor’s funded activities. The University
agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 32 -
11-5 FINDING: NONCOMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE STREGTHENING
MINORITY-SERVING INSTITUTIONS PROGRAM
Federal Department: Department of Education
CFDA Numbers: 84.382
Program Name: Strengthening Minority-Serving Institutions
Award Numbers: P382D090004 / P382A080007
Questioned Cost: $9,796 known ($221,565 projected - calculated as follows:
$9,796 (error noted in sample) / $41,945 (sample size) X $948,708
(total expenditures))
Chicago State University (University) did not fully comply with compliance requirements of activities
allowed and unallowed, allowable costs/cost principles, period of availability of Federal funds, and
reporting applicable to the Strengthening Minority-Serving Institution program. We noted the
following:
We tested 25 expenditures totaling $41,945 and noted the following:
 Two expenditures (8%) were not in accordance with the program regulations. One charge
($7,500) was for tour guide services for 16 students and 2 staff participants in New Orleans.
The tours were to include: cultural night in New Orleans, plantation tour, city tour, swamp tour,
D Day Museum, and African American Museum. The other charge ($390) was for the
purchase of 10 IPAD cases. These charges do not meet the criteria of allowable activities or
charges for this program. (The questioned costs were $7,890).
The Higher Education Act of 1965 (Title VII Section 724(d)(4)) states that program funds may be
used for: “scholarships, fellowships, and other financial assistance for needy graduate students
to permit enrollment of the students in, and the completion of, a masters degree in mathematics,
engineering, the physical sciences, computer science, information technology, nursing, allied
health, or other scientific disciplines in which African Americans are underrepresented.” The
tours in New Orleans and the IPAD cases do not meet this criteria.
 One payroll expenditure ($1,944) was charged to the program using a 100% time and effort
rate. However, the effort certification report completed by the employee and signed by the
employee’s supervisor for that month indicated that only 75% of the employee’s time should
be charged to the program. (The questioned cost was $486).
 One payroll expenditure ($901) was charged to the program using a 16.67% time and effort
rate. However, the effort certification report completed by the employee and signed by the
employee’s supervisor for that month indicated that only 13% of the employee’s time should
be charged to the program. (The questioned cost was $198).
OMB Circular A-21, Section J.10. provides for charging of compensation to a sponsored
agreement for services rendered for work on that agreement. The apportionment of employees’
salaries which are chargeable to more than one sponsored agreement or other cost objective will
be accomplished by methods that produce an equitable distribution of charges for the employees’
activities. The University indicated that it uses the plan confirmation method in which the
employee or principal investigator confirms the allocation of time spent on the program. The
University indicated that no adjustments were made to the charges based on the confirmations.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 33 -
11-5 FINDING: NONCOMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE STREGTHENING
MINORITY-SERVING INSTITUTIONS PROGRAM (Continued)
 One payroll expenditure ($1,222 for the pay period May 1 to May 15, 2011) was incurred after
the period of availability of the award. Award P382A080007 expired on March 31, 2011, but
the University continued to charge costs to the award. (The questioned cost was $1,222). The
Department of Education awarded the University $1,084,211 to fund award P382A080007 for
the period October 1, 2008 through March 31, 2011. We noted that the University charged
cumulative expenditures of $1,137,869 to this award program. The University overexpended
the award by $53,658. The University will not be able to receive a cost reimbursement from
the Department of Education for the overexpended amount.
OMB Circular A-110 Section 28 states that where a funding period is specified, a recipient may
charge to the grant only allowable costs resulting from obligations incurred during the funding
period and any pre-award costs authorized by the Federal awarding agency.
We examined the only 2 reports that were required to be submitted during the audit period for the
above awards and noted the following:
 The final performance report for award P382A080007 submitted for the period October 1,
2008 to March 31, 2011 reported the budgeted expenditures instead of actual expenditures.
The total budget for the project was $1,084,211 and the total expenditures recorded for the
project were $1,137,869 (the University overexpended the award by $53,658). The University
indicated on the report that it was for the period from October 1, 2008 until September 30,
2010 instead of the correct performance period indicated above.
 The annual performance report for award P382D090004 was submitted for the period
September 1, 2010 to June 24, 2011 and reported incorrect amounts for total expenditures.
The previous budget period reported amounts spent of $500,000, (this amount was the
budget for the period) when the actual amount expended was $400,919. The current budget
period shows an amount expended of $397,754, when the actual amount was $397,282.
The instructions for the performance report (final and annual) require the University to report
expenditures for allowable grant obligations incurred during the period. The University did not
retain documentation to support the financial information reported.
OMB Circular A-110 Section 51 (a) states that “Recipients are responsible for monitoring each
project, program, subaward, function or activity supported by the award.” Section 53(b) states
“Financial records, supporting documents, statistical records, and all other records pertinent to an
award shall be retained for a period of three years from the date of submission of the final
expenditure report or, for awards, that are renewed quarterly or annually, from the date of the
submission of the quarterly or annual financial report, as authorized by the Federal awarding
agency.”
