Deficiencies abundant in the audit of NSCS financial statements

Nebraska’s Auditor of Public Accounts (APA) raised concerns about the financial statements for the year ended June 30, 2017 of the Nebraska State College System (NSCS). An audit report released in January found problems across all three colleges’, Chadron State College, Peru State College, and Wayne State College, financial statements with deficiencies ranging from the inaccurate preparation of financial statements, and errors in financial reporting.
The audit noted that “The NSCS lacked personnel with the required knowledge and expertise to prepare accurate financial statements in accordance with governmental accounting standards.” Further, the auditor explained that at each college, only one person was responsible for preparing the financial statements and there was “no other review procedures in place to ensure accuracy and consistency among colleges.” As a consequence of this the financial statements required many revisions and adjustments.
Altogether, the overall error rate came to 77 percent of line items which required adjustments to 74 of the 96 financial line items. Chadron State College (CSC) had an error rate of 6 percent in statement of net position, an error rate of 30 percent in statement of changes, and an error of 46 percent in cash flow statements. CSC’s overall error rate, being the lowest of the three colleges, came to 28 percent, compared to Wayne State College (WSC) whose error rate was 47 percent and Peru State College (PSC) whose came to 67 percent.
At CSC, the APA has questions regarding expenses, information gathering methods, methods of collecting money and revenue, and the lack of segregation of duties. Regarding money and revenue, CSC had several financial transactions that did not have proper information to support them. In one situation, there was more cash on hand at the end of concession sales than what was displayed in the cashiering system during an athletic event, with variances ranging from $2 to $12.
In another instance, CSC had a deficiency in the documentation and collection of $7,778 in insurance money during a summer football camp. The documentation provided did not “indicate that someone has compared a complete listing of paid individuals to the actual participants in attendance,” read the audit.
CSC also had an infraction wherein which they deposited $9,645 for a Track T-Shirt Sale Fundraiser and had inadequate documentation to support the sales. Among the other deficiencies, CSC had several untimely deposits including women’s basketball and concessions sales. These deposits, according to the Neb. Rev. Stat. 84-710 (Reissue 2014), should have been cashed “within three business days of the receipt thereof when the aggregate amount is five hundred dollars or more and within seven days of the receipt thereof when the aggregate amount is less than five hundred dollars. CSC was knocked on four of 14 revenue transactions tested by the APA, one including child care revenue that amounted in $1,250 deposited 11 business days after the receipt date.
The APA also audited one of CSC’s contracts, specifically the bidding and awarding process, during which they found that the contracts “did not follow the procedures required by the Board policy” and did not seem to follow “good internal control and sound business practice.” CSC provided documentation that did not support or follow the proper bidding procedures listed in the Board Policy 7010.
Several of CSC’s contracts, including “Roots & Wings Inc.,” and “American Engineering,” also were not reviewed by a legal counsel. The auditors recommended that the NSCS “implement produces to ensure that all contacts receive a documented legal review,” to which the NSCS replied, “The NSCS has standard contract forms reviewed by legal counsel for many contracts. College staff have been provided training on standard contract language. The Vice Chancellor of Facilities and IT reviews major construction contracts in accordance with standard language templates. The NSCS is not staffed to allow legal review for every contract executed.”
“Legal reviews of contacts are necessary to ensure risk and legal implications are mitigated to a low level,” read the audit.
In additional to other deficiencies, three CSC payments to vendors, ranging from $14,000 to more than $60,000, were “not issued within the statutorily required 45-day payment timeframe.”
The APA provided suggestions and feedback to the NSCS, and the responses were provided in the report. These suggestions provided recommendations that ranged from ways to combat inaccurate reporting of revenue and incorrect documentation by increased training, secondary reviews of documentation and financial information, and uniform reporting templates for all three colleges and the system itself. In regard to untimely payments, the APA suggested that the NSCS “implement produces to ensure invoices are paid within 45-days, as required by state law.”
The NSCS had this to say in the audit, “CSC will review procedures to ensure adequate documentation is kept on file to support any payments held past the statutory required 45-days.”
The APA also recommended system wide training for accounting staff and to all employees responsible for data entry in the accounting system to “ensure internally prepared information is complete and accurate upon submission to the auditors.”
“The NSCS will look for ways to improve existing producers for financial statement preparation in order to reduce financial statement errors. Those responsible for financial statement preparation have already met and plan to continue meetings to improve consistency and address concerns arose during the audit, as well as to implement continued training opportunities, when available and where necessary, to ensure staff are informed and up to date on the proper financial statement line item handling of transactions,” read the audit.