UTPA FY2013 Financial Audit

Transcription

1 THE UNIVERSITY OF TEXAS-PAN AMERICAN OFFICE OF AUDITS & CONSULTING SERVICES UTPA FY2013 Financial Audit Report No

2 The University of Texas-Pan American Office of Audits & Consulting Services February 12, 2014 Dr. Robert S. Nelsen, President The University of Texas Pan American 1201 West University Drive Edinburg, TX Dear Dr. Nelsen: Background The UT System is composed of nine academic and six health-related institutions of higher education as well as UT System Administration. Annual Financial Reports (AFRs) and related footnote information are prepared by the financial reporting officers at each UT institution and UT System Administration in accordance with accounting and financial reporting requirements promulgated by UT System policy and the Texas Comptroller of Public Accounts to be included in the UT System Consolidated AFR. The Office of the Controller at UT System Administration consolidates AFRs from all UT institutions and UT System Administration and prepares footnotes and other related disclosures so that the UT System Consolidated AFR is prepared in accordance with generally accepted accounting principles. The information included in The University of Texas Pan American (UTPA) AFR and related footnote information are the responsibility of UTPA management. At the February 2012 meeting, the Board of Regents approved the renewal of Deloitte to conduct an independent audit of the Consolidated AFR of the UT System for FY 2012 and FY Deloitte has audited the Consolidated AFR, which includes the balance sheet as of August 31, 2013, and the related statements of revenues, expenses, and changes in net assets and cash flows for the year then ended. As part of the external financial audit, UTPA s Office of Audits and Consulting Services performed financial audit procedures provided by Deloitte of the UTPA AFR. On December 20, 2013, Deloitte provided UT System management an unqualified opinion for the FY 2013 Consolidated AFR of the UT System. Deloitte presented its opinion on the Consolidated AFR to the Board of Regents at the February 5, 2014 meeting. Scope and Procedures The internal audit functions from across the UT System agreed to assist Deloitte in conducting the independent financial audit. All work performed by internal audit was done under Deloitte's direction. The scope of the audit procedures developed by Deloitte and executed across the UT 1

3 System varied based on size of the institution and financial statement line item. Deloitte performed and managed work at four of our largest health institutions, UT Austin, System Administration, and the UT Health Science Center at Tyler (UTHSCT). Internal audit at these institutions and System Administration assisted Deloitte in the performing the independent financial audit of the Consolidated AFR. Deloitte assigned work to the internal audit staff at the remaining eight academic institutions and the UT Health Science Center at San Antonio. The extent of the work assigned to these institutions, in coordination with work performed and managed by Deloitte at the larger UT institutions and System Administration, was limited to procedures necessary for Deloitte to provide an opinion on the Consolidated AFR for the fiscal year ended August 31, We executed the assigned audit procedures, documented our work in working paper templates provided by Deloitte, and submitted our completed working papers to Deloitte for review. As required by UTS 142.1, we also verified UTPA s Monitoring Plan process to ensure that the sub-certification of accounts and management s assertions on segregation of duties were valid. Objectives The overall objective of the external financial audit is to determine whether the Consolidated AFR of the UT System presents fairly, in all material respects, the financial position of the UT System as of August 31, 2013, and its changes in nets assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The objective of the work we performed for Deloitte was to execute financial audit procedures, in coordination with procedures performed at each UT System institution and System Administration, sufficient for Deloitte to express an opinion on the Consolidated AFR of the UT System. The extent of our procedures is not sufficient to provide an opinion on the AFR of UTPA and was limited to determining whether any material adjustments need to be recorded in the UTPA AFR and included within the Consolidated AFR for the areas enumerated in the Results section of this report. In addition, our objective was to determine whether UTPA s Monitoring Plan and subcertification process is in place and functioning as intended. This included determining whether account reconciliations are being performed and whether duties are adequately segregated as asserted by management. Standards Deloitte is required to perform the audit of the consolidated financial statements of the UT System in conformity with auditing standards generally accepted in the United States of America. Those standards require that Deloitte plan and perform their audits in order to obtain reasonable assurance about whether the consolidated financial statements of the UT System are free of material misstatements. We performed the financial audit procedures under the direction of Deloitte. Our audit of the UTPA monitoring plan was conducted in accordance with the guidelines set forth in The Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing. 2

