TABLE OF CONTENTS - Office of Internal Audit of the College of...For the fiscal year 2013-14, the College generated tuition revenues totaling $26.5 million and auxiliary revenues totaling

TABLE OF CONTENTS Page

OBJECTIVES, SCOPE AND METHODOLOGY .......................................................... 1 BACKGROUND ........................................................................................................... 2 Personnel .............................................................................................................. 4 Financial Information ............................................................................................ 5 FINDINGS AND RECOMMENDATIONS ..................................................................... 7

1. Financial Management .................................................................................... 8 2. Revenue and Accounting Controls ................................................................ 9 a) Ticket Sales ................................................................................................ 9 b) Rental Income ............................................................................................. 10

3. Payroll and Personnel Administration ........................................................... 13

a) Payroll Approval ......................................................................................... 13 b) Employees Sign On Process ..................................................................... 13 c) Extra Compensation Appointments ......................................................... 14 d) Outside Activity/Conflict of Interest ......................................................... 14 e) Employee Background Checks ................................................................. 15

4. Expenditure Controls ...................................................................................... 17

a) Purchasing After-the-Fact ......................................................................... 17 b) Travel .......................................................................................................... 17 c) Petty Cash ................................................................................................... 18 d) Auxiliary Expenditures .............................................................................. 18 e) Use of Student Fees ................................................................................... 19 f) Credit Card Controls .................................................................................. 21 g) Foundation Expenses ................................................................................ 21

5. Asset Management .......................................................................................... 24

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OBJECTIVE, SCOPE AND METHODLOGY Pursuant to our approved annual plan, we have completed an audit of the College of Architecture + The Arts (College or CARTA). The primary objective of this audit was to determine whether established financial controls and procedures are:

Adequate and effective;

Being adhered to; and

In accordance with University policies and procedures, applicable laws, rules and regulations.

Our audit included the College’s financial transactions for the fiscal year 2013-2014. The audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing, and included test of the accounting records and such other auditing procedures as we considered necessary under the circumstances. Audit fieldwork was conducted from May to September 2014. During the audit, we:

Reviewed University policies and procedures, applicable Florida statutes and regulations, and CARTA Policies and Procedures Manual;

Observed current practices and processing techniques; Interviewed responsible personnel; and

Tested selected transactions.

Sample sizes and transactions selected for testing were determined on a judgmental basis. As this was the first internal audit of CARTA, there were no prior internal audit recommendations related to the scope and objectives of this audit requiring follow-up. Similarly, there were no other external audit reports issued during the last three years with any applicable recommendations related to the scope and objectives of this audit.

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BACKGROUND

The College of Architecture + The Arts at Florida International University (FIU or University) offers undergraduate and graduate degree programs in Architecture, Interior Architecture, Landscape Architecture, Art, Art History, Communication Arts, Music and Theatre. The College’s total enrollment for fall 2014 was 1,698 undergraduate and 331 graduate students. The College was formed in 2006 with one central vision: to be at the forefront of teaching, research, and service in art, design, performance, and communication. Its mission is to encourage intellectual development, critical awareness, and excellence in student-centered undergraduate and graduate education; local, national, and international problem-solving engagement; and scholarly and creative activity. The College’s facilities are located at the Modesto Maidique Campus (MMC). The College’s School of Architecture Building has a combination of five buildings of different heights interconnected with walkways and bridges that together offer 102,000 square feet of state-of-the-art classroom, studio, gallery, workshop and office space. The buildings open up to a central courtyard that the architect hopes will foster interaction among students and the faculty. The Paul L. Cejas School of Architecture Building is the main learning center for architecture, interior architecture, and landscape architecture students. Some of the elements that make this venue unique are:

The pre-graduate and graduate studios; Over twelve critique rooms; The use of ceramic tile in tones of yellows, oranges and reds; The use of pre-cast concrete tilt-up panels; The multi-level technologically advanced studio with space for 375 students; A 150-seat auditorium with a state-of-the-art audiovisual system; The research facilities and digital fabrication labs; and An exhibition gallery for students to display their work.

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The College also manages the Herbert and Nicole Wertheim Performing Arts Center (WPAC), which houses the School of Music and the Department of Theatre. The WPAC houses a 600-seat concert hall and a 150-seat recital hall, as well as rehearsal halls, faculty offices, a computer music studio, practice rooms, the Mainstage Theatre, the Black Box Theatre, and a rotunda-capped atrium that serves as the entrance to both the music and theater wings.

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Personnel As of October 2014, the College had 82 faculty, 12 faculty administrators and 16 staff members. The College’s organization chart, including various advisory and working groups, is shown below.