University officials stated that time and effort reports were not properly reconciled to payroll records
during the time period in question. The trip to New Orleans for students to present the posters of
their research was an allowable cost, however, the additional costs for the tours should not have
been charged to the program. The charge subsequent to the period of availability was due to a
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 34 -
11-5 FINDING: NONCOMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE STREGTHENING
MINORITY-SERVING INSTITUTIONS PROGRAM (Continued)
clerical error and led to the overexpenditure of the project. The University officials further stated that,
unlike submitting grant proposals that require permission from the institution, fiscal officers have had
the flexibility to submit their performance reports directly to the grantor.
Failure to comply with Federal requirements may result in disallowed program costs and jeopardize
future Federal funding. (Finding Code Nos. 11-5, 10-18)
RECOMMENDATION
We recommend the University improve its controls to ensure that the University complies with
requirements applicable to its Federally funded programs.
UNIVERSITY RESPONSE
Sponsored Programs will work closely with Legal and Labor Affairs to improve upon the policies and
procedures for reviewing and approving contracts and amendments. As part of those improvements,
Sponsored Programs has hired a Post-Grant and Compliance Administrator who will provide
oversight and work with fiscal officers and principle investigators on active Federal and State funded
contracts and subcontracts. Oversight will involve staff training on relevant grant processes. The
Office of Grants and Research Administration (OGRA) has implemented new procedures for three-month
closeouts and quarterly reconciliations. All approvals for expenses have been transferred
from the grant accountants to the Post-Grant and Compliance Administrator and VPA of Sponsored
Programs. The University agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 35 -
11-6 FINDING: INADEQUATE CONTROLS OVER PREPARATION OF A COMPLETE AND ACCURATE
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Federal Department: Department of Education
Department of Health and Human Services
Department of Defense
National Science Foundation
National Institutes of Health
U.S. Agency for International Development
Department of Agriculture
Department of Housing and Urban Development
National Aeronautics and Space Administration
Department of Energy
Department of Justice
Department of Health and Human Services Centers for Disease
Control and Prevention
Corporation for National & Community Services
Small Business Administration
CFDA Numbers: Various (See Schedule of Expenditures of Federal Awards)
Program Name: Student Financial Assistance Cluster
Research and Development Cluster
Strengthening Minority-Serving Institutions
TANF Cluster
Textbook and Learning Material Program
Office of Science Financial Assistance Program
Minority Science and Engineering Improvement
Special Education - Personnel Development to Improve Services
and Results for Children with Disabilities
Improving Teacher Quality State Grants
TRIO Cluster
Minority Health and Health Disparities Research
Health Careers Opportunity Program
Family Community and Violence Prevention Program
Head Start Cluster
Child Care and Development Block Grant
Child Nutrition Cluster
Interest Subsidy
Science
Edward Byrne Memorial Justice Assistance Grant Program
ARRA - Prevention and Wellness – Communities Putting Prevention
to Work Funding Opportunities Announcement
Learn and Serve America_Higher Education
Small Business Development Centers
Questioned Cost: None
Chicago State University (University) did not prepare a complete and accurate Schedule of
Expenditures of Federal Awards (SEFA).
The University provided the auditors its “Final” SEFA on November 8, 2011. The Notes to the SEFA
were provided on November 9, 2011. We tested the accuracy and completeness of the SEFA
provided and noted the following:
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 36 -
11-6 FINDING: INADEQUATE CONTROLS OVER PREPARATION OF A COMPLETE AND ACCURATE
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
 A pass thru program with a Catalogue of Federal Domestic Assistance (CFDA) number of
93.575 was identified as being part of the Head Start Cluster. There is no such program that
is part of the Head Start Cluster.
 An incorrect CFDA number was reported for one program.
 Two programs passed awards through to sub-recipients ($195,373) that were not reported.
 The Federal Pell Grant Program (CFDA 84.063) and Federal Work Study (CFDA 84.033) did
not include the administrative cost allowances charged to the program in the amount reported
on the SEFA.
 One program listed under the Student Financial Assistance Cluster had the title “Federal
Financial Aid Program” and was reported under CFDA 84.063. This item was actually a
portion of the subsequent expenditures of the administrative cost allowance revenue that was
charged to the Federal Pell Grant Program and the Federal Work Study Program.
 The Notes to the SEFA did not properly report the balance of Federal Perkins Loans
outstanding at year end.
OMB Circular A-133 section 300(d) requires the University to prepare a SEFA in accordance with
section 310. Section 310 identifies the required elements of the SEFA. Each individual Federal
program should be listed by Federal agency and CFDA number. Any awards passed through to sub
recipients should be identified. For programs included in Clusters, individual Federal programs within
each cluster should be listed. The outstanding balances of loans or loan guarantees at year end
should be disclosed in the SEFA or the Notes to the SEFA.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that a complete and accurate SEFA is prepared.
All the above errors were brought to the attention of the University and they were asked to correct
their SEFA. The final corrected SEFA was provided on November 29, 2011.
University officials stated that the conditions cited in this finding were the result of miscalculations and
clerical errors. Since then a plan for redistribution of responsibilities and duties has been developed and
is in the process of implementation.
