An Audit Report on Selected Financial Processes at Sam Houston State University
June 2010
Report Number 10-030
Overall Conclusion
Sam Houston State University (University) should improve financial controls and oversight in areas such as asset management, investments, and financial reporting. For example:
- The University's process for capitalizing real property assets does not comply with state property accounting requirements. As a result, the University did not report at least $5,846,691 in depreciation on its fiscal year 2009 annual financial report.
- As of August 31, 2009, $22,283,196 (42 percent) of the $53,055,228 the University had invested in a multi-strategy bond fund was held in investments with ratings that were lower than the ratings requirements in statute and the Texas State University System's investment policy.
- The University misclassified cash balances on its fiscal year 2009 annual financial report. It overstated restricted cash by $10,950,000 and understated unrestricted cash by the same amount.
In fiscal year 2009, the University had 185 grants and subrecipient contracts with awards totaling $31,020,390. Although the University has policies and procedures regarding grant management, it did not always manage grants in accordance with those policies and procedures. For example, the University did not consistently ensure that (1) the appropriate individuals approved grants before the University initiated the grants and (2) principal investigators disclosed any potential conflict of interest with the grant sponsors.
The University complied with its policy regarding the use of an indirect cost rate that was lower than the federally approved indirect cost rate for 12 (15 percent) of 80 grants tested. It did not retain approximately $453,132 in grant funds that it could have retained to cover administrative costs associated with the grants that it managed. In addition, the University did not prepare two required annual reports on its use of indirect cost funds.
Auditors communicated other, less significant issues to the University's management separately in writing.
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