Communication, Alumni + Advancement Fundraising Alumni

Office Manager

Sr. Secretary

Lab Manager

Photo Lab Tech (0.50)

Audio Visual Specialist

Fine Arts Specialist

Correspondent (0.25)

FT Faculty (17)

CommArts Advisory Board

CommArts Studio

FIU Debate Society

Honors Society

TEDx FIU Club

Toastmaster International Student

Organization

Office Manager

Program Assistant

Assistant Director

Coordinator of Engagement

(Vacant)

FT Faculty (12)

Office Manager

Secretary

Program Assistant

Events Manager (0.70)

Correspondent

Marching Band Program Assistant

FT Faculty (25)

Office Manager

Sr. Fiscal Assistant

Events Manager (0.30)

Correspondent

Fine Arts Specialist

Production Specialist

Costume Shop Manager(Vacant)

FT Faculty (10)

Office Manager(0.50)

Events Clerk (0.33)

Recruiter (0.33)

Computer Specialist (0.33)


FT Faculty (3)

Office Manager(0.50)

Events Clerk (0.33)

Recruiter (0.33)



FT Faculty (3)

Office Manager

Finance Assistant(Vacant)

Events Clerk (0.33)

Recruiter (0.33)



FT Faculty (17)

Interior Architecture Advisory Board

Interior Architecture Student Organization

Director’s Circle

CARTA Faculty Assembly

CARTA Assembly Steering

CommitteeAdministrativeAssistant

Information Architect

Interim Development

Officer

CARTA Design Team

Assistant Director

Alumni AffairsSr. Administrative

Assistant

Advisor (6)

Program Assistant

Assistant Dean, Finance + Operations

Office Manager

Sr. Secretary

Accountant

Office Manager

Events Manager

Facilities Manager (0.75)

Assistant Director, Marketing

Graduate Assistants (0.50)

FIU By Design

Department of Architecture

Chair

Department ofInterior

ArchitectureChair

Department ofLandscape

ArchitectureChair

Department ofTheatre

Interim Chair

SchoolMusic

Interim Chair

Department of Communication

Arts Chair

Department ofArt + Art History

Chair

Associate Dean, Exec Director, Cultural + Community

Development

CARTA Online (4)

Sr. Associate Dean, Academic Affairs

Dean’s Leadership Advisory Board

MBUS Artist-in-Residence

Coordinator Alumni and

Advancement Affairs

Director ofDevelopment

Interim Director ofStrategic Alignment

Dean’s Distinguished Fellows

DEAN

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Financial Information For the fiscal year 2013-14, the College generated tuition revenues totaling $26.5 million and auxiliary revenues totaling $3.2 million. During the same period, the College also established approximately $2.1 million in philanthropy contributions and almost $1 million in research funds. Two departments, Communication Arts and Architecture, generated approximately 56% of the College’s tuition revenues, as shown in the chart below.

Tuition and Auxiliary Revenues by Department for FY 2014

Comm Arts Architecture MusicArt+ArtHistory

Theatre Interior ArchLandscape

Arch

Tuition Revenue $8,766,574 $6,137,494 $4,861,636 $3,725,801 $1,445,692 $903,193 $622,067

Auxiliary Revenue $1,132,162 $639,005 $620,726 $366,221 $205,165 $195,298 $46,564

$‐

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

In M

illions

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The College incurred expenses of approximately $13.8 million in Education & General (E&G) funds and approximately 1.7 million in Auxiliary funds. The School of Music and the Department of Architecture spent approximately 46% of the seven academic departments’ E&G expenditures. Total E&G and Auxiliary expenditures by academic department are depicted in the following chart.

Expenditures by Department for FY 2014

(Note: $2.8 million of E&G expenditures by the Dean’s Office were excluded from the chart.)

Music ArchitectureArt+ArtHistory

Comm Arts TheatreLandscape

ArchInterior Arch

E&G Expense $2,886,705 $2,153,337 $1,968,492 $1,506,483 $1,267,777 $636,078 $533,131

Auxiliary Expense $624,113 $506,246 $118,437 $76,933 $102,594 $47,760 $175,801

$‐

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

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FINDINGS AND RECOMMENDATIONS

Overall, our audit disclosed that the College’s established financial controls and procedures were mostly adequate. However, there were areas where internal controls need strengthening, particularly in the areas of: revenue and accounting controls, payroll and personnel administration, expenditure controls and asset management. Especially, the use of equipment use fees and material & supply fees collected needs to be closely monitored. Our overall evaluation of internal controls is summarized in the table below.