Failure to prepare a complete and accurate SEFA prevents the University from having an audit
properly performed in accordance with OMB Circular A-133, which may result in the suspension of
Federal funding. (Finding Code Nos. 11-6, 10-9)
RECOMMENDATION
We recommend the University improve its controls over financial reporting so that it can prepare a
complete and accurate SEFA.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 37 -
11-6 FINDING: INADEQUATE CONTROLS OVER PREPARATION OF A COMPLETE AND ACCURATE
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
UNIVERSITY RESPONSE
The University agrees with the recommendation. Sponsored Programs has established new policies
and procedures to ensure compliance with Federally funded program regulations and reporting of
expenditures in current fiscal years. Sponsored Programs accountants will report to the Chief Fiscal
Officer and all fiscal reports will be approved by the Chief Fiscal Officer.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 38 -
11-7 FINDING: STUDENT FINANCIAL AID AWARDED TO STUDENTS AT AN UNAPPROVED LOCATION
Federal Department: U.S. Department of Education
U.S. Department of Health and Human Services
CFDA Numbers: 84.007, 84.033, 84.038, 84.063, 84.268, 84.375, 84.376, 84.379,
93.925, 93.407
Program Name: Student Financial Aid Cluster
Questioned Cost: $212,679 known
Chicago State University (University) awarded student financial aid to students at an unapproved
location.
Our testing of the United States Department of Education School Participation Management Division,
Eligibility and Certification Approval Report disclosed that 1 offsite location, where Chicago State
University provides education courses, was not approved prior to providing services at that location.
The University provided a listing of students receiving financial aid at this location totaling $212,679.
The Code of Federal Regulations (34 CFR 600.20(c)(1)) requires that any institution that wishes to
expand the scope of its eligibility and certification and disburse Title IV funds must apply to the
Secretary of Education and wait for approval to add a location at which the institution offers 50% or
more of an education program.
University officials stated that they were unaware of the provision that requires the University to apply
to the Secretary of Education for approval to add the above-referenced offsite location.
Failure to properly get locations approved by the Department of Education may jeopardize future
Federal funding. (Finding Code No. 11-7).
RECOMMENDATION
We recommend the University seek approval from the Department of Education for any locations
where education programs are offered, prior to offering classes at these locations.
UNIVERSITY RESPONSE
The University has responded immediately to the recommendation. The appropriate action has been
taken as evidenced by the submission of required Change Request forms to offer off-site degree
programs to the Higher Learning Commission (HLC). Effective February 3, 2012, the University has
received response letters from HLC staff indicating positive recommendations for offering all of the
off-site degree programs. The HLC Change Panel will present these recommendations at the March
19, 2012 Institutional Actions Council Meeting. Once presented, these approvals will be forwarded to
the Department of Education as recommended. In addition, the appropriate Corrective Action Plan
has been developed to ensure compliance.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 39 -
11-8 FINDING: STUDENT FINANCIAL ASSISTANCE NOT RECONCILED ON A MONTHLY BASIS
Federal Department: U.S. Department of Education
U.S. Department of Health & Human Services
CFDA Numbers: 84.007, 84.033, 84.038, 84.063, 84.268, 84.379, 84.376, 84.375,
93.925, 93.407
Program Name: Student Financial Assistance Cluster
Questioned Cost: Undetermined
Chicago State University (University) did not reconcile its student financial assistance (SFA) awards
and expenditures on a monthly basis.
We requested the University provide us with their monthly reconciliations of program and fiscal
records related to all programs of their Student Financial Assistance Cluster. The University provided
us with reconciliations for Federal Direct Loan and Federal PELL, however all reconciliations were
prepared after the end of the fiscal year and there was no evidence that records had been reconciled
throughout the year. No reconciliations of the other SFA awards were provided. Although a
reconciliation of Federal PELL was provided, certain information used in the reconciliation could not
be verified and agreed to external records.
The U.S. Department of Education’s “The Blue Book: Accounting, Recordkeeping and Reporting by
Postsecondary Educational Institutions Participating in the Federal Student Aid Programs” requires
the University to perform monthly reconciliations of program records, fiscal records and draw downs.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that the program records are reconciled to the fiscal records on a monthly basis.
University officials stated monthly reconciliations of the program and fiscal records related to all
programs of the Student Financial Assistance Cluster cannot be the sole responsibility of one
department; rather, it requires the coordinated efforts of Financial Affairs, Grants and Student
Financial Aid. After the end of the fiscal year, Financial Affairs fully reconciled the Federal Direct
Loan and PELL programs which account for the bulk of the Federal awards to students. This task
requires a distribution of work between departments which inhibited the completion of this task.
Failure to properly reconcile program and fiscal records is a violation of Federal regulations and could
result in a loss of Federal funding. (Finding Code Nos. 11-8, 10-8, 09-5, and 08-12)
RECOMMENDATION
We recommend the University properly reconcile all student financial awards to the University’s fiscal
records for each student financial assistance program on a monthly basis.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 40 -
11-8 FINDING: STUDENT FINANCIAL ASSISTANCE NOT RECONCILED ON A MONTHLY BASIS (Continued)
UNIVERSITY RESPONSE
Sponsored Programs has established new written policies and procedures to ensure compliance with
our Federally funded program regulations and reporting of expenditures in the current fiscal year.
