Internal Auditing

Case in Point:
Lessons for the pro-active manager

February 2010
Vol. 2 No. 2
Quotable...

Character is much easier kept than recovered.

~Thomas Paine1

February 17, 2010, marked the one-year anniversary of the passage of the American Recovery and Reinvestment Act of 2009 (ARRA). At Auburn University, as of January 31, 2010, we have been awarded over $66 million in ARRA funding that must be accounted for and spent appropriately.

The bill states how funds can and cannot be used by institutions of higher learning (Title XIV, Section 14004). As stewards of public funds, institutions must be aware of these guidelines. How ARRA funds should be used: "A public institution of higher education that receives funds under this title shall use the funds for education and general expenditures, and in such a way as to mitigate the need to raise tuition and fees for in-State students, or for modernization, renovation, or repair of institution of higher education facilities that are primarily used for instruction, research, or student housing, including modernization, renovation, and repairs that are consistent with a recognized green building rating system."

How ARRA funds should NOT be used: "An institution of higher education may not use funds received under this title to increase its endowment."

Additional Prohibitions: "No funds awarded under this title may be used foró

(1) the maintenance of systems, equipment, or facilities;
(2) modernization, renovation, or repair of stadiums or other facilities primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public; or
(3) modernization, renovation, or repair of facilitiesó
    (A) used for sectarian instruction or religious worship; or
    (B) in which a substantial portion of the functions of the facilities are subsumed in a religious mission."

For more information on ARRA, visit the AU ARRA web site.

ARRA is a prime example of how new compliance risks are continuing to emerge for higher education. Two years ago, no one had to worry about ARRA compliance yet today itís a top compliance priority. Assisting you in staying aware of emerging issues, risks, and trends is a large part of this monthly communication. We again invite you to examine the current events happening across our industry and ask you to then consider whether these issues affect your area of responsibility here at Auburn University.

Sincerely,

John A. Estrada, CPA, CFE
Audit Manager

M. Kevin Robinson, CIA, CFE, CCEP
Executive Director, Internal Auditing


Information Security Related Events

Feb 23, 2010: The U.S. will not be able to mitigate the risk from cyberattack until the government gets more actively involved in protecting the nation's network, which may not occur until after a "catastrophic event" happens, McConnell said in testimony during a hearing of the Senate Committee on Commerce, Science and Transportation.(link)

Feb 19, 2010: Nearly one thousand former Southern Illinois University students are at risk for identity theft. University officials say an old computer in the math department was hit by a virus last month. (link)

Feb 15, 2010: About 1,200 patients of The University of Texas Medical Branch at Galveston had their privacy violated by an employee of a company hired by UTMB to assist with billing from third-party payers. (link)


Misappropriation/Fraud/Ethics Events

Feb 18, 2010: The University of Maryland, Baltimore made $410,000 in "questionable compensation payments" to a senior employee between 2007 and 2009, according to a state audit released Thursday. The payments, made in addition to the employee's salary, were not disclosed in budget reports to the General Assembly. The university also failed to submit the employee's contract for approval by the attorney general's office or for review by the Board of Regents, the audit charges. (link)

Feb 18, 2010: Fairfield University raised approximately $775,000 from 1997 to 2007 for Project Pierre Toussaint, a program funded through a charity created by its former chaplain and founded by his prize student to help abandoned boys in Haiti, but cannot document how $120,500 of that money was spent. (link)

Feb. 3, 2010: GA police arrested a 37-year-old security analyst Monday on a felony extortion charge for trying to shake down a student who downloaded music in return for not turning her in to the UGA Office of Judicial Programs, according to university police. (link)


Compliance/Regulatory Failure Events

Feb. 12, 2010: Oklahoma State University and T. Boone Pickens, an alumnus and one of its largest donors, have sued a life insurance company over a fund-raising plan that took out policies on alumni with the aim of raising hundreds of millions of dollars for the university. (link)

Jan 27, 2010: Rutgers police said they had arrested six members of a sorority on charges of aggravated hazing, alleging they repeatedly beat at least three pledges between Jan. 18 and Jan. 25. (link)


Other News & Events

Feb 24, 2010: An Indiana University freshman who alleged she had been raped in 2006 said after a campus judicial proceeding that the university "not only harbors rapists, but also disregards, ignores and fails women." (link)

Feb 24, 2010: Campuses around the country are using certain promotions in attempt to get college students to fill out their 2010 Census questionnaires this spring. Census data is used to assign federal funds, and a more thorough count that includes the student population can mean additional money for higher education. (link)

Feb 18, 2010: UC San Diego leaders and civil rights activists have condemned a student party that mocked Black History Month with a ghetto-themed "Compton Cookout." (link)

Feb 17, 2010: Most Americans believe that colleges today operate like businesses, concerned more with their bottom line than with the educational experience of students, according to a new study. And the proportion of people who hold that view has increased to 60 percent, from 52 percent in 2007. (link)

Feb. 14, 2010: Amy Bishop, 45, a neurobiologist and assistant professor at the University of Alabama in Huntsville, was arrested and charged with capital murder. She is accused of killing three of her colleagues and injuring three more during a faculty meeting. (link)

Feb 12, 2010: A leader at Virginia Tech's campus newspaper said the organization will sue in court if the university goes forward with a threat to cut its funding and disrupt its advertising revenues. (link)

Jan. 27, 2010: Average college endowment returns plummeted 18.7% last year, the worst decline for higher education since the Great Depression, a report says. (link)


If you have any suggestions, questions or feedback, please e-mail me at robinmk@auburn.edu. We hope you find this information useful and would appreciate hearing your thoughts. Feel free to foward this email to your direct reports, colleagues, employees or others who might find it of value. Back issues of this newsletter are available on our web site at http://www.auburn.edu/audit.

If you have any suggestions for items to include in future newsletters, please e-mail Robert Gottesman at gotterw@auburn.edu.

Department of Internal Auditing
Auburn University
304 Samford Hall
M. Kevin Robinson, Exec. Director
robinmk@auburn.edu
334.844.4389
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