INTERNAL CONTROLS RATING CRITERIA SATISFACTORY FAIR INADEQUATE Process Controls

X

Policy & Procedures Compliance

X

Effect X Information Risk

X

External Risk X INTERNAL CONTROLS LEGEND

CRITERIA SATISFACTORY FAIR INADEQUATE Process Controls

Effective Opportunities exist to improve effectiveness

Do not exist or are not reliable

Policy & Procedures Compliance

Non-compliance issues are minor

Non-compliance Issues may be systemic

Non-compliance issues are pervasive, significant, or have severe consequences

Effect Not likely to impact operations or program outcomes

Impact on outcomes contained

Negative impact on outcomes

Information Risk

Information systems are reliable

Data systems are mostly accurate but can be improved

Systems produce incomplete or inaccurate data which may cause inappropriate financial and operational decisions

External Risk None or low Medium High

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The areas of our observations during the audit are detailed below. 1. Financial Management During the audit, we observed that the College has been operating in a fiscally responsible manner. The Dean and the Assistant Dean for Finance & Operations diligently oversee the College’s fiscal activities, which include budget management, analysis of revenues and expenditures and monitoring spending. For example, each department within the College was required to submit a quarterly variance analysis report of their financial activities for E&G and Auxiliary accounts to the Dean’s Office for review. All expenses were also approved at the Dean’s Office level, as well as a quarterly meeting was held by the Dean and the Assistant Dean with department chairs and budget staff to evaluate their financial conditions. We also noted that the College has a comprehensive operations manual, which covers various areas of faculty, students and administration. However, the manual did not include specific auxiliary operations such as ticket sales and rental activities. The University’s Auxiliary Enterprises Operating Guidelines states that: “Every auxiliary must have written policies and procedures which guide the day-to-day operations of the activity…” An auxiliary operations manual provides direction to new personnel, is ready reference source for all employees, provide clarifications of responsibilities, and help assure consistent application of management’s expectations. Since many of the unique tasks are assigned to only one employee to perform, a manual would serve as a valuable guide in case of employee substitution and/or turnover. Recommendation

The College of Architecture + The Arts should:

1.1

Require departments to develop their auxiliary operations manual to document current policies and procedures.

Management Response/Action Plan: 1.1 Each existing auxiliary (non-student fee/tuition related) operation entity will be

required to put together a manual. For new auxiliary requests, a draft manual will be required at the time of request of the activity number.

Implementation date: August 2015

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2. Revenue and Accounting Controls

Apart from funding generated from student tuition and fees (e.g. material & supply fees or equipment use fees), the College also has auxiliary operations such as ticket sales and rental of concert and theatre spaces located in the Herbert and Nicole Wertheim Performing Arts Center (WPAC). The WPAC Events Manager is responsible for collecting and depositing funds from ticket sales at the Box Office, as well as for preparing rental contracts and collecting rental fees. The areas of revenues tested are as follows: a) Ticket Sales Total revenues from ticket sales by the School of Music (Activity No. 295003002) and the Theater Department (Activity No. 297003003) were recorded in the University’s ledgers at approximately $49,000 and $22,500, respectively for the fiscal year ended June 30, 2014. We selected ticket sales totaling $8,328 for 20 Music and 14 Theatre related events for testing. Our test disclosed the following conditions.

The WPAC has a procedure for students and members of the cast and crew for all Music and Theatre productions to get complimentary tickets. However, procedures for providing complimentary tickets to faculty/staff members are undefined. While staff indicated that complimentary tickets have been issued to faculty/staff members upon request, we noted that other faculty/staff members were paying for the tickets.

Funds collected were not always deposited in a timely manner. Per University

Policy No. 1110.010, Cash Control Policy Statement, all collected cash and checks must be remitted to the Student Financials Office within 2 days of receipt. Our review of 20 receipts for Music related events disclosed 18 instances in which the funds were deposited at the Student Financials Office between 3 to 39 business days after collection. For Theatre related events, 8 out of 14 receipts tested were deposited 3 to 8 business days after collection.

To ensure that all collections from ticket sales by the School of Music or the Department of Theatre were deposited into the appropriate activity numbers, reconciliations should have been performed. We found that 28 transactions totaling $3,058 from Theatre related ticket sales were incorrectly recorded in the School of Music’s activity number and 27 transactions totaling $3,717 from Music related ticket sales were recorded in the Theater Department’s activity number.

Having a clear written complimentary ticket procedure, making timely deposits, and reconciling collections to department ledgers will further strengthen the College’s internal controls.

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b) Rental Income Total revenues from rental activities by the School of Music (Activity No. 2950030011) and the Theater Department (Activity No. 2970030004) were recorded in the University’s ledgers at approximately $110,857 and $14,300, respectively for the fiscal year ended June 30, 2014. We selected and tested 10 rental contracts, totaling $29,965, from the School of Music and 3 rental contracts, totaling $12,460, from the Theatre Department. Our test disclosed the following exceptions.

