department of examiners of public accounts report on alabama a&m

Ronald L. Jones, Chief Examiner 15-216

Report on the

Alabama A&M University

Normal, Alabama

October 1, 2008 through September 30, 2013

Filed: March 13, 2015

Department of Examiners of Public Accounts

50 North Ripley Street, Room 3201 P.O. Box 302251

Montgomery, Alabama 36130-2251 Website: www.examiners.alabama.gov

Ronald L. Jones Chief Examiner

State of Alabama Department of

Examiners of Public Accounts P.O. Box 302251, Montgomery, AL 36130-2251

50 North Ripley Street, Room 3201 Montgomery, Alabama 36104-3833

Telephone (334) 242-9200 FAX (334) 242-1775

Honorable Ronald L. Jones Chief Examiner of Public Accounts Montgomery, Alabama 36130

Dear Sir:

Under the authority of the Code of Alabama 1975, Section 41-5-21, we submit this report on the results of the examination of Alabama A&M University for the period October 1, 2008 through September 30, 2013.

Sworn to and subscribed before me this the Q./o day of .,j-~ , 20 12_.

Audxr.L G ~ Notary Public

Sworn to and subscribed before me this the .(2JQ_ day ofSe~, 2015._.

~c§~ Notary Publi~

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15-216

Respectfully submitted,

~ Hal Bradsher

fPublic Ace

Table of Contents Page

Alabama A&M University Normal, Alabama

Summary A Contains items pertaining to state legal compliance, University operations and other matters. Comments D Contains information pertaining to the history of the University. Schedule of State Compliance and Other Findings E Contains detailed information about findings pertaining to state legal compliance and other findings. Additional Information 1 Provides basic information related to the University. Exhibit #1 Board Members and Officials – a listing of the Board

members and University officials. 2 _________________________________________

15-216 A


SUMMARY

Alabama A&M University October 1, 2008 through September 30, 2013

Alabama A&M University (the “University”) is a state land-grant university, which provides opportunities for Bachelor, Master’s and Doctoral degrees in a number of different programs. The University receives funding from state, local, private and federal sources in addition to student tuition, fees and auxiliary activities. The University expends these resources for education and general purposes, auxiliary activities, research, public service, student services, institutional support, capital acquisitions and retirement of indebtedness. The University is a part of the Alabama Cooperative Extension System, the outreach organization for the land grant function of Alabama A&M University and Auburn University. The Thomas Agricultural Research Station at Hazel Green is a part of the University and provides outdoor laboratory space for agricultural research. Farm support buildings for plant, soil and animal sciences research are also available for use by the research scientists and students. The University is a participant in the state’s agricultural research program administered by the Alabama Agricultural Experiment Station, headquartered at Auburn University. The State Black Archives, Research Center and Museum is located on the University’s campus. The Center serves the state by collecting and preserving source materials on the contributions, achievements and general experiences of black Americans, providing bibliographic information to state agencies, and encouraging the use of collected materials in state educational services. Additional information on the history of the University is included in the Comments section of this report. The firm of Banks, Finley, White & Co., Certified Public Accountants conducted the financial audit for the fiscal years ended September 30, 2009 through September 30, 2013. This report presents the results of an examination of the University and a review of compliance by the University with applicable laws and regulations of the State of Alabama in accordance with the requirements of the Department of Examiners of Public Accounts under the authority of the Code of Alabama 1975, Section 41-5-14.

15-216 B

Findings are numbered and reported by the examination period in which the finding originally occurred. The following instances of noncompliance with state laws and regulations and other matters were found during the examination as shown on the Schedule of State Compliance and Other Findings and are summarized below. CURRENT FINDINGS ♦ 2013-001 The University did not ensure that the Trust for Educational Excellence was

administered in accordance with the Court’s instructions.

♦ 2013-002 Procedures did not ensure that entries to the payroll files were properly reviewed resulting in overpayments to employees.

♦ 2013-003 Procedures did not ensure that support for incentive payments to the President

were properly reviewed prior to payment. ♦ 2013-004 A payment for reimbursement of moving expenses was not properly supported. ♦ 2013-005 Change Orders and record retention practices relating to the Wellness Center

construction project may not be in compliance with the Code of Alabama and applicable regulations.

♦ 2013-006 The University may not have complied with the competitive bid law relating to

equipment purchased for the Wellness Center. ♦ 2013-007 The University may not have complied with the Code of Alabama by returning a

bid bond to a general contractor that submitted the lowest bid on the Thigpen Hall project without proper documentation to support this action.

♦ 2013-008 The University may not have complied with the Code of Alabama by negotiating

a contract on the Thigpen Hall renovation project and by processing a Change Order to add work not in the scope of the bid specifications.

♦ 2013-009 The University failed to properly safeguard assets by operating without fidelity

bond coverage for over two years. ♦ 2013-010 The University may not have complied with the Code of Alabama by not

remitting unclaimed property to the State Treasurer. ♦ 2013-011 The University may not have complied with appropriations acts by not sending

earmarked funds to Miles College as prescribed by the applicable appropriations acts.

