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Examples identified in the report, include:
In June 2018, KSU’s administration requested its Board to approve an endowment spending plan for internal endowed funds, allowing the University to use endowment income to help mitigate the impact of some of the current year budget reductions. The motion, which was approved by the KSU Board, identified that funds would be used as intended by donors “for scholarships, endowed professorships, and other-directed activities,” but also identified internal controls that would be implemented to develop long-term policies, oversight, and reporting of endowment income used. As detailed in Finding 9 of this report, KSU failed to fully implement those controls but still withdrew over $2.7 million to supplement its cash balances.
As noted in Finding 3, KSU contracted a CPA firm to provide internal auditing services, but the firm's preliminary report was not communicated to its former President or Board, as the former EVP for Finance chose not to provide a response to the audit findings, and without a response, the report was not issued.
Additionally, in Finding 3, after hiring a full-time internal auditor and developing an internal audit plan for FY 2021, no work affiliated with the plan was completed or communicated. The former Internal Auditor attributed this to a lack of or incomplete records, an inability to access people and information due to COVID, and directives from the former EVP for Finance to not cooperate with the internal audit process. KSU’s former President was aware the Internal Auditor was not getting the requested financial information and stated that he requested the former EVP for Finance assist the former Internal Auditor, but the former EVP for Finance responded that he was working on the external audit.
Related to information technology, our review identified 28 user classes that were not being used (stale accounts), as reported in Finding 17. KSU staff advised these user classes were created by a former employee in August 2010 and, while it was a known issue for years, no action was taken to address it. Stale accounts pose a security risk as they can be used to compromise an entity’s system.
The administration must ensure internal controls are fully implemented and monitoring is maintained for controls to be effective. Furthermore, management should prioritize identifying and resolving weak controls to ensure operations are efficient and effective, which will reduce the University’s exposure to fraud, waste, or abuse.
The review of KSU's financial operations identified several instances in which KSU provided little to no oversight of its spending, records, and financial obligations. Some examples from the report include:
Finding 2 identifies that the substantially incomplete condition of KSU's financial records limited APA procedures in multiple areas of the special examination including budgeting, procurement and contracting, expenditures, travel and expense reimbursement, and federal grants.
Finding 4 identifies KSU lacks internal controls to prevent overspending and has failed to ensure the completeness of its accounting records. This includes having an outstanding