For two out of three Theatre rental contracts reviewed, the collection of $6,675 and $4,858 was recorded in the University’s department ledgers although each contract shows a rental charge of $7,883 and $5,943, respectively. The difference of $2,293 was paid directly to the Theatre Department’s Technical Director by the customer. The Technical Director also received $315 from another rental contract during the audit period.

According to the WPAC Events Manager who is responsible for monitoring rental contracts, she received instruction from a former Department Chair to allow customers to pay the Technical Director directly. However, we found that no other University employees who spent time on renting the facility were paid directly from the customer. In addition, this type of the arrangement is an unallowable practice by the University. Allowing a University employee to receive compensation directly from the customers without going through the University’s regular payroll system reduces the Department’s rental income, results in avoiding required payroll taxes, and excludes the extra compensation from the employee’s Wage and Tax Statement (W-2). After our discussion with the Assistant Dean of Finance & Operations, she informed us that the Department’s practice was made without her or the Dean’s knowledge and will be discontinued immediately.

There were seven instances where rental revenues were recorded incorrectly.

For example, a rental charge of $5,040 was recorded in Music Ticket Sales Activity No. 2950030002 rather than in Music Rental Activity No. 2950030011. Instead of recording collections totaling $8,175 from 2 rental contacts in Theatre Rental Activity No. 29700030004, only $7,603 was recorded and the remaining $572 was recorded in Sales Tax Activity No. 1104140007. However, no sales tax was collected since the customers provided a sales tax exemption certificate. Also, collections totaling $9,000 from 4 rental contracts by the School of Music were recorded as Ticket Sales rather than Rental Income.

Rental fees were discretionally waived by the former Director of the School of Music without any written policy or procedure. It should be noted that the Theater Department did not waive its rental fees during our audit period.

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Checks were not restrictively endorsed immediately upon receipt to limit negotiability in case of loss or theft.

The WPAC Events Manger performs incompatible functions, e.g., creating a rental contract, collecting, and depositing or distributing checks. In the absence of mitigating controls or greater segregation of duties, the College exposes itself to unnecessary risk.

Closely monitoring WPAC events will improve the College’s controls over its rental activities. Recommendations

The College of Architecture + The Arts:

2.1

Ensure that a written procedure for complimentary tickets and rental fee waivers is developed and incorporated into the auxiliary operations manual.

2.2

Ensure that all collections are deposited promptly and checks are restrictively endorsed upon receipt.

2.3

On a monthly basis departments should reconcile their transactions against their departmental ledger, and investigate and resolve differences.

2.4

Ensure that all forms of employee compensation are made pursuant to University policies and paid through the regular payroll system.

2.5

Ensure that WPAC ticket sales and rental activities are closely monitored and/or the job responsibilities of the WPAC Events Manager are properly segregated.

Management Response/Action Plan: 2.1 A policy will be developed and incorporated into the auxiliary operations manual.


2.2 We will reinforce with employees the importance of depositing all collections promptly and endorsing checks upon receipt. In addition, the procedure to deposit checks and revenue will be integrated into the operations manual. New employees will be required to study the operations manual in order to make sure they understand policies and procedures.


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2.3 We will reinforce with employees the importance of reconciling their transactions against their departmental ledger and investigate and resolve differences. In addition, Departments will be required to submit their reconciliation on a monthly basis to the Office of the Dean.


2.4 We will reinforce with the WPAC Events Manager the importance of processing employee compensation pursuant to University policies and paid through the regular payroll system. In addition, an incremental full time position will be created to supervise the WPAC Events Manager. The focus of the position will be the management of the auxiliary operations within CARTA, including the WPAC rental activities, and to ensure that University policies and procedures are adhered to as it relates to employee payments, deposits, revenue collection, etc.

Implementation date: February 2015

2.5 We will reinforce with the WPAC Events Manager the importance of the

segregation of duties. In addition, an incremental full time position will be created to supervise the WPAC Events Manager. The focus of the position will be the management of the auxiliary operations within CARTA, including the WPAC rental activities, and to ensure that University policies and procedures are adhered to as it relates to employee payments, deposits, revenue collection, etc.


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3. Payroll and Personnel Administration For the fiscal year 2013-14, salaries and fringe benefits were $13.7 million or 82% of the College’s total expenditures. We focused our review primarily on payroll approval, temporary employee hiring, and extra state (overload) compensation. a) Payroll Approval The University’s payroll guidelines require managers/proxies to have first-hand knowledge of the employee’s work and/or leave hours or obtain written confirmation from the employee’s supervisor of the hours being reported prior to approving the payroll. In this regard, the College’s payroll approval process needs to be strengthened. We reviewed time and attendance records covering 18 pay periods from July 6, 2013 through March 14, 2014, which included 12,153 transactions. Our review revealed that 19% or 2,321 transactions were not approved by the College’s managers/supervisors. As a result, they were approved by default by the University’s Payroll Department who have no knowledge of CARTA employees’ hours worked or leave taken. The table below illustrates the number and percentage of payroll transactions not approved by each department of the College.