15-216 C

♦ 2013-012 An employee of the University may not have complied with the ethics law by

requisitioning purchases from a company with which she has ties.

♦ 2013-013 The University procedures did not ensure that travel payments to employees were made in accordance with the Code of Alabama.

♦ 2013-014 The University did not consistently reimburse Board members for expenses in a manner which complies with the Code of Alabama.

UNRESOLVED PRIOR FINDINGS

♦ 2008-002 We were unable to determine if the University’s operating bank account and other accounts were being reconciled to the general ledger.

♦ 2007-002 A complete physical inventory of capital assets has not been performed in recent years.

♦ 2005-006 Documentation of revenue collected for athletic events was not retained and amounts collected were not properly accounted for.

♦ 2005-005 Fixed asset subsidiary accounts did not support amounts presented in the

financial statements. The following officials/employees were invited to an exit conference to discuss the findings and recommendations appearing in this report: Dr. Andrew Hugine, Jr., President; Dr. Kevin Rolle, Executive Vice-President/Chief Operating Officer; Mr. Clayton Gibson, Vice-President for Business and Finance; and Mr. Norman E. Jones, Assistant Vice-President for Finance and Comptroller. The following individuals attended the exit conference: Dr. Andrew Hugine, Jr., President; Dr. Kevin Rolle, Executive Vice-President/Chief Operating Officer; Mr. Clayton Gibson, Vice-President for Business and Finance; Mr. Norman E. Jones, Assistant Vice President for Finance and Comptroller; and Dr. Malinda Gilmore, ACE Fellow 2014-2015. Representing the Department of Examiners of Public Accounts was Mr. Hal Bradsher, Assistant Director of Education Audits and Ms. Lola Fuqua-Haney, Examiner.

15-216 D


COMMENTS

Alabama A&M University October 1, 2008 through September 30, 2013

The University was organized in 1875 as the result of a bill passed in the State Legislature in 1873 and through the continued efforts of its first Principal and President, William Hooper Councill, an ex-slave. The school opened on May 1, 1875, as the Huntsville Normal School with an appropriation of $1,000 per year. It had 61 students and two teachers. Industrial education was introduced around 1878. It attracted wide attention and the school was assisted financially by the Slater and Peabody Funds and by private contributors. The work in industrial education was so successful that the State Legislature authorized the name to be changed to the “State Normal and Industrial School at Huntsville”. The appropriation was increased by the State to $4,000 per year. In 1891, the school became the recipient of a part of the Federal Land-Grant Fund provided by an act of Congress which was approved on August 30, 1890. The purpose of this fund was to provide further training in agriculture and mechanical arts in the various states at the college level. The name of the school was changed again to “The State Agricultural and Mechanical College for Negroes,” and a new location was provided at Normal, Alabama, where the school would have ample room for the development of its trades and agricultural programs. In 1919, the institution became a junior college, and its name was changed to “The State Agricultural and Mechanical Institute for Negroes.” In 1939, by authority of the State Board of Education, the Institute was permitted to offer work on the senior college level. On January 14, 1948, the name was again changed to the “Alabama Agricultural and Mechanical College.” On June 26, 1969, the Alabama State Board of Education adopted a resolution changing the name of the institution to “Alabama Agricultural and Mechanical University.”

E

Schedule of State Compliance and Other Findings

Schedule of State Compliance and Other Findings For the Years Ended September 30, 2013


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Finding/Noncompliance

2013-001 Finding: The Alabama A & M University Trust for Educational Excellence, ("Trust") was established by the Federal court as a result of the Knight-Sims vs. the State of Alabama Remedial Decree. The court mandated that the principal of any public funds, gifts, grants, monies and property of every kind and character received by the Trust shall be maintained in perpetuity as the corpus of said Trust with at least 25% of the annual income therefrom to be reinvested in the corpus of the Trust. The 75% not required to be reinvested in the corpus could be used for specified educational purposes at Alabama A&M University. During our examination, we reviewed the audited financial statements of the Trust. The audited financial statements for the fiscal year ended July 31, 2012 showed that none of the annual income totaling $1,377,644.00 was reinvested in the corpus. The $1,377,644.00 in income and $2,673,737.00 of the balance from the permanently restricted corpus of the trust was transferred to the University. The financial statements for the fiscal year ended July 31, 2013 also indicated that none of the annual income totaling $4,033,576.00 was reinvested in the corpus. A member of the Board of Alabama A&M University raised concerns about this practice. Documents furnished to us indicate that the firm who audited the Trust issued a Statement to the President Pro-Tempore of the University Board of Trustees indicating that it was their belief that the Court ordered stipulations no longer applied. The University officials, the Executive Director of the Trust for Educational Excellence, and other Board members also received a copy of this Statement. Since 25% of the income was not reinvested in the corpus during these two years and $2,673,737.00 was removed from the corpus, the University may not have complied with the terms of the perpetual Trust. The Trust is administered by the Alabama A & M Foundation (Foundation). The Foundation By-Laws state that biannual meetings are to occur in June and October of each year. A review of the minutes provided for the Foundation show that only four meetings occurred during the five year period from October 1, 2008 through September 30, 2013. A quorum was present in only three of these meetings. Recommendation: The University should develop controls to ensure that the Trust corpus is maintained in perpetuity and income is reinvested in accordance with the instructions of the Court.



