An audit of the Nebraska State College System found systemic problems across three state college campuses.
Problems were uncovered involving the segregation of duties and inaccurate preparation of financial statements at Chadron State, Peru State and Wayne State.
“The NCSC lacked personnel with the required knowledge and expertise to prepare accurate financial statements in accordance with governmental accounting standards,” the audit reads. “Additionally, the NSCS control environment was not conducive to fair and complete financial reporting, as there were no review procedures in place to ensure accurate financial statements were prepared.
“As a result of this lack of expertise and control procedures, the NSCS submitted draft financial statements that were materially misstated and required numerous adjustments and revisions.”
In all, 77 percent of the line items had errors, the audit says, requiring adjustments to 74 of 96 line items. The adjustments ranged from $60 to more than $19.7 million. In addition to financial statement line items, 107 errors were made in the footnote disclosures and another 28 were found in the Management Discussion and Analysis section of the report by the NSCS. Finally, the auditor’s office discovered another 28 coding errors that were left unchanged on the financial statements “due to their relatively insignificant values” ranging from $117 to $75,589.
Chadron State College had the lowest percentage of errors, revising 27 line items, compared to 29 at the system’s main office, 45 at Wayne State and 64 at Peru.
The Nebraska State Auditor’s Office made several suggestions for decreasing the incidents of inaccurate reporting, including training, uniform reporting templates across the system and a documented review by a second individual after financial information is prepared, as well as a review by the system office.
The college system, headed by Stan Carpenter, responded to the audit by saying it has already taken steps to address the state’s concerns and will continue to look for ways to improve its procedures going forward.
At Chadron State, auditors had concerns about revenue collections, expenses, a lack of segregation of duties and information technology.
On the revenue side, four of 14 CSC transactions lacked adequate support. In one instance, cash on hand at the end of concession sales at athletic events was higher than the sales processed through the cashiering system. Ticket sales at football games, which occur at multiple gates, also were not adequately documented. One person also handled the issuance of and payment collection for athletic season passes, and finally, a deposit for more than $7,700 for football camp registration had inadequate documentation to show that all of the participants had paid the registration.
Chadron State was also dinged for four untimely deposits, in which it took anywhere from four to 13 business days to deposit payments from child care revenue, women’s basketball and concession sales. Another three transactions did not have enough documentation for the auditor’s to determine if the deposits were made in a timely manner.
On the expense side of the financial statements, CSC lacked appropriate documentation for one payment associated with paying a vendor $3,074 in reimbursable expenses for a first-time accreditation visit.
Three payments by the college also fell outside the statutorily required 45-day payment period. The college pointed out that in one of those instances, CSC and the vendor renegotiated the payment date because work on the project was not complete when the invoice was sent to the college. In the second instance, CSC said it did not receive an emailed invoice from the vendor, which delayed payment, while the final transaction was slowed due to problems setting up the ACH transaction.
The auditor’s office was provided documentation only about the renegotiated payment date during its review.
When it came to auditing CSC’s contracts, the state determined that the college did not follow board policy in one instance, failing to have discussion on whether or not the service was provided by only one vendor. Board policy requires that the Vice President for Administration and Finance, the Vice Chancellor for Facilities and Information Technology and the Vice Chancellor for Finance and Administration discuss awarding such no-bid contracts.
System-wide nine contracts were signed by and NSCS representative after the date they went into effect, instead of prior to that date. Four of those contracts were awarded by Chadron State College, with the required signature appearing anywhere from seven days to two months after the contract was already in effect.
Legal review and termination clauses of contracts also drew scrutiny by the auditors. Thirteen NSCS contracts were not reviewed by an attorney, including two entered into by Chadron State. The college system contends that it uses standard contract forms and trains its staff in standard contract language, as it is not staffed to allow for a legal review of every contract.
Five contracts also failed to include a termination clause; four of them were from Chadron State, but the NSCS said they were short term contracts and did not require termination clauses.
The three colleges are required to upload their contracts for public viewing on a statewide contract database. Five contracts were missing from the database, including two from Chadron State.
“By failing to enter its contracts into the State’s contract database, the NSCS not only failed to comply with requirements of the Taxpayer Transparency Act but also inadvertently prevented both the Legislature and the general public from having access to valuable financial information,” the audit reads.
The NSCS noted that the contracts were added to the database after the discrepancy was uncovered and procedures for uploading the contracts will be reviewed.
By law each of the colleges is required to submit their accounts receivable write-offs to the State Claims Board for approval. However, the write-offs are being submitted only to the NSCS Board of Trustees, an action that has re-occurred each year between 2012-17 for a total of $1.3 million.
“When delinquent accounts receivable are not submitted to the State Claims Board for write-off approval, the NSCS is in violation of State statute,” the audit reads. The auditor’s have pointed out this inconsistency in previous audits, but the NSCS continues to have its write-offs approved only by its Board of Trustees.
The lack of segregation of duties became a concern for the auditors because one person is capable of handling all aspects of a revenue transaction from the mail room to reconciling the cash accounts. A similar finding was discovered on the accounts payable side.
During the information technology audit, one user account at CSC was not terminated for seven months after the employee left the college. The oversight allowed the former employee to access the college’s NeSIS system after his termination date. Other concerns regarding password reset questions have since been resolved with a switch to a new vendor, the NSCS says.