UNIVERSITY OF SOUTH FLORIDA and RELATED ENTITIES External Audit Findings Status Report to the BOT Audit & Compliance Committee August 25, 2016

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Lily Hart
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1 and RELATED ENTITIES Audit Auditor Recommendations Management s Response to Auditor of No. 1 Background Screening The University should enhance its procedures to ensure that background screening, including fingerprinting, are performed for individuals in positions of special trust or responsibility, including those that have direct contact with persons under 18 years of age. Management will perform level two background screenings for those individuals who were identified in the finding and are still employed with the University. Management has completed the designation of those positions identified in the findings as sensitive or special trust. Management is enhancing its procedures to ensure that positions identified as sensitive or special trust complete a level two background screening. Donna Keener, Associate Vice President, Human Resources No. 2 Florida Residency If it is the University s intent to continue classifying students who are from a Latin American or Caribbean country as Florida residents for tuition purposes when such students are not awarded State Government scholarships but are awarded scholarships from University funds, the University should seek guidance from the Board of Governors as to whether this practice is allowable under State law. The University believes that since the residents of a Latin American or Caribbean country were awarded scholarships from a fund that includes state appropriations and student generated fees (i.e. funds from a State University), the scholarships should be considered State scholarships as contemplated by Section (10)(e), Florida Statutes. As such, the University has requested guidance from the Board of Governors as to whether this practice is allowable under State law. Billie Jo Hamilton, Associate Vice President, Enrollment Planning & Management USF expects the BOG to propose an updated regulation to clarify this issue. 1

2 and RELATED ENTITIES Audit Auditor Recommendations Management s Response to Auditor of No. 3 REPEAT FINDING Severance Pay The University should ensure that future employment agreements contain provisions for severance pay that are consistent with State law. The University should also take appropriate action to amend existing employment agreements to appropriately address the provisions required by State law. The University s position is that it complies with section (4), Florida Statutes, and respectfully disagrees with this finding. The contractual provisions identified as inconsistent with section (4), F.S. reflect the market for individuals in intercollegiate athletics, which is relatively small and where the impact of a termination without cause tends to create damages that are difficult to quantify, such as reputational loss and reductions in future hiring prospects and earning potential. Therefore, the contractual provisions in question include a pre-negotiated liquidated damages calculation intended to address equitable damages rather than payments for services to be rendered. This distinction is significant because the damages described herein do not meet the definition of severance pay in section (4)(d), F.S.: (d) As used in this subsection, the term severance pay means the actual or constructive compensation, including salary, benefits, or perquisites, for employment services yet to be rendered which is provided to an employee who has recently been or is about to be terminated. The term does not include compensation for: 1. Earned and accrued annual, sick, compensatory, or administrative leave; 2. Early retirement under provisions established in an actuarially funded pension plan subject to part VII of ch. 112; On its face, this statutory definition only addresses compensation for employment services to be rendered and says nothing about reputational damages or reduced earning potential. The liquidated damages calculation also does not amount to actual or constructive compensation for services as defined in section (4)(d), F.S., 2

3 and RELATED ENTITIES Audit Auditor Recommendations Management s Response to Auditor of because the liquidated damages calculation explicitly excludes stipends, bonuses, performance incentives and benefits, which are all tied to services to be rendered in the contracts in question. In fact, the liquidated damages calculation is less than the compensation for services to be rendered available under the contracts in question. Absent these provisions, uncertainty and expense would likely and needlessly result in what would otherwise be straightforward employment separation. Finally, it should be noted that these payments are paid from USF Athletics revenue sources and not public funds. Donna Keener, Associate Vice President, Human Resources No. 4 Information Technology Access Controls The University should ensure that IT access privileges granted enforce an appropriate separation of duties and are necessary and remove any inappropriate or unnecessary access privileges detected. Privileges to the University s Enterprise Resource Planning (ERP) system finance and human resources applications have been removed. Privileges to the underlying infrastructure are necessary to perform security related duties. Therefore, the administrative privileges to the underlying infrastructure have been further restricted to required personnel and mitigating controls are in place to monitor activities of the required personnel. Alex Campoe, Assistant Vice President, Information Technology 3

4 and RELATED ENTITIES Audit Auditor Recommendations Management s Response to Auditor of No. 5 2 nd REPEAT FINDING Information Technology Security Controls User Authentication and Logging and Monitoring of System Activities The University should improve security controls related to user authentication and logging and monitoring of system activity to ensure the continued confidentiality, integrity, and availability of University data and IT resources. A detailed response to all issues raised by the State Audit with respect to the confidentiality, integrity and availability of the data residing in our systems will be submitted separately in order to maintain the need-to-know aspect of the report. The University believes that the current controls are adequate to establish a secure environment. However, the University will review the security settings and if necessary, make appropriate changes. Alex Campoe, Assistant Vice President, Information Technology PARTIALLY CORRECTED March 1, Federal Circular A-133 Audit, Number Significant Deficiency REPEAT FINDING Student Financial Assistance Cluster CFDA No and The University should enhance procedures to document each student s last date of attendance to ensure the accurate and timely identification, calculation, and return of unearned Title IV HEOA funds to the applicable Federal programs. In addition, perform a review of all unofficial withdrawals during the fiscal year and, if any additional unofficial withdraws are identified for students who received Title IV HEOA funds, the appropriate amount of funds should be returned to the applicable Federal programs. The Office of the Registrar enhanced procedures to document each student s last day of attendance with a modification to the egrades system that requires faculty to enter the last date of attendance for all students receiving an I, F or U grade. Additionally, for faculty who use Canvas, an option was added that allows faculty to check for the last date of any activity for students. The Office of University Scholarships and Financial Aid Services performed a review of fiscal year unofficial withdrawals, and funds were returned as appropriate. Management is also performing an additional review of processing compliance as required by the US Department of Education. The 2014 audit finding was issued during FY 2015, thus, the two year finding. The remedy USF reported in the 2014 audit response was implemented for the summer 2015 grading cycle. USF has implemented enhanced procedures to ensure compliance. Lois Palmer, Interim University Registrar 4