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2013-002 Finding: Internal controls should ensure that supporting documentation for changes to the electronic payroll file are properly reviewed prior to entering the information into the payroll system. The examination included a review of payroll payments to 30 employees. Based on our review it appeared that 6 of the employees had received overpayments of various amounts totaling $4,558.76 in the 2009-2010 and 2010-2011 fiscal years. The University initiated procedures to obtain reimbursement for the overpayments due and obtained $277.55 from 2 of the employees. It was determined that $3,401.87 of the total still due was owed by persons no longer employed by the University. Recommendation: Procedures should be developed to ensure that changes to the payroll file are properly reviewed and supported prior to being entered into the payroll system.

2013-003 Finding: The President’s July 2009 employment contract provided for base compensation of $230,000. Since the President was to maintain a residence off campus, the contract provided a $3,000 per month housing allowance. The contract also provided an $800 per month car allowance (increased to $1,000.00 in October 2013), allowed the use of Hillcrest, an on campus president’s residence, for and in connection with the business of the University and the performance of his functions as President and representative of the University, and other benefits. The contract provided that the President shall have earned incentive pay in each year in which certain benchmarks were reached, including the following.

1. 5% of his University salary in any year in which the first year student enrollment increases by 15%.

2. 5% of his University salary in any year in which he raises individual and corporate donations to the University in an amount in excess of $3,500,000.

On October 9, 2012, the President submitted a letter to the President Pro Tempore of the Board requesting incentive pay of 15% totaling $34,500 based on an increase in enrollment from Fall 2009 to Fall 2010 as well as donations of $4,058,000 in fiscal year 2009-2010 and $3,812,703 in fiscal year 2011-2012. On October 15, 2012, the President Pro Tempore of the Board prepared a letter to the Vice-President for Business and Finance authorizing the payment of the incentive.



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Finding Continued: Both letters were forwarded to all members of the Board of Trustees. On November 30, 2012 the President sent a letter to the Vice-President for Business and Finance requesting that the incentive be paid to the Alabama A&M Foundation in two $17,250.00 installments in the 2012 and 2013 calendar years. This letter also requested that the Foundation credit the funds to the account of the President and his wife. The President was to instruct the Foundation on how the funds should be distributed in separate correspondence. The University disbursed $17,250 to the Alabama A&M Foundation in December 2012 and an additional $17,250 in May 2013 to satisfy the incentive request. Of the donation amounts claimed in these years $3,385,000 and $626,992 respectively were from the company holding the food service contract at the University. These amounts were given in consideration of the University’s agreement to enter into a contract extending through June 2020, and not donations. Since these amounts are not considered to be donations, $23,000 (2/3 of the incentive) was not actually earned. Based on a request from the President after this was brought to his attention, the Foundation refunded the $23,000.00 to the University in January 2015. IRS guidelines state that wages subject to federal employment taxes generally include all pay you give to an employee for services performed. It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. A review of the amounts reported on the President’s W-2 for calendar year 2012 and 2013 indicated that the cash payments for the housing allowance, car allowance, and incentive were not included in the gross income reported. The housing and car allowances were included on 1099’s provided during the examination. The $34,500.00 incentive was not reported. The University may not have complied with IRS guidelines by not including all payments made to the President pursuant to his contract on his W-2. Recommendation: The University should develop procedures to ensure that all incentive payments are properly supported. Procedures should also ensure that all payments to employees are included on federal tax reports as required.



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2013-004 Finding: The contract for the employment of the Chief of Staff dated August 14, 2009 allowed for payment of reasonable moving expenses. A payment request was submitted on October 9, 2009 to initiate the payment of $6,534.55 to this employee based on an invoice from a moving company that showed a scheduled move date of October 27, 2009 and a list of items moved. Information in the footer of the invoice indicated it was produced in June 2010. Due to the disparity in the dates additional procedures were taken to verify the validity of this invoice. The phone number on the invoice was called and it was determined that it was in error and was not the number of the moving company. Contact was made with the company and a copy of the invoice was sent to the company for verification purposes. According to the company representative the invoice was not produced by the company and the Chief of Staff was not in their database. Based on the above the Chief of Staff repaid the $6,534.55 to the University on January 30, 2015. Recommendation: Reimbursement requests should be properly supported.

