Washington State University. July 1, 2007 through June 30, 2008

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1 Washington State University July 1, 2007 through June 30, 2008 January 2009

2 Audit Approach Accountability for Public Resources and Legal Compliance We perform individual audits of entities on a cyclical basis to provide reasonable assurance of compliance with legal requirements as well as to determine if adequate internal controls are in place. In keeping with general auditing practices, we do not examine every transaction, activity or area. Instead, our audits focus on identifying and examining those transactions, activities or areas that pose the highest risk of noncompliance. Financial Statements We perform an annual audit of the statewide basic financial statements in accordance with Government Auditing Standards. These financial statements are included in the Comprehensive Annual Financial Report (CAFR) prepared by the Office of Financial Management. The CAFR reflects the financial activities of all funds, organizations, institutions, agencies, departments and offices that are part of the state's financial operations. We also perform an audit of the basic financial statements prepared by Washington State University, which are included in the University s separate CAFR. Federal Compliance We perform an annual audit of federal grant expenditures for the state of Washington as required by the Single Audit Act. Federal grant audit work is performed on a statewide basis, and we select federal programs for audit using risk-based criteria set forth in the U.S. Office of Management and Budget Circular A-133. Audit Scope Our audit was planned and conducted using a risk-based approach for the period beginning July 1, 2007 and ending June 30, 2008: Accountability for Public Resources and Legal Compliance We evaluated accountability for public resources and compliance with certain laws and regulations in the following areas: Cash receipting Billings/receivables Payroll/personnel Disbursements/expenditures Open public meetings/records laws Contracts/agreements Compliance with grant requirements Procurement (bidding) Contracts/agreements Travel Fuel card usage Consumable inventory Surplus property Small and attractive assets such as computers 1

3 Financial Statements For the State CAFR we tested University s account balances and financial activity related to: Cash and cash equivalents Bonds payable Depreciable assets Charges for services Buildings Education expense Accumulated depreciation For the University s CAFR we tested the account balances and financial activity related to those above, plus: WSU endowment investments State appropriations Long-term debt Salaries and wages Federal grants and contracts Benefits Federal Compliance We evaluated internal controls and tested compliance with federal requirements, as applicable to Student Financial Aid. Specifically, the Department of Education Programs selected for review were: Perkins loan Academic competitive grant Health professional student loan Supplemental educational opportunity grants Fiscal operations report and application to participate Audit Results Audit Recommendations We are pleased to report no findings or management letter comment items. This audit marks the tenth consecutive year no findings were reported for the University. We will review the status of the following exit items in our next audit. We prepared department memos to compliment departments on their controls and processes where no issues of audit concern were noted for the following: Cash count of Vancouver Campus Cash count of Cougar Card Cash count of Housing and Dining 2

4 University Wide Issues We recommend Business Services and the Office of Internal Audit review the policies, guidance and training provided in the following areas and determine if additional action should be taken to improve compliance and minimize the risk of misuse or misappropriation of state resources. Property Inventory During our departmental reviews we identified weaknesses in controls over surplus property. During testing, numerous assets that had been released to Surplus Stores were still identified as active in the AIS Property System. Although Surplus Property Reports are used by the releasing department and Surplus Stores to manage the process, these forms are not numerically controlled or easily retrievable to ensure surplus property is disposed of or sold as intended. To assist us in our departmental reviews of fuel cards, we obtained a list of WSU owned vehicles from Risk Management and Insurance (RMI). We found that RMI did not have information regarding the responsible department for more than 160 vehicles. We attempted to locate 75 of these vehicles in the AIS Property System using the Vin/Serial Number and 63 could not be identified. Of the 12 located in the system, 3 had indications that they were surplused by the department but still showed as active in the system. Although many of these vehicles may still be in use, there is a risk that costs are being incurred for assets that no longer benefit University operations. Fuel Cards During our departmental reviews we identified weaknesses in the controls over the use of fuel cards. None of the departments reviewed had written policies and procedures communicating the expected controls over vehicle and fuel card use. Although the Voyager Card Program provides statement information that can be used to monitor fuel purchases to assist in ensuring purchases are for a legitimate business purpose, these control measures are not used consistently. We obtained the December 2008 Voyager Expense Summary and noted the report includes a miles per gallon calculation for monitoring purposes. Of the 49 business units using the program, 20 are not requiring odometer readings and another 20 did not use the control consistently as calculations ranged from.22 to 173 miles per gallon. Financial Aid We recommend that the University confirm with the Department of Education that the underlying costs related to Perkins Loan late fees are allowable. Financial Reporting The University should continue to analyze and improve controls to ensure the accurate reporting of financial information. The University should adhere to state guidance when determining depreciable lives for capital assets or obtain written approval for deviations from the Useful Life Schedule as required. 3