Staff has been trained and provided copies of the new procedures. Sponsored Programs
accountants will report to the Chief Fiscal Officer and all fiscal reports will be approved by the Chief
Fiscal Officer. A Grants and Finance Accounting Specialist has been hired who will work closely with
the Office of Financial Aid and Finance to reconcile student financial aid on a monthly basis. The
University agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 41 -
11-9 FINDING: RETURN OF TITLE IV FUNDS
Federal Department: U.S. Department of Education
CFDA Numbers: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379, 84.376, 84.375
Program Name: Student Financial Assistance Cluster
Questioned Cost: $8,873 known (projected $52,942 calculated as follows: $8,873
(error noted in sample) / 60 (withdrawals in sample) X 358 (total
withdrawals))
Chicago State University (University) did not properly calculate and remit the proper amount of “Title
IV Funds” for students who withdrew from classes to the Department of Education (ED).
Our review of 60 students who withdrew from the classes revealed the following:
 For two students (3%), the University calculated the return of Title IV Funds as if the student
attended class; however the class rosters indicated that the student never attended. All of the
aid disbursed to the student should have been refunded to ED.
 Seventeen (28%) refund calculations were incorrect because the University did not use the
correct withdrawal date and/or used an incorrect tuition amount.
The above items resulted in an amount still due to ED of $8,873.
The Code of Federal Regulations states:
 (34 CFR 668.22 (b)(1) thru (2) – The student’s withdrawal date is the last date of academic
attendance as determined by the University’s attendance records.
 (34 CFR 668.21 (a)(1) – For a student who does not begin attendance in a payment period of
enrollment, the University must refund all Title IV funds credited to the student’s account.
 (34 CFR 668.22 (g)(ii)(2)) – Institutional charges are tuition, fees, room and board and other
educationally related expenses assessed by the institution.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that “Return of Title IV Funds” are calculated properly and remitted timely.
University officials stated that crucial staff members of the registrar’s office retired and new staff was
not fully trained on existing procedures. As a result, the dates used to calculate the refunds were
based on the date that the registrar’s office received notice of the withdrawal instead of the date that
the withdrawal process was initiated by the student.
Failure to complete accurate refund calculations and remit Title IV funds may jeopardize future
Federal funding. (Finding Code Nos. 11-9, 10-12)
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 42 -
11-9 FINDING: RETURN OF TITLE IV FUNDS (Continued)
RECOMMENDATION
We recommend the University implement adequate internal controls to ensure that all calculations
are accurate and that refunds are made to ED.
UNIVERSITY RESPONSE
Mandatory training has been scheduled for all impacted offices. Performance metrics are being put in
place immediately to monitor compliance of staff. The review and update of the business process will
occur to increase efficiencies. The University accepts the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 43 -
11-10 FINDING: U.S. AID PROGRAM
Federal Department: United States Agency for International Development
CFDA Numbers: 98.
Program Name: Textbook and Learning Materials Program
Questioned Cost: None noted
Award numbers: RLA-A-00-09-00036-00
Chicago State University (University) did not comply with certain requirements related to its award
from the United States Agency for International Development (USAID).
We examined 25 expenditures totaling $1,076,529 and 7 contracts totaling $5,541,125 and noted the
following:
 Two expenditures (8%) included charges ($15,627) that related to the prior fiscal year.
We examined all of the procurements for this program and noted the following:
 Two contracts were not executed timely and the University incurred expenses for services
performed by the vendor (totaling $7,892) prior to the signing of the contract.
The Illinois Procurement Code (30 ILCS 500/20-80(d)) (Code) states “Vendors shall not be paid for
any goods that were received or services that were rendered before the contract was reduced to
writing and signed by all necessary parties.” This amendment of the Code became effective July 1,
2010.
The Fiscal Control and Internal Auditing Act (30 ILCS 10/3001) requires the University to maintain a
system of internal fiscal and administrative controls, that provide assurance that resources are
utilized efficiently and effectively and in compliance with applicable law. This would include proper
controls over contracts and payments to vendors.
OMB CIRCULAR A-110 section 21 (b) requires the recipient’s financial management system to
provide for accurate, current and complete disclosure of the financial results of each Federally-sponsored
project or program.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that charges are recorded in the appropriate accounting period and all applicable laws and
regulations are complied with.
University officials stated most of these expenditure exceptions occurred as a result of business
practices and a culture prevalent under former management which are still in process of being
addressed and rectified.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 44 -
11-10 FINDING: U.S. AID PROGRAM (Continued)
Failure to comply with Federal requirements may result in disallowed program costs and jeopardize
future Federal funding. Failure to charge expenditures to the correct fiscal year results in incorrect
reporting. (Finding Code Nos. 11-10, 10-5, 09-4, 08-9, 07-5, 06-3, 05-1, 04-01, 03-1)
RECOMMENDATION
We recommend the University improve its procedures to ensure that the University complies with all
requirements applicable to its Federally funded programs. We also recommend that the University
report their expenditures in the correct fiscal year.