2013-005 Finding: The Code of Alabama 1975, Section 39-2-2, requires awarding authorities to advertise for sealed bids before entering into any contract for a public works project involving an amount in excess of fifty thousand dollars ($50,000). The Code of Alabama 1975, Section 41-16-21, states that the educational and eleemosynary institutions shall let by free and open competitive bidding on sealed bids to the lowest responsible bidder all contracts of whatever nature for labor, services or work or for the purchase or lease of materials, equipment, supplies, or other personal property involving fifteen thousand dollars ($15,000) or more. The Records Disposition Authority for Public Universities of Alabama requires that capital improvements contract records be retained for six years after the expiration of the applicable capital improvement contract. Public Works contracts are sometimes adjusted during the course of construction due to unforeseen circumstances not contemplated by the owner when bid specifications were prepared. These adjustments are referred to as change orders. The Attorney General, in Opinion 79-313, set out the types of change orders to be allowed on public works projects as follows: Minor changes for a total monetary value less than required for

competitive bidding; Changes for matters relatively minor and incidental to the original

contract necessitated by unforeseeable circumstances arising during the course of the work;



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Finding Continued: Emergencies arising during the course of the work on the contract; Changes for alternates provided for in the original bidding where there is

no difference in the price of the change order from the original best bid on the alternate;

Changes of relatively minor items not contemplated when the plans and specifications were prepared and the project was bid which are in the public interest and which do not exceed 10% of the contract price.

The opinion also required that a signed statement from the architect be attached to each change order containing the following: A statement of what the change order covers and who instituted the change

order and why it is necessary or desired; There must be a statement stating the reasons for using the change order

method rather than competitive bids; There must be a statement that all prices have been reviewed and found

reasonable, fair and equitable and recommending approval of the same; The local owner shall either endorse the architects statement and

recommendations or submit a separate statement covering the foregoing items.

The Alabama Building Commission has developed forms to be used to process project changes. These forms require the Owner and Architect to supply information needed to fulfill the requirements of Attorney General Opinion 79-313 that lists the guidelines relating to Change Orders. The Contract for the construction of the Wellness Center was entered into on May 1, 2008 based on the lowest bid for $12,138,000. After the final Change Order dated April 21, 2010, project changes had added $1,338,434.89 to and deducted $101,940.70 from the cost of work on the contract. The following was noted relating to change orders reviewed on this project. Documentation available at the University relating to change orders did not

include the statements from the architect and owner required to be attached to each change order as required by Attorney General Opinion 79-313.

The total changes exceeded the 10% mentioned in Attorney General Opinion 79-313.



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Ref. No.


Finding Continued: As relates to Change Order #4, only the unsigned Change Order form was

available for review. No documentation was available to support the cost added. The form provided indicated that this change order added $63,893.75 to the contract when $110,314.24 was apparently added to the contract by this Change Order based on the cumulative total carried forward to Change Order #5. Failure to retain these construction contract documents does not comply with the Records Disposition Authority for Public Universities of Alabama.

Bid specification required contractors to include allowances in their bids. In accordance with contract documents, allowances that are not used are credited back to the owner. Change Order #1 dated November 8, 2008 included the addition of $465,323.00 for fireproofing work which was partially funded with the $250,000.00 allowance for a net increase of $215,323.00. This addition included $37,308 for overhead and profit of the general contractor. Since an allowance for fireproofing was included in the bid specifications, this work was contemplated when the bid specifications were prepared and may not be an allowable change according to Attorney General Opinion 79-313. Failure to subject this work to competitive bids may not comply with the Code of Alabama 1975, Section 39-2-2.

Change Order # 3 dated July 7, 2009 included an addition of $92,672.75 for physical education equipment. This addition included $12,087.75 for overhead and profit of the general contractor. This equipment should have been bid under the Code of Alabama 1975, Section 41-16-21 and not as part of the public works contract in order to avoid the overhead and profit paid to the general contractor.

Recommendation: The University should develop controls to ensure compliance with the Records Disposition Authority for Public Universities of Alabama, the Code of Alabama 1975, Section 39-2-2 and Section 41-16-21; and Attorney General Opinion 1979-313.



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2013-006 Finding: The Code of Alabama 1975, Section 41-16-21, states that the educational and eleemosynary institutions shall let by free and open competitive bidding on sealed bids to the lowest responsible bidder all contracts of whatever nature for labor, services or work or for the purchase or lease of materials, equipment, supplies, or other personal property involving fifteen thousand dollars ($15,000) or more. The Records Disposition Authority for Public Universities of Alabama requires that capital improvements contract records be retained for six years after the expiration of the applicable capital improvement contract. Based on invoices from the architect and other documents relating to the Wellness Center project it was determined the University had entered into an agreement with the architect allowing the architect to hire a company to serve as a Program Manager in accordance with a revised Furniture Fixtures and Equipment (FF&E) completion package. Project budget information provided indicated that this company was to receive $390,295.00. According to documentation reviewed the University had provided $355,345.00 to the architect relating to the program management service as of August 12, 2009. The University was asked to provide a copy of the agreement with the architect relating to the program management services. The agreement could not be located. During the 2009-2010 fiscal year the University purchased $329,192.53 in fitness equipment for the facility. The University was asked to provide bid documentation relating to this purchase. According to the University this bid was handled by the Program Manager. The bid tabulation and other documents relating to this purchase could not be located so we were unable to determine if the University complied with the competitive bid law in purchasing this equipment. Recommendation: The University should develop controls to ensure compliance with the Records Disposition Authority for Public Universities of Alabama and the Code of Alabama 1975, Section 41-16-21.