Department

Total Transactions

Total Exceptions

Percentage

Architecture 2,361 641 27% Music 2,099 552 26% Landscape Architecture 387 68 18% Dean’s Office 3,165 567 18% Theatre 1,233 215 17% Interior Architecture 516 78 15% Communication Arts 1,147 123 11% Art & Art History 1,245 77 6%

Total/Average 12,153 2,321 19% The absence of an adequate payroll approval process leaves the University vulnerable to paying employees for time not worked and maintaining inaccurate leave records, which can be costly in the long term. b) Employee Sign On Process Before new employees start working, hiring departments must advise them to complete a sign-on packet and other important documents, such as Loyalty Oath, Employment Eligibility Verification Form I-9, and Employee’s Withholding Allowance Certificate Form W-4, in order to be placed on payroll. We observed that temporary employees were permitted to start working before the sign-on process was completed. For example, three temporary employees started working

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on May 13 and July 8, 2013 and January 16, 2014, respectively, although Human Resources did not receive the required documents until June 28, 2013, July 19, 2013 and May 20, 2014, respectively. Although we did not identify exceptions, the practice of allowing individuals to work before they are cleared to do so increases the University’s exposure to potential liability particularly in the case of unauthorized foreigners where fines are as high as $16,000. c) Extra Compensation Appointments University Policy No. 1710.110, Dual Employment and Compensation, states:

All employees may be approved for secondary employment which constitutes dual employment does not interfere with the regular work of the employee, does not result in any conflict of interest between the two activities, and . . . Approval must be requested and granted by Human Resources prior to commencement of the secondary employment.

We sampled 14 secondary employment contracts totaling $18,430. Our review disclosed that, for the most part, secondary employment did not interfere with the regular work of the employees and did not result in any conflict of interest between two activities. However, the overload assignment process needs to be improved:

All of secondary employment contracts reviewed were approved from 7 to 206 days after commencement of the secondary employment;

For ten of the contracts tested Human Resources approval was obtained after the employees completed their secondary employment; and

Two employees received extra compensation totaling $3,680 for assignments

that appeared to be part of their normal job duties. Delays in the overload approval process and providing employees extra compensation appointments that are part of their regular job duties may have the adverse impact on the College’s budget and expenditures. d) Outside Activity/Conflict of Interest According to University Policy No. 1710.075, Conflict of Interest, any University employee considering outside activity/interest is required to complete the Report of Outside Activity Form prior to engaging in such activity and may not engage in such activity until the outside activity has been approved. The Policy also requires the Report of Outside Activity Form to be completed on an annual basis and/or when an outside activity begins or substantially changes, or has not been previously reported. During our test of rental income, we found that an employee of the Theater Department, who manages the department’s scene shop that has power tools such as saws, drills or

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pneumatic staplers, as well as assists in supervising and teaching the students proper scenic carpentry, construction methods and tool safety, “rented” the Department’s props and furniture for his own company and paid $400 without sales tax. According to the WPAC Events Manager, the price was established by the employee and a faculty member. Apart from this questionable transaction, the employee should have reported the activity on an Outside Activity/Conflict of Interest Form, which under normal circumstances might have been disapproved as a real conflict of interest. e) Employee Background Checks During our testing, we noted that three employees who received and/or handled collections in the WPAC Box Office had undergone a background check, but two of them had not been fingerprinted. According to University Policy No. 1710.257, Pre-Employment Requirement, more in-depth criminal history checks including fingerprinting, through the Florida Department of Law Enforcement are required for new employees (or employees recently promoted) who are handling cash or managing cash transactions and all financial services positions. Recommendations


3.1

Ensure that manager/supervisors who have direct knowledge of the employees’ work and/or leave hours approve all biweekly payrolls.

3.2

Prohibit its departments to allow temporary employees to work before employee requirements are fulfilled.

3.3

Complete the extra compensation appointment approval process prior to commencement of the secondary employment.

3.4

Ensure that extra compensation is for assignments beyond the employee’s normal job duties.

3.5

Ensure that Outside Activity/Conflict of Interest Forms are properly completed and approved.

3.6

Prohibit the use of University property for personal business.

3.7

Ensure that all employees who receive and/or handle cash are fingerprinted.