UNIVERSITY RESPONSE
Sponsored Programs has established new policies and procedures to ensure compliance with our
Federally funded program regulations and reporting of expenditures in current fiscal years. New
procedures include training of accounting staff on grant processes. Sponsored Programs
accountants will report to the Chief Fiscal Officer and all fiscal reports will be approved by the Chief
Fiscal Officer. The University agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 45 -
11-11 FINDING: COSTS CHARGED TO RESEARCH AND DEVELOPMENT CLUSTER
Federal Department: National Science Foundation
Department of Defense
National Institutes of Health
CFDA Numbers: 12., 12.431, 47.049, 47.074, 47.076, 47.082, 93.865, 93.701, 93.859
Program Name: Research and Development Cluster
Questioned Cost: None
Chicago State University (University) did not fully comply with compliance requirements of allowable
costs/cost principles applicable to its Research and Development Cluster programs. We noted the
following:
We tested 25 expenditures totaling $563,155 and noted the following:
 One expenditure ($17,816) was a contract for preventative maintenance services that was not
signed by the University until January 5, 2011; however, the contracted service period began
on October 1, 2010. (No questioned cost)
 Three expenditures (12%) included charges ($1,078) that related to the prior fiscal year. (No
questioned cost)
 One expenditure (4%) for payroll to a student ($570) was not approved by appropriate fiscal
officer of the program. (No questioned cost)
The Illinois Procurement Code (30 ILCS 500/20-80(d)) (Code) states “Vendors shall not be paid for
any goods that were received or services that were rendered before the contract was reduced to
writing and signed by all necessary parties.” This amendment of the Code became effective July 1,
2010.
The Fiscal Control and Internal Auditing Act (30 ILCS 10/3001) requires the University to maintain a
system of internal fiscal and administrative controls, that provide assurance that resources are
utilized efficiently and effectively and in compliance with applicable law. This would include proper
controls over contracts and payments to vendors.
The University Administration and Finance Policies and Procedures Manual Section 9.3 states that
the fiscal officer is responsible for signing the student’s time sheet.
OMB CIRCULAR A-110 section 21 (b) requires the recipient’s financial management system to
provide for accurate, current and complete disclosure of the financial results of each Federally-sponsored
project or program.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that charges are recorded in the appropriate accounting period and all applicable laws and
regulations are complied with.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 46 -
11-11 FINDING: COSTS CHARGED TO RESEARCH AND DEVELOPMENT CLUSTER (Continued)
University officials stated most of these voucher exceptions occurred as a result of business
practices and a culture prevalent under former management which are still in process of being
addressed and rectified.
Failure to comply with Federal requirements may result in disallowed program costs and jeopardize
future Federal funding. (Finding Code Nos. 11-11, 10-10)
RECOMMENDATION
We recommend the University improve its controls to ensure that the University complies with
requirements applicable to its Federally funded programs.
UNIVERSITY RESPONSE
Sponsored Programs has established new policies and procedures to ensure compliance with our
Federally funded program regulations and reporting of expenditures in the current fiscal year.
Sponsored Programs accountants will report to the Chief Fiscal Officer and all fiscal reports will be
approved by the Chief Fiscal Officer. Sponsored Programs will work closely with Legal and Labor
Affairs to improve upon the mechanisms, policies and procedures for reviewing and approving
contracts and amendments. As part of those improvements, Sponsored Programs has hired a Post-
Grant and Compliance Administrator who will provide oversight and work with fiscal officers and
principle investigators on active federal and state funded contracts and subcontracts. Oversight
includes training of staff on grant processes. The University agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 47 -
11-12 FINDING: SUSPENSION AND DEBARMENT
Federal Department: National Science Foundation
Department of Defense
National Institutes of Health
U.S. Agency for International Development
Department of Health and Human Services
CFDA Numbers: 12., 12.431, 47.049, 47.074, 47.076, 47.082, 93.865, 93.701, 93.859, 93.910
98., 93.600, 93.708
Program Name: Research and Development Cluster
Textbook and Learning Materials
Family Community and Violence Prevention Program
Head Start Cluster (passed through from City of Chicago)
Questioned Cost: None identified
Chicago State University (University) did not have adequate controls to ensure that vendors had not
been suspended and debarred from participating in contracts funded by Federal awards.
We made inquiries of University personnel to obtain an understanding of the University’s internal
controls relative to suspension and debarment of vendors. We observed evidence that the University
added a clause in its standard contract in December of 2009; however, contracts in place prior to
December of 2009 did not have the clause and few were amended to include it when renewed. We
examined 13 covered transactions of the above programs that totaled $6,632,266 and noted the
following:
 Four of the contracts tested totaling $863,943 did not include a vendor certification stating that
the vendor was not suspended or debarred and did not include a clause or condition relative
to suspension and debarment. The University also did not examine the Excluded Parties List
to determine if these vendors were suspended or debarred.
