s 378.106 L72MSUF 2001 Legislative Audit Division State ofMontana Report to the Legislature March 2002 Financial-Compliance Audit For the Two Fiscal Years Ended June 30, 2001 Montana State University Campuses) (All This report contains 13 recommendations to the university. Major issues addressed in this report include: Inadequate procedures for collecting bad debts. Weaknesses in control over cash. Weak control over accounting for fixed assets. Improperly classifying $1.6 million ofindirect cost recoveries as restricted. STATE DOCUMENTS COLLECTION R 2 2002 Montana state library 1515 E. 6th AVE. HELENA, MONTANA 59620 Direct comments/inquiries to: Legislative Audit Division Room 160, State Capitol PO Box 201705 MT 01-10 Helena 59620-1705 Helpeliminatefraud,waste, and abuse in stategovernment. Call the Fraud Hotline at 1-800-222-4446 statewideor444-4446 in Helena. MONTANASTATELIBRARY 3 0864 0015 3725 FINANCIAL-COMPLIANCE AUDITS Financial-compliance audits are conducted by the Legislative Audit Division to determine ifan agency's financial operations are properly conducted, the financial reports are presented fairly, and the agency has complied with applicable laws and regulations. In performing the audit work, the audit staffuses standards set forth by the American Institute ofCertified Public Accountants and the United States General AccountingOffice. Financial-compliance audit staffmembers hold degrees with an emphasis in accounting. Most staffmembers hold Certified Public Accountant (CPA) certificates. Government Auditing Standards, the Single Audit Act Amendments of 1996 and OMB CircularA-133 require the auditorto issue certain financial, internal control, and compliance reports. This individual agency auditreport is not intended to comply with these reporting requirements and is therefore not intended for distribution to federal grantoragencies. The Legislative Audit Division issues a statewide biennial Single Audit Report which complies with the above reporting requirements. The Single Audit Report forthe two fiscal years endedJune 30, 1999, was issued on March 30, 2000. The Single Audit Report forthe two fiscal years endedJune 30, 2001, willbe issued by March 31, 2002. Copies ofthe Single Audit Report, when available, can be obtained by contacting: Single Audit Coordinator Legislative Audit Division Office ofBudget and Program Planning Room 160, State Capitol State Capitol PO Box 201705 MT MT Helena 59620 Helena 59620-1705 Phone (406) 444-3616 MEMBERS OF THE LEGISLATIVE AUDIT COMMITTEE SenatorJohn Cobb Representative Joe Balyeat SenatorJim Elliott Representative Dee Brown Senator Dan Harrington Representative Bill Eggers SenatorKen Miller Representative Hal Jacobson SenatorCorey Stapleton Representative JeffPattison, Vice Chair SenatorJonTester, Chair Representative David Wanzenried LEGISLATIVE AUDIT DIVISION Scott A. Seacat, Legislative Auditor Deputy Legislative Auditors: John W. Northey, Legal Counsel Jim Pellegrini, Performance Audit & Tori Hunthausen, IS Audit Operations James Gillett, Financial-Compliance Audit March 2002 The Legislative Audit Committee ofthe Montana State Legislature: This is our report on the financial-compliance audit ofthe Montana State University (all campuses) for the two fiscal years ended June 30, 2001. This audit report includes recommendations related to improving bad debt collection procedures, improving control over cash, improving control over student accounts receivable and classifying $1.6 million ofindirect cost recovery money as restricted rather than unrestricted. We thank the president and university stafffor their assistance and cooperation during the audit. Respectfully submitted, Scott A. Seacat Legislative Auditor Room 160. State Capitol BuildingPOBox 201705 Helena, MT 59620-1705 Phone(406)444-3122 FAX (406)444-9784 E-Mail ladfastate.mt.us Legislative Audit Division Financial-Compliance Audit For the Two Fiscal Years Ended June 30, 2001 Montana State University Campuses) (All Members ofthe audit staffinvolved in this audit were Laurie Barrett, Jeane Carstensen-Garrett, Chris G. Darragh, Laurie H. Evans, Wayne D. Guazzo, Cindy S. Jorgenson, Brenda Kedish, Hollie Koehler, Angela Lang, Amber Long, Laura L. Norns, Alexa O'Dell, Paul J. O'Loughlin, and Joyce Weber. Digitized by the Internet Archive in 2012 with funding from Montana State Library http://archive.org/details/financialcomplia01mont 1 Table of Contents Appointed and Administrative Officials iv Report Summary S-l