University of Illinois

Speeches and statements

Remarks to the Legislative Audit Commission

President B. Joseph White
FY 2004 Audit
October 25, 2005

Members of the Legislative Audit Commission:

Thank you for the opportunity to meet with you this morning.

I appear before you today as the chief executive and what I think of as the chief steward of the University of Illinois.

I believe that the University of Illinois is the state’s single most important asset in creating a prosperous future for the people of Illinois during a time of tremendous economic and social transition.

As a result, I care deeply about everything that affects the value and management of this asset, from the matters addressed in the Fiscal Year 2004 audit to the big picture issues of the quality of the University and the job we are doing for students and the people of the state.

I place a very high value on the audit function. I want to express my appreciation to Auditor General Bill Holland, his staff and the professionals who conducted the 2004 audit.

I have chaired board audit committees and today I serve as an audit committee member on two public company boards. This experience has given me an appreciation of the importance and value of high integrity, high quality financial reporting and strong, effective internal controls.

I should also note that my 89-year-old dad is a CPA for whom auditing is a calling akin to the priesthood. I am imbued with his values in this regard.

I read the findings of the 2004 audit with great interest. Overall, I found them more reassuring than disturbing. While I would like to see an exception-free audit report, this is virtually never the case in a large, complex organization like the University of Illinois.

What reassures me is what I did not see – there was no fraud, no malfeasance, no pattern of seriously flawed financial reporting or weak internal controls.

I also saw no defensiveness on the part of the financial managers of the University in response to the audit findings. Eight exceptions are noted by the auditors in their findings. Management accepts them and has fixed or is fixing them.

Specifically, four exceptions have been fixed and are now behind us:

• 04-1 Timely bank reconciliations;
• 04-2 Accurate recording of gifts in kind;
• 04-4 An unauthorized storeroom at the University of Illinois at Chicago (UIC);
• 04-6 Expenses charged in the wrong fiscal year.

Four other exceptions are providing to be thornier to resolve permanently for various reasons. These include:

• 04-3 Timely notification of appointments to the funding agency by a department at UIC;
• 04-5 Real estate leases not completely documented and not filed timely with the state Comptroller;
• 04-7 Inadequate property and equipment listing – the current threshold of $500 creates enormous paperwork backlog;
• 04-8 Contracts not filed timely with the state Comptroller. The volume is high because of our faculty’s success in attracting about $600 million a year in funded research, a nice problem to have.

In summary, the exceptions identified by the auditors are of concern but not egregious. And, they are either resolved or being addressed.

These findings do not keep me awake at night as president of the University. What does keep me awake are bigger picture issues that can be summarized as follows:

1. How can we maintain and strengthen the quality of the University of Illinois in the face of eroding state support and our desire to keep tuition affordable to ensure access?

2. More specifically, I worry about maintaining and restoring academic quality following several years of state budget cuts and no increases. I also worry about the more than $600 million backlog of what is politely called “deferred maintenance” and the absence of new capital in recent years.

Let me close by again thanking you, the members of the Legislative Audit Commission, and the auditors whose findings we are discussing today.

Now, I welcome your questions and comments.

Thank you.