We examined the Excluded Parties List System and determined that none of the vendors identified
were included on the list.
The Code of Federal Regulations (2 CFR 215 Appendix A) prohibits the University from contracting
(if the amount is equal to or expected to exceed $25,000) with parties on the government-wide
Excluded Parties List.
The Code of Federal Regulations (2 CFR 180.300) requires the University to perform additional
procedures to ensure that vendors are not debarred and suspended prior to entering into a covered
transaction. Those procedures include:
 Checking the Excluded Parties List System; or
 Collecting a certification from that person; or
 Adding a clause or condition to the covered transaction with that person.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 48 -
11-12 FINDING: SUSPENSION AND DEBARMENT (Continued)
program compliance requirements. Effective internal controls should include procedures to ensure
that vendors and subrecipients are not suspended or debarred.
University officials stated that the University's form contract was revised by the legal department in
2009 to include the required federal debarment and suspension language. The contracts referenced
above were multi-year form contracts which were drafted prior to 2009 and entered into pursuant to
grant agreements. The older multi-year contracts (that did not contain the updated language) were
inadvertently automatically renewed.
Failure to ensure that vendors are not suspended or debarred increases the risk that the University
may be conducting business with an unauthorized vendor. The Federal Agency may disallow costs
related to this vendor, debar or suspend the University, or annul or terminate the transaction.
(Finding Code Nos. 11-12, 10-14)
RECOMMENDATION
We recommend the University improve its controls to ensure that each vendor engaged in a covered
transaction is not suspended or debarred from Federal award programs.
UNIVERSITY RESPONSE
The University accepts responsibility for this audit finding. We have implemented processes to
ensure that all of our contracts including those that are executed pursuant to a grant renewal contain
all the required certifications.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 49 -
11-13 FINDING: LATE SUBMISSION OF LOAN DOCUMENTS
Federal Department: U.S. Department of Education
CFDA Numbers: 84.268, 84.038
Program Name: Student Financial Assistance Cluster
(Federal Direct Student Loan)
(Federal Perkins Loan)
Questioned Cost: None noted
Chicago State University (University) did not timely submit loan disbursements to the U.S.
Department of Education (ED) and did not report a loan to the University’s Federal Perkins Loan
Servicer (FPLS).
Our sample testing of 60 students that received financial assistance included 56 students who
received Federal Direct Student Loans and 2 students who received Federal Perkins Loans. We
noted the following:
 We noted that the University reported the Federal Direct Student Loan originations for all 56
of the students in our sample. However, during our review of Program reconciliations, we
noted 1 student who had loan originations on August 20, 2010 and January 9, 2011; but the
University did not report them to ED until July 5, 2011 (147 and 289 days late).
 For one student receiving a Federal Perkins Loan, we noted that the University had not
transmitted the loan disbursement to the FPLS as of October 31, 2011.
The Code of Federal Regulations (34 CFR 685.301(e)(2)) states that the University must submit the
initial disbursement record for a loan to ED no later than 30 days following the date of the initial
disbursement. The University must submit subsequent disbursement records, including adjustment
and cancellation records, to ED no later than 30 days following the date of disbursement, adjustment,
or cancellation is made.
The University’s Federal Perkins Loan Procedures states that the Collection Specialist will transmit
each disbursed loan to the University’s FPLS.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that the loan originations are reported to ED and the FPLS in a timely manner.
University officials stated this was an isolated incident. Fiscal year 2011 was our first full year with
Direct Loans. When the error was discovered on July 5, 2011, it was corrected immediately.
University officials also stated the transmission of the Federal Perkins loan was delayed due to the
departure of the previous Federal Perkins Loan administrator.
Failure to timely submit Federal Direct Student Loan originations to ED is a violation of Federal
regulations and could result in a loss of Federal funding. Failure to transmit Federal Perkins Loan
originations to the FPLS may result in the University failing to collect on the loan. (Finding Code No.
11-13)
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 50 -
11-13 FINDING: LATE SUBMISSION OF LOAN DOCUMENTS (Continued)
RECOMMENDATION
We recommend the University timely submit all loan originations to ED and the University’s FPLS.
UNIVERSITY RESPONSE
The Office of Financial Aid and the Office of Financial Affairs have established documented policies
and procedures to ensure compliance. Staff have been trained on the new procedures. Performance
metrics are established and will be tied to employee evaluations. Software to assist in Direct Loan
reconciliation has been updated and Direct Loans are reconciled monthly. The renewal of the
Contract with the University’s Federal Perkins Loan Servicer has been renewed and the University is
now working closely with the FPLS to ensure that all paperwork is up to date. The University agrees
with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 51 -
11-14 FINDING: NOTIFICATION OF DISBURSEMENT
Federal Department: U.S. Department of Education
CFDA Numbers: 84.268, 84.379
Program Name: Federal Direct Student Loans
Teacher Education Assistance for College and Higher
Education Grants (TEACH)
Questioned Cost: None
Chicago State University (University) did not provide the required notification to students regarding
the anticipated date and amount of each disbursement and the student’s (or parent’s) right to cancel
student loans or TEACH grants.