4 Results We have performed the procedures enumerated below solely to assist Deloitte in providing an opinion on whether the consolidated financial statements of the UT System were free of material misstatement for fiscal year ended August 31, 2013, and in conformity with accounting principles generally accepted in the United States of America. The results of our work are limited to the procedures performed as follows: 1. Information Technology 1. Obtained understanding of IT control environment related to financial reporting. 2. Completed IT Questionnaire. 2. Cash 1. Updated Deloitte Risk of Material Misstatement (ROMM) schedule. 2. Evaluated Design and Tested the Implementation of Monthly Bank Reconciliations Control Activity. 3. Bank Confirmations compared to bank reconciliations and tied to general ledger. 4. Cash account book balances agreed to AFR. 3. Property Plant and Equipment (PP&E) 1. Updated Deloitte Risk of Material Misstatement (ROMM) schedule. 2. Evaluated Design and Tested the Implementation of Capital Asset Additions Control Activity. 3. Reconciled PPE roll forward schedule with general ledger. 4. Construction in Progress (CIP) and capital additions testing. 5. Capital Asset disposal testing. 6. PPE accounts agreed to AFR. 7. Analytical testing of accumulated depreciation and depreciation expense. 4. Reporting Package (AFR) and Other 1. Trial Balance tied out to the AFR. 2. Conducted Fraud inquiry of management. 3

5 3. Summarized significant changes in the entity and its environment that occurred during FY Confirmed with management any applicable subsequent events. 5. Monitoring Plan 1. Obtained and reviewed the UTPA Monitoring Plan. 2. Obtained sub-certifications of all project accounts. 3. Selected for testing a sample of 10 project accounts that certified yes. 4. For project accounts tested, we verified that the July 2013 account reconciliations were completed and properly reviewed. Follow-up During our audit, we followed up on the implementation status of prior year s recommendations reported in the FY 2012 internal audit report. Based on our work, we determined that all recommendations were implemented as noted in Appendix A. In Closing We appreciate the assistance provided to us during the audit by management and UTPA personnel. We hope the information presented in this internal audit report is helpful. Sincerely, Eloy R. Alaniz, Jr., CPA, CIA, CISA Executive Director of Audit, Compliance & Consulting Services cc: Audit Committee Mr. Esequiel Granado, Comptroller 4

6 Appendix A - Follow-up on Prior Year s Findings and Recommendations The following table summarizes our prior audit results, recommendations, and the results of our current year follow-up: No. Finding Recommendation 1 Capital Assets Not Recorded in the Proper Period Implementation Status During PP&E testing, we identified $333,889 of purchased equipment received on August 9, The invoice was received by Accounts Payable on August 25, The invoice was not entered into the system until September 27, Consequently, the equipment was not recorded as an asset until September 2011 of FY Based on the date received, this asset should have been an FY 2011 addition. The effect on the balance sheet was an overstatement of $333,889 of PP&E and accounts payable in FY 2012, an understatement in FY 2011 by the same amount. In addition, depreciation expense was overstated in FY 2012 by the same amount. As part of the financial tasks at year end, Accounts Payable should verify that significant goods or services received on or before year end are properly recorded to ensure proper cutoff for year end. Implemented 2 Depreciation Expense Not Recorded in the Proper Period During our review of this equipment, we noted the Oracle fixed asset module is configured to calculate depreciation for capital assets the subsequent month of acquisition. Consequently, all real property additions received in August are not depreciated until the September of the subsequent fiscal year. Thus, depreciation expense and accumulated depreciation is understated for all assets placed in service in August Assets Management should establish a year end procedure to determine the appropriate depreciation expense for capital assets purchased and placed in service in the month of August. An accrual to record material amounts of depreciation expense and accumulated depreciation should be made to ensure that the financial statements are properly stated in accordance to GAAP. Implemented 5