22

Finding 4: KSU Lacks Controls to Prevent Overspending and Failed to Ensure Completeness of Its Accounting Records.

Review of the purchasing and accounting processes identified numerous control weaknesses that contributed to KSU's current financial condition.

• KSU's accounting system, Banner, does not autogenerate a hold preventing expenditures from being made when the account's budget has been exceeded.
• While KSU's policy requires select procurements be made using a purchase order process, this requirement was not routinely followed. Credit cards and direct pay check requests (which allow direct payments to individuals and vendors without a purchase order) were used, circumventing internal controls over spending.
• Credit cards were used extensively without any supervisory approvals and vendor information was not recorded in a manner that would allow staff to track all payments made to a vendor.
• Checks reported in the Banner system could be voided within KSU's check writing system causing its accounting system to incorrectly identify a payment as being made though it was still outstanding.

Without addressing these issues, KSU did not control and properly monitor its spending. Among issues identified:

Spending Controls

When a purchase is requested, KSU’s accounting system will notify purchasing staff that the account does not have sufficient funds, but it will still permit the purchase to be processed. This is discussed further in Finding 7. To ensure KSU stays within the approved budget, the system should be programmed to reject the requisition and require a budget amendment to proceed. Also, KSU personnel identified, that during the examination period, the process would allow the former EVP for Finance to make the decision to move forward with the purchase even if it exceeded the budget. This practice permitted the former EVP for Finance to control the budgets of all departments at a centralized position rather than permitting department heads to have control over their budgets.

The purchase order method is the best method for controlling expenditures, as when purchase orders are created in Banner, the entire amount of the purchase order is encumbered in the system so that the applicable budget is reduced by that amount.

• KSU reports that during the period FY 2019 through FY 2021, approximately 12-24 personnel had credit cards that could be used instead of a purchase order.
• If staff did not have an approved purchase order and needed to pay an invoice, a direct check was requested.
• Additionally, if the staff person did not have a KSU credit card, a personal credit card could be used for payment and a reimbursement requested from KSU.

The control of using purchase orders to prevent budget overages and control spending was futile as other unregulated methods were allowed for purchasing.