Our sample testing of 60 students that received financial assistance included 56 students who
received student loans. We noted that none of the students received the required notification
regarding the disbursement of loan proceeds. Two of these students also received TEACH grants.
Neither of these students received the required notification regarding disbursement and cancellation
options related to the TEACH grants.
The Code of Federal Regulations (34 CFR 668.165(a)) states that the University must send
notification in writing no earlier than 30 days before, and no later than 30 days after, crediting the
student’s account at the University. The notification must inform the student or his/her parents how
and when Title IV funds will be disbursed. The notice is also required to explain the student’s right to
cancel all or a portion of any loans or TEACH grants and the date that that it must be cancelled by.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that students (or his/her parents) are informed of their rights related to student loans and TEACH
grants.
University officials stated the notices to the students were not sent, due to oversight.
Failure to send the required notification to students regarding the anticipated date and amount of
each disbursement and the student’s (or parent’s) right to cancel student loans or TEACH grants
results in noncompliance with Federal regulations and could jeopardize future Federal funding.
(Finding Code Nos. 11-14, 10-23)
RECOMMENDATION
We recommend the University revise its procedures and ensure that all students receive proper
written notification of aid disbursements and their rights to cancel such loans or TEACH grants in
accordance with Federal regulations.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 52 -
11-14 FINDING: NOTIFICATION OF DISBURSEMENT (Continued)
UNIVERSITY RESPONSE
The Office of Financial Aid has established policies and procedures to ensure compliance. The
documented process reflecting the required change from the previous year was not fully
communicated to staff that should have been able to submit notifications of disbursements in the
absence of the financial aid director. Staff have been trained on the new process. Staff accountability
has been determined, and performance metrics are being connected to employee evaluations. The
University agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 53 -
11-15 FINDING: FINANCIAL AID AWARDED TO INELIGIBLE STUDENT
Federal Department: U.S. Department of Education
CFDA Numbers: 84.379
Program Name: Student Financial Assistance Cluster
(Teacher Education Assistance for College and Higher
Education Grants (TEACH)
Questioned Cost: $2,000 known (projected $5,331 calculated as follows: $2000
(error noted in sample) / $72,656 (sample size) X $193,656 (total
TEACH expenditures))
Chicago State University (University) did not ensure that all students receiving TEACH Grants met
eligibility requirements as determined by the U.S. Department of Education (ED).
During our testing of a sample of 60 students receiving student financial assistance, we noted that
two students received TEACH grants. One of these students had a calculated GPA of 3.253521 as
of the end of the Fall, 2010 term. But the student also had a grade of “Incomplete” as of that time.
That student’s grade of “Incomplete” was subsequently removed and the student’s TEACH aid was
rescinded for the Spring, 2011 term on the same day that the matter was brought to the University’s
attention.
As a result of that condition, we decided to expand our testing of GPA eligibility for TEACH grant
recipients and selected an additional sample of 22 students to ensure that the University was
adhering to the regulations. We noted the following:
 One student received an award ($2,000) when they did not meet the eligibility requirements
pertaining to grade point average.
 We were unable to determine the eligibility for one additional student due to a grade of
“Incomplete”. The University was unable to provide a copy of the student’s Incomplete Grade
Request & Contract.
The Code of Federal Regulations (34 CFR 686.11(a)(v)(A)(2)) requires students to have a cumulative
grade point average of at least 3.25 on a 4.0 scale as of the most recently completed payment
period.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that eligibility requirements have been satisfied.
University officials stated that the awarding of the Teach Grant to an ineligible student was an
oversight. The University’s inability to locate the incomplete records is a result of the strain placed on
the resources of the registrar’s office during the transition that occurred due to the retirement of its
former Director and two staff members.
Awarding aid to an ineligible student resulted in noncompliance with the eligibility requirements and
may result in a loss of future Federal funding. (Finding Code Nos. 11-15, 10-11)
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 54 -
11-15 FINDING: FINANCIAL AID AWARDED TO INELIGIBLE STUDENT (Continued)
RECOMMENDATION
We recommend the University improve its controls to ensure that each student meets the eligibility
requirements prior to awarding aid.
UNIVERSITY RESPONSE
The Office of the Registrar and Office of Financial Aid have established policies and procedures to
ensure compliance. The policy relating to the awarding of TEACH Grants has been amended to read
“If a student has an incomplete grade (“I”), the student will not be considered for a TEACH Grant, for
any semester, until the “I” has changed to a regular letter grade. Staff has been trained and are
familiar with the new policy and procedures. The University agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 55 -
11-16 FINDING: RETENTION OF PERKINS LOAN RECORDS
Federal Department: U.S. Department of Education
CFDA Numbers: 84.038
Program Name: Student Financial Assistance Cluster
(Federal Perkins Loan)
Questioned Cost: None
Chicago State University (University) did not retain records of cancellation and deferment requests
under the Federal Perkins Loan (FPL) program.