Introduction 1 Audit Objectives 1 Background 1 Montana State University-Bozeman 4 Montana State University-Billings 4 Montana State University-Northern 4 Montana State University-Great Falls College ofTechnology 5 Prior Audit Recommendations 7 Prior Audit Recommendations 7 Findings and Recommendations 9 Inadequate Procedures for Collecting Accounts Receivable 9 Student Accounts Receivable 9 Accounts Receivable for Grants and Contracts 10 Controls Over Cash Collections 1 Suggestions for Improved Controls 12 Other Cashiering Activities on Campus 12 Timeliness ofDeposits 14 Travel Advances 14 Plant Fund Accounting 15 Control Over Perkins Loan Accounts 17 Notification ofTheft 18 Social Security Withholding 19 Payroll Controls 19 Accountability Over Equipment Inventory, Library Books and Intangible Assets 20 Property and Equipment Inventory at MSU-Northern 21 Physical Inventory ofEquipment at MSU-Bozeman 21 Library Book Valuation for MSU-Billings & MSU-Northern 21 Intangible Assets on the Accounting Records for MSU- Billings 22 Unrestricted Indirect Cost Reimbursement Moneys Reported as Restricted Funds 23 Page i Table of Contents Independent Auditor's Report and Montana State University-Bozeman Financial Statements Independent Auditor's Report Page A-3 Balance Sheet - June 30, 2001 Page A-6 Statement ofChanges in Fund Balances Year Ended June 30, 2001 Page A-8 Statement ofCurrent Funds Revenues, Expenditures and Other Changes Year Ended June 30, 2001 Page A-9 Statement ofChanges in Fund Balances Year Ended June 30, 2000 Page A-10 Statement ofCurrent Funds Revenues, Expenditures and Other Changes Year Ended June 30, 2000 Page A-l 1 Notes to Financial Statements Page A-13 Independent Auditor's Report and Montana State University-Billings Financial Statements Independent Auditor's Report Page B-3 Balance Sheet - June 30, 2001 Page B-6 Statement ofChanges in Fund Balances Year Ended June 30, 2001 Page B-8 Statement ofCurrent Funds Revenues, Expenditures and Other Changes Year Ended June 30, 2001 Page B-9 Statement ofChanges in Fund Balances Year Ended June 30, 2000 Page B-10 Statement ofCurrent Funds Revenues, Expenditures and Other Changes Year Ended June 30, 2000 Page B-l 1 Notes to Financial Statements Page B-13 Page ii Table of Contents Independent Auditor's Report and Montana State University-Northern Financial Statements Independent Auditor's Report Page C-3 Balance Sheet -June 30, 2001 Page C-5 Statement ofChanges in Fund Balances Year Ended June 30, 2001 Page C-6 Statement ofCurrent Funds Revenues, Expenditures and Other Changes Year Ended June 30, 2001 Page C-8 Statement ofChanges in Fund Balances Year Ended June 30, 2000 Page C-10 Statement ofCurrent Funds Revenues, Expenditures and Other Changes Year Ended June 30, 2000 Page C-12 Notes to Financial Statements Page C-13 University Response Montana State University Page D-3 Page iii Appointed and Administrative Officials Board ofRegents ofHigher Mark Semmens Great Falls Education Edwin H. Jasmin. Vice Chair Big Fork Christian Hur, Student Regent Billings Lynn Morrison-Hamilton Havre Richard Roehm Bozeman Margie Thompson, Chair Butte John Mercer Poison Judy Martz, Governor* Linda McCulloch, Superintendent ofPublic Instruction* Richard Crofts, Commissioner ofHigher Education* *Ex officio members Commissioner ofHigher Richard Crofts, Commissioner ofHigher Education Education Joyce Scott. Deputy Commissioner for Academic and Student Affairs Rod Sundsted, Associate Commissioner for Fiscal Affairs Laurie Neils, Director ofBudget and Accounting Montana State University Geoffrey Gamble, President - effective 12/00 All Campuses Terry Roark, Interim President - through 1/00 1 MSU RolfGroseth, System Coordinator Virginia Key, Internal Auditor Montana State University David Dooley, Provost and Vice President for Academic Affairs Bozeman Craig Roloff, Acting Vice President for Administration and Finance - effective 9/01 Thomas Stump, Vice President for Administration and Finance - through 9/01 Thomas McCoy, Vice President for Research and Creative Activities Laura Humberger, Controller - effective 5/01 Dianna Wojtowicz, Controller- through 12/00 Montana State University Ronald P. Sexton, Chancellor Billings Janie C. Park, Provost and Academic Vice Chancellor Lee Peters, Vice Chancellor ofStudent Affairs Terrie Iverson, Administrative Vice Chancellor LeAnn Anderson, Director ofFinancial Services Jim Nielson, Director ofBusiness Services Trudy Collins, Budget Officer and Internal Audit Page iv