5 RESOLUTION OF PREVIOUSLY DISCLOSED FINDINGS and RELATED ENTITIES Audit Auditor Recommendations Management s Response to Auditor of 2014 Federal Circular A-133 Audit, Number Significant Deficiency Student Financial Assistance Cluster CFDA No Enhance procedures to document each student s last date of attendance to ensure the accurate and timely identification, calculation, and return of unearned Title IV HEOA funds to the applicable Federal programs. Improvements were made in the University s procedures for documenting a student s last date of attendance prior to June 30, 2015 as follows: Procedures were developed and documented to communicate with faculty each term to stress the importance of collecting an accurate date of last attendance. End of term audits were conducted and faculty individually contacted when the dates of last attendance were missing to ensure completeness of records. A change in the egrades system was implemented in February, 2015 to allow faculty to clearly indicate that a student never attended. Additional improvements were developed and implemented after June 30, 2015 to clarify communications to instructors that a student s last date of attendance is to be reported on when the last date a student had academic activity within the course. Lois Palmer, Interim University Registrar 2014 Federal Circular A-133 Audit, Number Significant Deficiency Research & Development Cluster CFDA No The institution s policies and procedures were not always sufficient to ensure Federal grant expenditures were adequately documented as allowable, reasonable, and necessary. The University has policies and procedures to ensure Federal grant expenditures are adequately documented as allowable, reasonable and necessary. Regarding the specific instances cited in the audit recommendation, the University does the following: P-Card Charges - Departments monitor transactions for adherence to grant terms. If disallowed costs are subsequently identified, they are transferred to an unrestricted account. Telecommunications Service Center Charges - The USF Information Technology department is in the process of documenting the cost basis for its rate schedule. Rebecca Puig, Assistant Vice President for Research & Innovation 5

6 and RELATED ENTITIES SUMMARY OF ENTITIES REVIEWED FOR AUDIT FINDINGS Highlighted Below USF Entity Audit Due (Month and Day) Current Audit s Previous Audit s Audit Firm University of South Florida System No s No s State of Florida USF Operational Audit (Issued every 2 years) 5 s 2 REPEAT 9 s 2 REPEAT State of Florida USF Sarasota-Manatee No s No Report in 2014 State of Florida USF St. Petersburg No Report in 2015 No Report in 2014 State of Florida State of Florida Federal Circular A REPEAT 2 s State of Florida USF Foundation, Inc. October 15 No s No s Cherry Bekaert LLP USF Alumni Association, Inc. October 15 No s No s Cherry Bekaert LLP USF Financing Corporation and USF Property Corporation October 15 No s No s KPMG LLP University Medical Service Association, Inc. (UMSA) October 15 No s No s Grant Thornton LLP USF Medical Services Support Corporation (MSSC) October 15 No s No s Grant Thornton LLP USF Health Professions Conferencing Corporation (HPCC) October 15 No s No s Mayer Hoffman McCann P.C. USF Health and Education International Foundation (HEIF) October 15 No s No s Mayer Hoffman McCann P.C. USF Health Sciences Center Self-Insurance Program (SIP) December 15 No s No s Saslow Lufkin & Buggy, LLP USF Health Sciences Center Insurance Co., Inc. (CIC) December 15 No s No s Saslow Lufkin & Buggy, LLP USF Research Foundation, Inc. October 15 No s No s Cherry Bekaert LLP USF Sun Dome, Inc. October 15 No s 1 Significant Deficiency James Moore & Co., P.L. USF Intercollegiate Athletics Program January 15 No s No s James Moore & Co., P.L. WUSF FM, A Public Telecommunications Entity Operated by USF January 15 No s No s James Moore & Co., P.L. WUSF TV, A Public Telecommunications Entity Operated by USF January 15 No s No s James Moore & Co., P.L. 6

UNIVERSITY OF SOUTH FLORIDA

UNIVERSITY OF SOUTH FLORIDA CURRENT YEAR FINDINGS and RELATED ENTITIES UNIVERSITY MEDICAL SERVICE ASSOCIATION, INC. (UMSA) 2010 Audit of Internal Control over Financial Reporting Significant Deficiency Reconciliation of Amounts Due