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2013-007 Finding: The Code of Alabama 1975, Section 39-2-11 states that if the low bidder on a Public Work contract discovers a mistake in his bid rendering a price substantially out of proportion to that of other bidders, the low bidder may seek withdrawal of its bid without forfeiture upon written notice to the awarding authority within three working days after the opening of bids whether or not award has been made. If the low bidder offers clear and convincing documentary evidence as soon as possible, but no later than three working days after the opening of bids, that it made such a mistake due to calculation or clerical error, an inadvertent omission, or a typographical error, the awarding authority shall permit withdrawal without forfeiture. The decision of the awarding authority shall be made within 10 days after receipt of the low bidder's evidence or by the next regular meeting of the awarding authority. In no event shall a mistake of law, judgment, or opinion constitute a valid ground for the withdrawal of a bid without forfeiture. The University took bids for work to be done on Thigpen Hall. According to the bid tabulation dated September 22, 2009, the lowest bid on the project was $780,093.00 to a company that had posted the required $10,000.00 bid bond. The low bidder withdrew his bid after the bid opening and retained his $10,000.00 bid bond. The project was awarded to the next lowest bidder for $905,100.00. The University did not obtain convincing documentary evidence that the low bidder made a mistake due to calculation or clerical error, an inadvertent omission, or a typographical error that caused his bid to be lower than the next lowest bidder. Failure to obtain and retain this documentation may not comply with the Code of Alabama 1975, Section 39-2-11. Recommendation: The University should develop controls to ensure compliance with the Code of Alabama 1975, Section 39-2-11.



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2013-008 Finding: The Code of Alabama 1975, Section 39-2-6 (b) states that if no bids or only one bid is received at the time stated in the advertisement for bids, the awarding authority may advertise for and seek other competitive bids, . . . the awarding authority may negotiate for the work through the receipt of informal bids not subject to the requirements of this section. Where only one responsible and responsive bid has been received, any negotiation for the work shall be for a price lower than that bid. The University took bids for a project to perform domestic water pipe replacement and HVAC renovation on Thigpen Hall. According to the bid tabulation dated September 22, 2009, bids were received from eight general contractors. The lowest bidder withdrew his bid and the next lowest bidder submitted a $1,004,100.00 bid. The University negotiated with this bidder in December 2009 and removed certain portions of the project to bring the cost down to the renovation budget. The negotiations removed items of work valued at $99,000.00 and the contract was entered into for $905,100.00. The $99,000.00 included the deletion of 18 HVAC fan coils for a reduction of $30,000.00. Since there was more than one bidder, negotiation of the contract price may not be in compliance with the Code of Alabama 1975, Section 39-2-6 (b). On May 31, 2011, the University processed a Change Order that increased the project by $282,392.15. The changes included: The installation of flooring for $124,576.00. The addition of 15 HVAC fan coils for $55,830.00. Light fixtures and switches in the amount of $101,986.15.

Adding costs to a project that are for items not in the original scope and at prices that appear to exceed the bid amount may not comply with guidance issued by the Attorney General in Opinion 79-313, which sets out the types of change orders to be allowed on public works projects. Recommendation: The University should develop controls to ensure compliance with the Code of Alabama 1975, Section 39-2-6(b), and Attorney General Opinion 1979-313.



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2013-009 Finding: In order to safeguard University assets controls should ensure that adequate fidelity bond coverage is maintained for all employees that handle cash or approve the disbursement of funds. It was noted that the University’s fidelity bond coverage lapsed on May 10, 2012. The University did not have fidelity bond coverage on its employees from May 10, 2012 to August 13, 2014. Recommendation: The University should develop procedures to ensure that fidelity bond coverage is maintained to adequately safeguard University assets.

2013-010 Finding: Under the “Uniform Disposition of Unclaimed Property Act of 2004” property is presumed abandoned if it is unclaimed by the apparent owner within the time set forth in the Code of Alabama 1975, Section 35-12-70 through 35-12-96. The Code of Alabama 1975, Section 35-12-71(11)(a) defines property as including but not limited to any of the following: money, a check, draft, deposit, interest, or dividend. The University had old outstanding checks totaling $91,936.22, on the Regions bank reconciliation. The check dates ranged from September 29, 2010 through June 27, 2013. Recommendation: The University should investigate old outstanding checks to determine their proper disposition. Outstanding checks meeting the criteria of unclaimed property should be remitted to the State Treasurer in accordance with state law.



