Fiscal Control and Internal Auditing Act FCIAA: Importance and Impact to University Units

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Fiscal Control and Internal Auditing Act
(FCIAA)Importance andImpact to University Units
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In the News

• Alabama - Thirteen people have been charged with
  theft at Bishop State Community College, and
  state auditors concluded that more than 290,000
  in federal financial aid was misused or stolen.
• North Carolina An audit of N.C. AT State found
  500,000 in questionable expenses by the former
  manager of a fellowship program, the misuse of
  100,000 by a former administrative assistant in
  the university's department of natural resources
  and environmental design, and the
  misappropriation of 87,000 by a former vice
  chancellor.
• Illinois - Two University of Illinois faculty
  members misspent federal grant and university
  money on hotel rooms and other luxury items and
  double-billed for expenses as part of nearly
  82,000 in questionable charges.

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What is the Fiscal Control and Internal Auditing
Act (FCIAA)?

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

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Example Material Control Weakness

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

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How does my unit benefit from having strong
fiscal and administrative controls?

• Helps protect the good reputations of unit
  administrators and staff.
• Demonstrates good stewardship to state, granting
  agencies, donors and taxpayers
• Helps ensure efficient/effective use of your unit
  resources
• Helps protect against misuse of resources,
  adverse audit findings and negative media
  coverage

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Message from the President

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

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Whos Responsible?

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

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What are administrative and fiscal systems of
internal controls?

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

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Administrative and Fiscal Systems of Internal
Controls - Examples

• Cash Receipts Control
• Gift Control
• Sponsored Program Control
• Budget Control
• Information Technology Control

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ExamplesCash Receipts Control Environment

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

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Examples Gift Control Environment

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

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ExamplesSponsored Program Control Environment

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

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Examples Budget Control Environment

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

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ExamplesInformation Technology Control
Environment

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

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Annual Evaluation Process

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

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Annual Evaluation Timeline

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

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Your role in the process

• Take a critical look at your fiscal and
  administrative controls
• View the questionnaire as a useful tool to help
  you inventory the condition/effectiveness of your
  units control environment
• Be candid in your questionnaire responses. If you
  find a weakness, you can include a note that you
  are addressing it or need assistance.
• Dont hesitate to use resources available to
  assist units in improving their controls
• By regularly addressing and improving our control
  environments, everyone benefits!
• Lets work together to foster a culture of strong
  fiscal and administrative controls

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Resource Tools

• Through Office of University Audits Website
• Internal Control Tools access tools to assist
  you in ensuring internal controls are in place
• www.audits.uillinois.edu/internal_controls/index.h
  tml
• Internal Control Training Classes
• http//training.obfs.uillinois.edu/index.cfm?campu
  sU
• http//training.obfs.uillinois.edu/index.cfm?campu
  sC
• http//training.obfs.uillinois.edu/index.cfm?campu
  sS
• Self-Assessment Questionnaire
• www.audits.uillinois.edu/Welcome/SelfAssessment20
  Survey.html

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OBFS Groups Available to Assist Your Unit

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

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Questions?