The institution exercises appropriate control over all its financial
resources. 


Compliance Judgment:  Partial compliance

The audit report, management letter and Statement of Unrestricted Net Assets Exclusive of Plant and Plant-Related Debt for fiscal year ended June 30, 2012, will be available approximately December 2012. They will be available as a Focus Report for the SACS On-Site Committee.

Narrative

East Carolina University (hereafter ECU or the university or the institution) exercises appropriate control over its financial resources by using both preventive and detective controls that are managed by qualified employees. Preventive controls are proactive controls that help to prevent a loss by deterring or preventing undesirable results. Institutional policies and procedures are in place to direct and control operational processes and safeguard assets.  During fiscal year 2008-2009, the University of North Carolina (hereafter UNC) established its Finance Improvement and Transformation (UNC FIT) initiative to strengthen the control environment by aligning UNC people, processes, and technology across the system, implementing process improvements over the short term, and laying the ground work for centralization of certain financial operations.  ECU participates in this initiative as described in a later section of the narrative. 

Annual risk assessments, continuous reviews, and analysis of controls and their effectiveness are in place to help ensure that ECU maintains control over its financial resources and that quality enhancement measures are in place.  These analyses of controls come in the form of self-assessments of internal controls, the review of key performance indicators (KPIs), and budget monitoring.  Detective controls attempt to detect undesirable acts (providing evidence that a loss has occurred but not preventing a loss from occurring).  Examples of detective controls are physical inventories (see ComprehensiveStandard3.11.1) and internal audits from the ECU Office of Internal Audit and Management Advisory Services (OIAMAS).  These internal audits are available upon request through the University AttorneyOIAMAS is discussed further in a later section of the narrative.  Control over financial resources is further enhanced by maintaining adequate employee bonding insurance coverage and medical malpractice insurance to prevent significant losses.

Financial operations and procedures of the university are also conducted in accordance with applicable rules, regulations, and policies of the State of North Carolina.

Qualified Personnel

Personnel who are responsible for safeguarding ECU’s financial resources are screened by the Department of Human Resources before hiring. Human Resourcesstaff verify that candidates have the necessary skills, training, and education to perform their duties. When recommended for employment, a background check is conducted.  As part of this process, resumes and transcripts are compared with written job descriptions.  Employment documents for all personnel in supervisory positions are available in the Department of Human Resources.

All Vice Chancellors report directly to the Chancellor.  Documentation of their qualifications and experience is provided in ComprehensiveStandard3.2.8The Vice Chancellor for Administration and Finance serves as the chief financial officer (CFO) for the university and has the primary responsibility for the establishment and communication of financial policies and procedures, the development and oversight of operating budgets, and overall maintenance of control of financial and physical resources.  

Under the leadership of the CFO, the responsibility of financial control is primarily shared within the Administration and Finance Division by the Offices of Financial Services and Business ServicesFinancial Services manages general accounting functions for all funds, accounts payable, payroll, financial reporting, systems coordination, budgets, and student financial services (which includes cashiering and student accounts receivable)Within Business Services is the Office of Materials Management that manages purchasing and fixed assets.  This office works closely with Financial Services and is discussed in ComprehensiveStandard3.11.1. 

Financial control over sponsored programs is the responsibility of the Vice Chancellor for Research and Graduate Studies (VCRGS) and the CFO.  The Office of Grants and Contracts (OGC) reports to the VCRGS and is responsible for post-award administration of sponsored programsOGC works closely with Financial Services and is discussed in detail in ComprehensiveStandard3.10.4.

Financial control over the Division of Health Sciences (DHS) is the responsibility of the Vice Chancellor for Health Sciences and the CFO.   The DHS consists of Brody School of Medicine and ECU Physicians, College of Nursing, College of Allied Health Sciences, School of Dental Medicine, Laupus Library, and the East Carolina Heart Institute.  The DHS has its own Office of Administration and Finance which works closely with Financial Services.   

Documentation of the qualifications and experience of individuals below the Vice Chancellor level who hold key financial leadership positions in the above offices is provided below.

Office of Financial Services:

Anne Jenkins, Associate Vice Chancellor for Financial Services
Anne Jenkins began serving in this capacity in May 2006 after serving as the University Budget Director since 1999.  She joined East Carolina University in 1983 as the Director of Systems Coordination and worked in this capacity until 1999. During 1994 through 1996 she also assumed additional responsibilities as Interim Assistant Vice Chancellor for Human Resources.  Before coming to ECU she held positions at Wachovia Bank and Trust Company NA including Auditing Officer and Senior Trust Examiner in the General Audit Department and Trust Information Officer in the Trust Division Control Department.  She has an MBA from the Fuqua School of Business at Duke University.


David Price, CPA, Director of Financial Reporting, State Funds, and Financial Transactions

David Price assumed this position in November 2002 after serving as the University Director of Accounting since March 1998.  He worked as an Assistant State Auditor for the North Carolina Office of the State Auditor from August 1997 through March 1998 and July 1989 through September 1996 and served as the Controller and Project Director at Lenoir Community College from September 1996 through August 1997.  Previously he worked for two years with public accounting firms.  He has a BSBA from the University of North Carolina at Chapel Hill and is a certified public accountant.