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2013-011 Finding: The Code of Alabama 1975, Section 41-4-93, states “All unencumbered balances of all appropriations shall revert to the State Treasury at the end of each fiscal year and to the credit of the General Fund or special fund from which the appropriation or appropriations were made…”. The University received appropriations from the Education Trust Fund for the Miles College Consortium for fiscal years 2008-2009 and 2009-2010 in the amount of $403,394.00 and $362,332.00 respectively. The documentation provided as of the date of this report indicates that approximately $8,067.88 of the 2008-2009 appropriation and all of the 2009-2010 appropriation were not forwarded to Miles College as of the end of the respective fiscal years. The funds for the 2009-2010 fiscal year were re-appropriated for use in the 2010-2011 fiscal year. In February 2011, Miles College submitted a request for the 2009-2010 appropriation in the amount of $359,229.00, which is $3,103.00 less than the amount received by the University for Miles College for the 2009-2010 fiscal year. The $359,229.00 amount on this February 2011 request ties to the 2010-2011 appropriation for Miles which was sent to Miles College in October 2011. Based on the documentation reviewed it appears that the University should send the $8,067.88 and $362,332.00 relating to the 2008-2009 and 2009-2010 respectively to Miles College in order to satisfy the legislative intent. Recommendation: The College should develop procedures to ensure that appropriations are expended in accordance with the applicable appropriations act.



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2013-012 Finding: The Code of Alabama 1975, Section 36-25-5, states that no public employee shall use or cause to be used his or her official position or office to obtain personal gain for himself or herself, or family member of the public employee or family member of the public official, or any business with which the person is associated unless the use and gain are otherwise specifically authorized by law. The Code of Alabama 1975, Section 41-16-82, requires the disclosure statement to be completed and filed with all proposals, bids, contracts, or grant proposals to the State of Alabama in excess of $5,000. Pursuant to the Code of Alabama 1975, Section 41-16-84 (b), the State of Alabama shall not enter into any contract or appropriate any public funds with any person who refuses to provide information as required. The University made 12 disbursements totaling $41,861.55 to the Alabama Women in Agriculture, Inc. (AWIA) during the period under examination. An employee of the University is the registered agent for this entity. Two of these disbursements were reviewed during the examination. For one of these disbursements, in the amount of $5,004.00, this employee issued the requisition requesting the purchase order to this entity, and endorsed the check issued by the University in payment for catering services received. This may not comply with the Code of Alabama 1975, Section 36-25-5. Since no disclosure form was obtained from the AWIA prior to issuing the $5,004.00 purchase order, the University may not have complied with the Code of Alabama 1975, Section 41-16-82. Recommendation: The University should develop controls to ensure compliance with the applicable ethics laws and ensure that disclosure forms are obtained prior to entering into purchase contracts in excess of $5,000.00.



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2013-013 Finding: The Code of Alabama 1975, Section 36-7-20 states that the amount allowable to a person traveling inside the State of Alabama in the service of the state or any of its departments, institutions, boards, bureaus, commissions, councils, committees, or other like agencies for expenses other than transportation may be fixed by the Governor at not less than seventy-five dollars ($75) per day. The current rate fixed by the governor is $75.00 per day. The Code of Alabama 1975, Section 36-7-22 states that persons traveling on official business in privately owned vehicles shall receive an amount equal to the mileage rate allowed by the Internal Revenue Code for income tax deductions per mile in lieu of actual expenses for transportation. During the 2009-2010 fiscal year an employee of the University made a

two day in-state trip and was reimbursed $150.00 per diem plus $119.00 for a hotel room and $16.00 for valet parking. The payment of the $135.00 for the hotel and valet parking caused the reimbursement to exceed the amounts fixed by the governor. The $135.00 was not repaid by the employee.

During the 2012-2013 fiscal year an employee of the University flew to Seattle and claimed both taxi expenses and personal mileage in Seattle on her travel claim. The personal mileage was not justified. Excess mileage was also claimed for the commute to the local airport in Huntsville. Total excess mileage claimed in the amount of $93.62 was repaid by the employee prior to the completion of our examination.

Recommendation: Controls should be developed to ensure that travel reimbursements are limited to the amounts allowable in accordance with the Code of Alabama 1975, Section 36-7-20 and Section 36-7-22.