5 Disbursements We gained an understanding of the processes related to general disbursements, procurement cards, fuel cards and travel in three areas to ensure expenditures were allowable, authorized and adequately supported. We noted the following issues: Departments should develop written procedures for the use of vehicles and fuel cards and monitor fuel purchases to ensure they are reasonable and for legal and allowable business purposes. Educational and Public Media Service Tri-Cities Campus Departments should ensure purchasing card usage is in accordance with BPPM Payroll We reviewed payroll procedures and tested for compliance with state laws and University policies in five areas. We noted the following issues: Daily Activity Reports (DARs) should not be returned to the employee after certification by the supervisor to maintain the integrity of the document in accordance with BPPM Education and Public Media Tri-Cities Campus Leave Reports and DARs should be dated and signed by the employee and supervisor in accordance with BPPM 60.60, and Educational and Public Media School of Biological Sciences Tri-Cities Campus Supporting documentation for temporary appointed positions should meet University s expectation. School of Biological Sciences Cash receipting We gained an understanding and confirmed the receipting and deposit processes in six areas. Based on our review, we noted the following: The University should ensure cash overages/shortages are accounted for per the State Administrative & Accounting Manual d and BPPM and retain only the authorized amount of till cash. Parking Services Department controls could be strengthened by reconciling the Point-of-Sale (POS) system to an internal billing system. (VetStar) A loss of equipment or cash should be promptly reported to the Internal Audit Office per BPPM

6 Department controls could be strengthened by having cashiers count the till upon receipt to ensure accuracy and comply with the Cash Handling Policies, BPPM 30.53, by ensuring checks are endorsed upon receipt. Departments should ensure adjustments and discounts are approved according to departmental policy. Departments should ensure daily deposits are adequately supported per BPPM Personnel should request identification from external auditors as required by BPPM School of Molecular Biological Sciences Departments should retain and disburse only the authorized amount of the imprest account. School of Molecular Biological Sciences Safeguarding property and consumable inventory We reviewed the control processes and tested procedures over property, small and attractive assets, and consumable and merchandisable inventories practices in four areas. Based on our review, we noted the following: Department controls over consumable and merchandised inventory could be improved if a perpetual tracking system was used. Departments using a perpetual inventory practice over consumable inventory could be improved if a written policy was developed to ensure consistent application. School of Biology Sciences Departments should consider monitoring small and attractive assets in accordance with BPPM School of Biology Sciences Departments should develop written policies regarding the Departmental Inventory System allowed by BPPM to ensure complete and accurate records are maintained. Educational and Public Media Services Departments should ensure surplused items are properly authorized and transferred per BPPM and the individual completing the physical inventory signs per SAAM and BPPM Educational and Public Media Services Departments should ensure property inventory records are compete and accurate as required by BPPM School of Biology Sciences 5

7 Contracts We reviewed the control process and tested compliance with written terms and agreements in two areas. Based on our review, we noted the following: The University should ensure compliance with contract terms and conditions. Educational and Public Media Services Grants We reviewed the control process and tested compliance with grant terms and conditions in two areas. We are please to report that no concerns were reported over grants at the College of Veterinary Medicine. In other areas, we noted the following: The University should ensure adequate documentation exists to determine expenditures are legal and allowable and within the scope of the grant. School of Biological Sciences Accountability Report Audit Reports This report summarizes the results of the accountability audit. The report will not include any findings. Financial Statement Reports Our opinion on the state of Washington s Basic Financial Statements is included in the state s CAFR. This report is issued by the Office of Financial Management in December of each year. Our opinion on the University s CAFR is included in the report published by the University. Single Audit Reports This report discloses the results of our audit of the major federal programs as well as our opinion on whether the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The Office of Financial Management issues this report in March of each year. The report will not include any findings for the University. 6

8 Concluding Remarks We would like to thank University officials and employees for their helpfulness and timely response to our audit requests. We now offer a free subscription service that allows you to be notified by when audit reports are released or posted to our Web site. You can sign up for this convenient new service on our website at: Contacts The State Auditor s Office is committed to maintaining open communication with all entities we audit. Please do not hesitate to contact us at any time. State Auditor s Office Contacts Debbie Pennick Audit Manager Karen Wilson Assistant Manager pennickd@sao.wa.gov wilsonk@sao.wa.gov 7