We tested 15 students that were awarded a cancellation or deferment during the fiscal year. The
University was unable to provide us with documentation of the request for cancellation or deferment
for 10 (67%) of the students.
The Code of Federal Regulations (34 CFR 674.19(e)(3)(ii)) states that the University must retain
repayment records, including cancellation and deferment requests for at least three years from the
date on which a loan is assigned to the Secretary, canceled or repaid.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that students’ cancellation and deferment requests are retained for the required retention period.
University officials stated the Collections Department at CSU went through a staffing transition at the
end of fiscal year 2011 and early 2012 that resulted in some documents being inadvertently misfiled
and unable to be located.
Failure to maintain the required records result in non-compliance with the Federal regulation and
could result in the loss of Federal funding. (Finding Code No. 11-16)
RECOMMENDATION
We recommend the University maintain the required documents in accordance with the Federal
regulations.
UNIVERSITY RESPONSE
The University has hired sufficient staff to manage the Perkins Loan program and is working diligently
to ensure all policies and procedures are being followed. Staff have been trained and are familiar
with the policies and procedures when processing transactions related to the loan program. The
University agrees with the recommendation.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 56 -
11-17 FINDING: DRUG FREE WORKPLACE
Federal Department: Department of Education
Department of Health and Human Services
Department of Defense
National Science Foundation
National Institutes of Health
U.S. Agency for International Development
CFDA Numbers: Various (see summary of auditors’ results)
Program Name: Student Financial Assistance Cluster
Research and Development Cluster
Strengthening Minority-Serving Institutions
TANF Cluster
Textbook and Learning Material Program
Family community and Violence Prevention Program
Head Start Cluster
Questioned Cost: None
Chicago State University (University) did not comply with the requirements of the Drug-Free Schools
and Communities Act.
The Drug-Free Schools and Communities Act Amendments of 1989 (Act) (Public Law 101-226)
requires the University to annually distribute to each student and employee the following information:
 Standards of conduct that clearly prohibit the unlawful possession, use, or distribution of illicit
drugs and alcohol on its property
 Description of the legal sanctions
 Description of health risks
 Description of programs available to students and employees relating to abuse
 Statement regarding sanctions and a description of those sanctions
During our review of University operations, it was noted that the University had no documentation
that an annual written distribution of the information above had occurred for students attending the
University.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that students and employees receive an annual notification of the information noted above.
University officials stated that they believed that they were in compliance by publicizing the
University’s Drug and Alcohol policy in an annual student handbook that is made available on the
University’s website. Going forward the University will take a more proactive approach in
disseminating the policy to the student body.
Failure to comply with the requirements of the Act results in noncompliance with Federal regulations
and could jeopardize future Federal funding. (Finding Code Nos. 11-17, 10-22)
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 57 -
11-17 FINDING: DRUG FREE WORKPLACE (Continued)
RECOMMENDATION
We recommend the University ensure that a written distribution of the items required in the Act is
done on an annual basis.
UNIVERSITY RESPONSE
The University believed that we were in compliance by publicizing the University’s Drug and
Alcohol policy in an annual student handbook which is made available on the University’s
website. However, the University accepts the recommendation and going forward the
University will ensure that within two to three weeks of each academic term a communication
disseminating the policy is sent to the student body.
The communication will come from the Office of Student Affairs and a calendar will be
created identifying the types of communications and approximate dates the communications
should be generated. Staff training has been completed.
STATE OF ILLINOIS
CHICAGO STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDINGS – FEDERAL COMPLIANCE
- 58 -
11-18 FINDING: EXIT COUNSELING
Federal Department: U.S. Department of Education
CFDA Numbers: 84.038
Program Name: Student Financial Assistance Cluster
(Federal Perkins Loan)
Questioned Cost: None
Chicago State University (University) could not provide evidence of conducting exit counseling for
Federal Perkins Loan (FPL) recipients who were no longer attending the University.
We tested 10 students that exited the University and were in the initial 9 month grace period during
the fiscal year. The University was unable to provide us with documentation that an exit interview
had been performed for 5 (50%) of the students.
The Code of Federal Regulations (34 CFR 674.42(b)) states an institution must ensure that exit
counseling is conducted with each borrower either in person, by audiovisual presentation, or by
interactive electronic means. The exit counseling must inform the student of the average anticipated
monthly repayment amount based on the student’s indebtedness and explain to the borrower various
options for repayment.
OMB Circular A-110 requires nonfederal entities receiving Federal awards establish and maintain
internal controls designed to reasonably ensure compliance with Federal laws, regulations, and
program compliance requirements. Effective internal controls should include procedures to ensure
that the University conducts exit counseling for students that have received Perkins loan funds and
are no longer attending the University.
University officials stated the Collections Department at Chicago State University went through a
staffing transition at the end of fiscal year 2011 and early 2012 and as a result the performance of
exit counseling was inconsistent.
Failure to conduct exit counseling or retain documentation of exit counseling could result in the loss
of Federal funding. (Finding Code No. 11-18)
RECOMMENDATION
We recommend the University conduct and retain