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Management Response/Action Plan: 3.1 We will reinforce with managers/supervisors the importance of approving time

biweekly. In addition, the time approval process will be stressed in the College’s operation manual.

Implementation date: Immediately 3.2 We will reinforce with managers/supervisors the importance of fulfilling the

employee sign on requirements. Implementation date: Immediately 3.3 We will reinforce with managers/supervisors the importance of completing the

extra state compensation request well prior to the commencement of any secondary employment.


3.4 CARTA Office of the Dean will work with HR in order to review employee’s normal duties to confirm there is no overlap.

Implementation date: Immediately

3.5 The reporting of the outside activity is managed by HR. We will work with HR to ensure that all of our employees complete the process in a timely manner.


3.6 We will reinforce with the WPAC Events Manager the importance of using University property only for business purposes. In addition, an incremental full time position will be created to supervise the WPAC Events Manager. The focus of the position will be the management of the auxiliary operations within CARTA, including the WPAC rental activities, and to ensure that University policies and procedures are adhered to as it relates to employee payments, deposits, revenue collection, etc.


3.7 The Office of the Dean will work with HR to update all job descriptions and, if necessitated by job duties, existing and new employees will undergo background checks.


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4. Expenditure Controls We selected 22 transactions totaling $96,699 from the School of Music and 8 transactions totaling $26,494 from the Theater Department, and reviewed all activity numbers related to the College’s optional student fees such as equipment use fees or material & supply fees. In addition, we reviewed 60 credit card transactions totaling $38,336 and Foundation expenditures totaling $53,540. Except for some of the observations noted below, our audit disclosed that the College’s non-payroll related expenditures tested were appropriate, allowable, and in accordance with University policies and procedures, applicable laws, rules and regulations. a) Purchasing After-the-Fact

Our test of expenditures disclosed that goods or services were received before securing a contract or a purchase order for 10 transactions totaling $32,581 from the School of Music. As a result, invoices for these transactions were already received for payments prior to issuing purchase orders or contracts. The expenses were primarily related to music performances or piano tuning services.

The University’s Procurement Service Manual states that, “Departmental employees do not have authority to place orders with vendors or contractors for supplies or services. The authority for issuing contracts and purchase orders is with the Purchasing Services Department. Purchases made by employees without first securing a purchase order or a contract are a violation of University and state policy…”

Purchase orders or contracts being issued after-the-fact circumvent the intent and purpose of established policies, for example, in this instance the procurement and budget control processes are weakened.

b) Travel

We noted that Travel Authorization (TA) for three transactions, totaling $13,570, was not prepared and submitted for approval. Two expenses totaled $5,290 incurred for bus charter services obtained by the School of Music for FIU Choir and Marching Band to go Tampa and Boca Raton, respectively. Also, an expense in the amount of $8,280 was paid by the Theater Department for an airfare of 24 students to attend the Kennedy Center American College Theatre Festival (KCACTF) in Roanoke, Virginia.

According to Florida Statute section 112.061(3)(a): “All travel must be authorized and approved by the head of the agency, or his or her designated representative, from whose funds the traveler is paid. . . .” Also, University Travel Expense Policy No. 1110.060 requires staff: “. . . not to make commitments to travel or to incur travel expenses without first obtaining the appropriate approval.” Using a TA benefits the College by encumbering funds resulting in better budgetary control over its funds.

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c) Petty Cash

While testing expenditures, we noted that two transactions, totaling $738.06, were for the replenishment of a petty cash fund maintained by the Theater Department. We noted that the petty cash was primarily used for costumes for Theatre productions and student classes.

University Policy No. 1110.030, Petty Cash states in part, “The fund shall be used for emergency, non-recurring disbursements and shall have a dollar limitation of $50 per disbursement.”

Our review of supporting receipts/invoices for 23 transactions using the Department’s petty cash disclosed the following exceptions:

Transactions were mostly non-emergency and for recurring purchases; Five purchases exceeded $50 threshold; and Five transactions were paid with individual debit/credit cards or a check.

We also observed that the Department’s petty cash fund was not properly controlled or timely replenished. For example, a request of a former Department Chair’s petty cash replenishment includes receipts more than 3 years old. In addition, the University Controller’s Office conducted a cash count at the Department and identified similar findings, and issued a memo on January 6, 2014, which states that: “... it was noted that the department is in violation of the Official University Policy for Petty Cash -1110.030.”

Due to the mostly non-emergency and recurring nature of purchases, administration cost of handling cash, and difficulty in distinguishing between business and personal use for items purchased, the Department needs to either better control petty cash or reevaluate whether a petty cash fund is necessary.

d) Auxiliary Expenditures

Florida Board of Governors (BOG) Regulation 9.013, Auxiliary Operations, states, “Each auxiliary service is an individual entity and shall be accounted for as such. . . . all pertinent institutional revenues and costs shall be assigned to each auxiliary and the consequent financial results of operations determined.” Accordingly, the College established each auxiliary service and activity number to account for their revenues and expenses.