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2013-014 Finding: The Code of Alabama 1975, applicable to Alabama A&M University addresses trustee expense reimbursement in two sections. Section 16-49-20 (a) (8) states that no trustee shall receive any pay or emolument other than his or her actual expenses incurred in the discharge of his or her duties. Section 16-49-28 states that the certificate of the president of the board or, in his absence, of the president Pro-Tempore, countersigned by the secretary, shall entitle the several trustees and ex officio members to the payment of their actual expenses incurred in the discharge of their duties as such trustees, in conformity with regulations governing travel expenses of state officials. The Code of Alabama 1975, Section 36-7-20 states that the amount allowable to a person traveling inside the State of Alabama in the service of the state or any of its departments, institutions, boards, bureaus, commissions, councils, committees, or other like agencies for expenses other than transportation may be fixed by the Governor at not less than seventy-five dollars ($75) per day. The current rate fixed by the governor is $75.00 per day. During the period covered by this examination it was determined that the amounts paid to Trustees for in-state travel had not been consistent. At times the trustees were reimbursed for actual expenses and at other times the reimbursements had been reduced to $75.00 a day for travel in overnight status. In some instances it was noted that Trustees were paid for only one day on overnight status for a trip that actually consisted of two days on overnight status. Based on questions in the examination the University sought an Attorney General’s opinion on this issue. Based on Opinion #2015-018 dated December 15, 2014 to Dr. Andrew Hugine, Jr., President of Alabama A&M University, the University may reimburse members of its board of trustees for actual expenses incurred for travel outside the State of Alabama. Alabama A&M University may also reimburse member s of its board of trustees for actual expenses for travel within the State of Alabama if the travel is for the purpose of attending or assisting in hosting a convention, conference, seminar, or other meeting of a national organization of which the state is a dues-paying member. Otherwise, reimbursement for in-state travel is limited to the per diem amounts set forth in Section 36-7-20 of the Code of Alabama. Recommendation: The University should develop procedures to ensure that Trustees are paid in accordance with the applicable sections of the Code of Alabama as stated by the Attorney General.



T

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2008-002 Finding: The software system used by the University accounts for ledger transactions and balances relating to each fiscal year separately. Proper procedures require the ending balances for each fiscal year be rolled into the subsequent year as beginning balances. Internal controls should ensure that all transactions are posted to the general ledger and monthly reconcilements of the ledger balances to the bank balances are done in a timely manner. The main operating funds are accounted for in two ledger accounts that are reconciled to three bank accounts. The reconcilement provided for the main operating funds for September 30, 2013 indicated that the ledger account balances reconciled to the bank balances. A review of the support for the reconcilement for the main operating accounts showed the following: Ledger balances shown on the reconcilement and identified as balances in

the system for the fiscal years ending September 30, 2010, 2011, and 2012 totaled $2,461,723.59. These balances had not been rolled into the transaction file for the 2013 fiscal year. This $2,461,723.59 as well as the balances for two accounts as of September 30, 2013 totaling ($1,578,953.00) were shown on the reconcilement to arrive at the total ledger balance of $882,770.59. The $2,461,723.59 did not match amounts currently in the system for these prior fiscal years. According to the University, adjustments to the ledger had been made after the reconciliation was done. A revised reconciliation was not prepared after these adjustments.

The amount on the reconcilement for the two accounts as of September 30, 2013 totaling ($1,578,953.00) exceeded the ledger balance by $13,850.92.

The reconcilement showed fiscal year 2012-2013 deposits to the bank that had not been entered into the ledger totaling $2,182,846.92. All but $364,742.05 of these deposits occurred prior to September 2013.

Based on our review we were unable to show that the September 30, 2013 bank balances relating to the main operating fund reconciled to general ledger balances. Reconcilements were requested relating to a bank account for the Universities cafeteria plan and two accounts relating to student loan funds that had a combined bank balance of $303,171.14 as of September 30, 2013. The reconcilements for these accounts had not been prepared. Monthly reconcilements were also requested for five bank accounts in June 2009, six bank accounts in August 2010, six bank accounts in May 2011, and six bank accounts in April 2012. The reconcilements for these accounts had not been prepared.



U

Ref. No.


Recommendation: The University should develop procedures to ensure all deposits are entered into the general ledger in a timely manner and that bank balances are reconciled to ledger balances on a monthly basis. Revised reconciliations should be prepared using the last ledger balance for the fiscal year.

2007-002 Finding: University policy states that Inventory Control should conduct a campus-wide inventory every two years. A complete physical inventory of capital assets has not been performed in recent years. As a result, several errors were noted in the testing of current year deletions and additions to capital assets. Out of a sample of 124 items of equipment with a purchase price in excess of $5,000.00, 40 items could not be located. According to the University 38 of these items had been disposed of and should not have been on the inventory.

Recommendation: The University should perform and document a campus-wide physical inventory on a yearly basis.

2005-006 Finding: Athletic Revenue Football Ticket Sales The University uses commercial software to print tickets and account for sales of football game tickets. On the day of a game a number of tickets are preprinted for sale by various cashiers in locations where they do not have access to the software or printers. The preprinted tickets that are not sold are later voided in the system. Other cashiers operating out of the ticket office print tickets as they are sold. The game held on October 13, 2012 was selected for testing. It was determined that reports were not available from the software system

to support the ticket activity. According to the ticket manager, the system reports would not print and receipt cashier totals were taken from the computer screen display. Since there were no printouts available for the cashiers, we were unable to properly support the funds each cashier was accountable for.

