State University of New York
Office of the University Auditor
Auxiliary Service Corporations
Summary of 2006-2007 Management Letter Comments
April 16, 2008
To assist campuses in strengthening controls over governance, revenue, disbursements, and asset management, we are providing examples of management letter comments that were addressed to the various campus auxiliary service corporations (corporations). These comments were provided by certified public accounting firms during the most recent audits of the corporations and represent internal control improvement opportunities cited by those firms. Corporations should review this list to ensure their operations adequately address each of the items.
- Hold the required number of board of directors meeting as required by the corporation's bylaws to ensure that the board is meeting its fiduciary responsibilities.
- Ensure the corporation's current investment portfolio is consistent with the investments authorized by the corporation's policies.
- Develop a policy that requires expiration dates for all bookstore and other gift certificates.
- Implement agency account policies that require timely submission of receipts and address the level of documentation required to support disbursements.
- Retain all insurance policies currently in effect and periodically review the policies to ensure that coverage is continued, as appropriate.
Revenue, Receipts, and Cash Management
- Deposit cash and checks on a timely basis to ensure cash is adequately safeguarded. For each employee with access to the safe (or cash receipts location), evaluate the need for such access.
- Periodically review accounting records and cash register records at the book store to ensure the amount of revenue being reported is accurate.
- Ensure that the process of recording, reporting, and reconciling cash is conducted by different employees. In the event that the corporation does not have enough individuals to segregate these functions, compensating controls such as budget to actual reports and periodic reviews of bank statements and/or bank reconciliations by someone independent of the accounting function should be conducted.
- Complete bank reconciliations on a timely basis to ensure any errors or irregularities are indentified and appropriate action is promptly taken.
- Ensure the maximum amount of money in any account is covered by FDIC insurance.
- Examine outstanding accounts receivable balances to determine whether amounts over 90 days are likely to be collected.
Procurement and Disbursement
- Ensure proper documentation and required signatures are provided by agency account holders to support disbursements from their accounts.
- Ensure proper segregation of duties among key business functions such as purchasing and accounts payable to prevent errors and irregularities.
- Stamp invoices as "paid" upon payment to prevent invoices from being paid more than once.
- Consider requiring dual signature on all checks exceeding a predetermined amount.
- Ensure that the corporation's tax exempt status is being utilized and supplied to vendors to prevent unnecessary sales tax charges.
- Periodically review the sales price of merchandise sold to the total (purchase and processing) costs to ensure that the corporation is charging a reasonable amount.
- Reconcile the accounts payable subsidiary ledger to the general ledger on a monthly basis to ensure that any errors are identified and corrected in a timely manner. This will also assist with future reconciliations in that errors will not be accumulating over time and will be easier to identify and resolve.
- Return all unclaimed payroll checks and W-2s to someone independent of the payroll function to follow-up and ensure that the individual is entitled to the check.
- Assign someone outside the payroll department to review and approve paycheck distributions.
- Utilize the correct pay rate when determining accrued liabilities for vacation and sick time.
Other Asset Management
- Review equipment records and retire any assets that are not in use or are deemed obsolete.
- Train employees conducting inventory counts and provide for at least one experienced employee familiar with the inventory to ensure that inventory is properly counted.
- Follow-up on any unusual or unexpected inventory counts and consider the need for a second count to minimize counting errors.
- Conduct inventory counts so that inventory lists are traced to items located on the floor and all items on the floor are traced back to the inventory listing. This will ensure that items located on the floor but not included on inventory lists are counted and included in the year end inventory.
Other Sources of Information Pertaining to Auxiliary Services Corporations
Auxiliary Services Corporations' Administrative Guidelines
Auxiliary Services Corporations Guidelines
For additional information, please contact the University Auditor at 518-320-1533.