During our test of expenditures, we observed that expenses totaling $12,939 were not charged to appropriate activity numbers:

The School of Music’s institutional membership dues $2,045 were paid from the

School’s Auxiliary Rental Activity (No. 2950030011).

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Engraved pens with each of nine departments’ name costing $5,113 were paid from the School of Music’s Tickets Activity (No. 2950030002).

A bus charter service for FIU Choir costing $2,185 was paid from the School of

Music’s Auxiliary Rental Activity (No. 2950030011). A MacBook Pro laptop costing $1,407 was paid from the Theater Department’s

Auxiliary Ticket Sales Activity (No. 297003003) for its faculty member who was not involved with this auxiliary service.

Two credit card transactions totaling $2,189, which were related to the School

of Music’s advertisement and recruitment expense, were charged to its Auxiliary Rental Activity (No. 2950030011).

Appropriately matching expenses to related revenues are required and is a rule tenet of fiscal accountability.

e) Use of Student Fees

The University may assess optional student fees, such as equipment use fee or material/supply fee, provided that the proceeds are used for the instruction of the course and equipment or material/supply is used directly by the students. Accordingly, the College’s academic departments were authorized to charge students an equipment use fee or a material/supply fee for certain courses.

According to BOG Regulation 7.003(7), material and supply fees can be assessed to offset the cost of materials or supply items which are consumed in the course of the student’s instructional activities, excluding the cost of equipment and equipment repairs and maintenance. Also, the University’s equipment use fee request form refers to BOG Regulation 7.003(18)(e), which authorizes state universities to assess fees and fines relating to the use, late return, and loss and damage of facilities and equipment.

During our expenditure testing, we noted that the proceeds from the optional student fees were not conform to the applicable Regulations. For example,

The equipment use fee of $32,555 paid by students was used for the purchase

and installation of chairs (risers) in the School of Music’s Recital Hall (WPAC 150). According to management, new metal risers replaced the existing wooden risers to improve the appearance and most importantly the acoustics of the room. However, while the Recital Hall clearly is used to benefit students it is also used by faculty and guest lectures and is rented to outside organizations.

The School’s justification for collecting equipment use fees from students was for the acquisition of equipment such as musical instruments, media and

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recording equipment in support of courses. Its use for capital improvements is questionable.

The material and supply fee of $11,112 collected by the School of Music was

used for the purchase of 12 lighting fixtures (8 Chauvet Colorado 1 Tri-Tour Led and 4 ETC Source Four Daylight). The School’s justification for collecting material and supply fee from students was for the acquisition of materials or supplies, such as musical scores, recordings, duplication cost, and accompanist, in support of courses, students, concert and production. The stage lighting fixtures likewise to our previous example, do not appear to be a consumable item in the course of the student’s instructional activities.

In addition, we reviewed the College’s charges to the activity numbers that account for FY 2014 expenses from the equipment use fees or material/supply fees collected. Our review disclosed $68,826 in questionable expenditures from fees collected from students:

Department Type of

Student Fees Activity Number

Type of Expenses

Total Expenses

Architecture Equipment Use Fee

2910030008 Payroll Expense

$ 64,852

Architecture Equipment Use Fee

2910030008 Telephone Expense

2,285

Music Material and Supply Fee


888

Art & Art History

Material and Supply Fee


801

Total $ 68,826

The School of Architecture’s equipment use fee request forms were approved by the Associate Vice President of Academic Affairs and the approved forms included expenses for personnel needed for the safe functioning of the equipment in the labs. However, the equipment use fee request form also states, “Justification for equipment use fee must include how this equipment is considered specialized, how it is integral and required to the instruction of the course, and how this equipment will be used directly by the students.”

We also observed that equipment use or the material supply fees collected were used to purchase items that were not directly used by the students. For example,

Three laptops costing $7,938 were purchased for three faculty members of the

Department of Architecture using equipment use fees. Two laptops and a monitor totaling $4,835 were purchased for three faculty

members of the Art & Art History Department using equipment use fees.

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Three smart TVs totaling $2,049 were purchased by Miami Beach Urban Studios (MBUS) using equipment use fees for gallery event information and welcome sign purposes.

Two other smart TVs purchased by MBUS via online were returned, resulting in

$134.48 in shipping and handling fee charged to equipment use fees. Software costing $200 was purchased by the School of Music using material &

supply fees for a faculty member’s research project.