The University could not locate the unsold tickets for this game for counting as part of the examination.

Procedures were not in place to ensure that accountability was established and maintained for all football tickets printed and that cash receipts were properly accounted for.



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Ref. No.


Parking Revenue The University charges for parking at the football stadium. A change fund and pre-numbered parking tickets are distributed to parking attendants prior to each home game. The amount of the change fund advanced and the numbered tickets issued to each attendant are listed on a separate Parking Cash Collection Form signed by the parking attendant and person issuing the change funds and tickets. The parking attendants return the change fund, cash receipts and unsold tickets to the parking supervisor after each game. The cash receipts due from each attendant is tabulated based on the Parking Cash Collection Forms and deposited. The parking revenue for the game held on October 13, 2012 was selected for testing. Parking tickets were sold by ten attendants at this game. The following was noted in our review of the Parking Cash Collection Forms submitted and other documentation. The Sales Manager for the Athletics Department signed for the receipt of

$29,987.00 after the game. Included in the amounts listed on the Parking Cash Collection Forms was

a total parking tickets sold of $26,750.00, an overage in collections of $1,559.00, and a total of $28,309.00.

Errors were noted in the calculations on the forms. The recalculated amounts reflected total parking tickets sold of $26,260.00, an overage in collections of $2,049.00, and a total of $28,309.00.

A $28,314.50 deposit was made to the bank which was $5.50 more than the $28,309.00 accountability listed on the eleven Parking Cash Collection Forms and $1,672.50 less than the $29,987.00 signed for by the Sales Manager for the Athletics Department.

The University was not able to locate the unsold parking tickets to verify the total of the returned tickets listed on the Parking Cash Collection Forms.

Based on this review it was determined that procedures were not in place to ensure that accountability was established and maintained for parking ticket receipts.

Recommendation: Procedures need to be developed to ensure that accountability is established and maintained for football ticket and parking revenues as well as unsold tickets.



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2005-005 Finding: Internal controls should ensure that all ledger entries relating to capital assets tie to supporting documentation and are reviewed by management. Reported balances should be reconciled to the general ledger. Variances between supporting documentation, ledger balances, and the amounts reported on the financial statements for all years were noted during the examination. The University was asked to determine the reason for the variances noted. A comparison worksheet prepared by the University for all years under examination based on the supporting documentation indicated that the general ledger balance for all classifications of property was over stated by a cumulative amount of approximately $9.6 million. The same comparison indicated that the reported balances were overstated by approximately $15.4 million. Recommendation: Capital asset ledger control accounts should be maintained to support amounts presented in the financial statements. Variances between the subsidiary and control accounts should be reconciled.

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Additional Information

Board Members and Officials October 1, 2008 through September 30, 2013

Alabama A&M University Exhibit #1 Normal, Alabama

2

Board Members Term Expires Hon. Robert Bentley, Governor Ex-Officio From January 1, 2011 Hon. Bob Riley, Governor Ex-Officio Until December 31, 2010 Hon. Robert Avery 2010 Hon Tom Bell, Jr. Resigned

February 2012 Hon. Lucien Blankenship 2012 Hon. Raymond Burse Resigned

June 2011 Hon. Norman Hill 2014 Hon. John Hudson, III 2018 Hon. Odysseus Lanier 2014 Hon. Edward E. May 2009 Hon. W. C. McNeil 2009 Hon. Emma Jean Melton 2010 Hon. James Montgomery, Sr. 2018 Hon. Chasidy Privett Resigned

September 2012 Hon. Leroy C. Richie 2009 Hon. Shefton Riggins 2010 Hon. Richard Reynolds 2014

Board Members and Officials October 1, 2008 through September 30, 2013

Alabama A&M University Exhibit #1 Normal, Alabama

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Board Members Term Expires Hon. Chris Robinson 2013 Hon. M. Lynn Sherrod 2010 Hon. David J. Slyman, Jr. 2009 Hon. Andre Taylor 2016 Hon. Velma Tribue 2018 Hon. Jerome Williams 2016 Officials Dr. Andrew Hugine, Jr. President July 2009 to Present Dr. Beverly Edmonds Interim President Until July 2009 Mr. Clayton Gibson Vice-President for

Business and Finance August 10, 2013

to Present Mr. Ralph Johnson Vice-President for

Business and Finance October 11, 2010 –

August 9, 2013 Mr. Dane Alexander Vice-President for

Business and Finance July 1, 2010 –

October 10, 2010 Mr. Charlie Rucker Vice-President for

Business Affairs Until June 30, 2010

Mr. Norman Jones Comptroller December 2010 to Present Mr. Patrick Farier Comptroller Until November 2010

department of examiners of public accounts report on alabama a&m

Documents

university normal

university officials

auburn university

university operations

alabama summary

examination of alabama

code of alabama

land grant function