Not using equipment use fee or material/supply fee collected from students for the intended purpose will increase the College’s program risk.

f) Credit Card Controls

We also tested 60 credit card transactions totaling $38,336 and determined that all of them were related to the College’s operations and were mostly in accordance with University policies and procedures. However, we noted that: 1) five transactions totaling $3,429 were processed based on credit card payment receipts without description of goods or services; 2) six transactions totaling $3,653 were not approved by a designated approver within the College; therefore, they were approved by a credit card administrator in the Controller’s Office; and six transactions totaling $4,438 were charged to inappropriate activity numbers.

It is essential that all credit card transactions are adequately supported with invoices/receipts and are recorded in to applicable activity numbers.

g) Foundation Expenses

During the audit period, the College’s Foundation expenditures totaled $603,143. We selected and tested 10 transactions totaling $53,540. Our audit disclosed that all expenditures tested were appropriate, allowable and in accordance with Foundation policies and procedures.

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Recommendations


4.1

Remind departments of the importance of following purchasing requirements for securing a purchased order or contract prior to receiving goods or services.

4.2

Ensure that departments obtain Travel Authorization prior to incurring travel expenses and/or traveling.

4.3

Reevaluate the necessity of the petty cash fund used by the Theater Department or require the Theater Department to strengthen controls over its use.

4.4

Ensure that each auxiliary operation is charged only for their related costs.

4.5

Ensure that all expenses from optional student fees collected are only limited to equipment or supplies/materials used directly by the students for courses.

4.6

Ensure that all credit card purchases are charged to proper account activity and timely approved after obtaining adequate invoices/receipts.

Management Response/Action Plan: 4.1 We will reinforce with employees the importance of following purchasing

requirements.

Implementation date: Immediately 4.2 We will reinforce with employees the importance of obtaining a travel

authorization prior to incurring any travel expense.

Implementation date: Immediately 4.3 The CARTA Office of the Dean will work with the Theatre Department in order to

understand the need for a petty cash funds.

Implementation date: February 2015 4.4 We will submit a request for activity numbers to be used to transfer left over

funds from the Department’s auxiliary activity.


4.5 We will reinforce with employees the importance of abiding to the equipment and supplies/materials fees. In addition, the Dean’s Office will continue to

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monitor/review/approve expenses in order to make sure that policies and procedures are followed. In regards to the Payroll Charges, the Associate Vice President of Academic Affairs approved the College’s request to use equipment fees for payroll in consultation with the General Counsel’s Office.

Implementation date: Immediately Auditor’s Comment: We will continue to consult with the College of Architecture + The Arts and the General Counsel’s Office on the propriety of including salaries in student equipment use fees

4.6 We will reinforce with employees the importance of approving in a timely manner

the credit card charges, as well as allocating to the correct funding source.


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5. Asset Management Per the University’s asset management system as of June 2014, the College had 81 capital assets with associated cost totaling $1.8 million. The College’s capital asset inventory as recorded in the system is up to date. We also confirmed with the Assistant Controller for Asset Management that they did not observe any missing capital assets while taking their annual physical inventory in late 2013 and early 2014. In addition to capital assets, the University’s Property Control Manual defines attractive property as “…University property costing less than the threshold amount of $5,000, but which are particularly vulnerable to theft and misuse.” The Property Control Manual recognizes that “Attractive” property items may vary from department to department, the manual offers such things as laptops, iPads, or video recorders as examples. In evaluating “attractiveness” in the context of their own environment the factors they are asked to consider include the security of the property location, the size and portability of the item, and its potential resale value if stolen. Attractive items are to be marked as University property and catalogued by the user department. Special property tags are available upon request from Property Control. During the audit, we noted that maintaining and tracking attractive property are decentralized and the responsibility of each department within the College. Although the Dean’s Office and other three departments maintained its own attractive property list, four other departments did not maintain and track their attractive property. They are: 1) Interior Architecture; 2) Landscape Architecture; 3) Music; and 4) Communication Arts. Upon our inquiry, the Assistant Dean of Finance and Operations informed us that the College will immediately develop a college-wide procedure regarding attractive property. The lack of accountability over attractive or sensitive property increases the likelihood of waste, fraud and abuse. Recommendation


5.1

Establish a procedure and track all attractive/sensitive property owned by the College.

Management Response/Action Plan: 5.1 A full time permanent position will be created in order to address this finding.

Among other things, the individual’s responsibility will be to oversee the purchase and inventory of attractive property for the College.

Implementation date: March 2015

Documents

TABLE OF CONTENTS - Office of Internal Audit of the College of...For the fiscal year 2013-14, the College generated tuition revenues totaling $26.5 million and auxiliary revenues totaling