Sherrilyn Johnson, CPA, Financial Director of Institutional Trusts/Foundations
Sherrilyn Johnson joined ECU in 1994 as a Special Funds Accountant and was named to the position of Financial Director of Institutional Trusts/Foundations in November 2002.  She provides leadership for financial services for the ECU Foundation, Inc., the ECU Real Estate Foundation, Inc., the ECU Educational Foundation, Inc., the ECU Medical and Health Sciences Foundation, Inc., the ECU Alumni Association, Inc. and the institutional Trust Funds for ECU.  Before coming to ECU she was the Finance Officer for Greene County Schools from 1987 through 1994 and a staff accountant for a public accounting firm from 1978 through 1987.  She has a BSBA from ECU and is a certified public accountant.  


Dee Bowling, CPA, MSA, Student Financial Services Director
Dee Bowling has served in this capacity since May 2003 after serving for two years as the Controller of the Medical Foundation of ECU, Inc.  Before coming to ECU she was the Pitt County Financial Services Manager for three years and the Assistant Director for Administration of the Pitt County Health Department for eight years.  She has a MSA and an MBA from ECU and is a certified public accountant.


Nancy Phelps, Budget Director
Nancy Phelps was named to this position in 2006 after serving as the Director of Systems Coordination and Special Projects since 1999.  In addition to serving as the University’s Budget Director, she began serving as the Banner Finance Functional Project Lead in 2003.  She joined ECU in 1985 as a Systems Accountant and worked in this capacity until 1999.  Before joining ECU she was the General Accounting Supervisor for four years at a savings and loan.  She has a BSBA from ECU.


Angela Wilson, Director of Systems Coordination
Angela Wilson has served in this position since June 2008 after serving as the Interim Director of Systems Coordination for two years and serving as a Systems Accountant since July 2000.  Prior to this she served as an Accounting Technician in various departments on campus since 1983.  She has a BSBA from ECU.

Office of Materials Management

Kevin Carraway, Director of Materials Management
Kevin Carraway was named to this position in 2011 after serving briefly as the Interim Director.  He was the University’s Associate Director of Materials Management since August 2003 after serving the University of North Carolina at Charlotte as the Director of Purchasing since February 2003, the Assistant Director of Purchasing from December 1999 through February 2003 and a Purchasing Agent from January 1998 through November 1999.  Previously he worked as a Purchasing Agent for private companies.  He has a BS in Business and Marketing Education from ECU.

Office of Grants and Contracts

Kathie Hall, Director of Grants and Contracts
Kathie Hall was named to this position in June 2007 after serving as Director, Associate Director and Assistant Director for the Office of Grants and Contracts at Emory University since September 1992.  Before joining ECU she served as the Fiscal Officer and Assistant Executive Director at Northern Rural Training and Employment Consortium from August 1998 through September 1992, the Director of Modoc County Training, Employment and Community Help from September 1982 through July 1988, the Senior Administrative Analyst for the Sponsored Projects Office at the University of California from December 1979 through September 1982, and the Administrative Assistant for the Statistical Laboratory/Statistics Department at the University of California from January 1975 through December 1979.  She has a BS in Economics from the University of California.

Division of Health Sciences:

Gary Vanderpool, Executive Associate Vice Chancellor for HS Administration and Finance
Gary Vanderpool has served in this position in Health Sciences (HS) since August 1992.  In addition he serves as the Interim Chief Financial Officer for ECU’s Brody School of Medicine since July 2006.  Previously he served as the Executive Associate Dean for Business Affairs at the Brody School of Medicine from August 1997 through September 2004.  Before joining ECU he served as the Director of Finance at the School of Medicine of Creighton University form June 1989 through July 1992.  He was the Director of Medical Logistics Management from June 1986 through June 1989 and Supervisor for the Newborn Screening Laboratory from August 1979 through June 1986.  He has a Master of Public Health from the University of North Carolina at Chapel Hill.

Carol Fornes, CPA, DHS Controller
Carol Fornes has served as the Controller in DHS since 2004 after serving as the Associate Director for Business Affairs in DHS from 1996 through 2004.  She was the Controller at the Regional Acceptance Corporation from 1994 through 1996.  From 1985 through 1988 she served as the Assistant Director for Systems and Accounting at the ECU School of Medicine and an ECU Systems Accountant from 1984 through 1985.  She joined ECU in 1984 after working as an Internal Auditor for five years.

Policies and Guidelines for Financial Services and Materials Management

Policies for good financial control are developed with input from key leaders across campus including those listed above.  Policies and guidelines for fixed assets inventory and control are discussed and provided in ComprehensiveStandard3.11.1.  Policies for sponsored programs are discussed and provided in ComprehensiveStandard3.10.4.  Other policies and guidelines for good financial control include spending, purchasing, procard, payment card data, receipting, collections, and change funds.  These policies and guidelines are provided below:

ECU Spending Guidelines These guidelines provide basic rules and regulations to assist employees in making fiscally sound and legal spending decisions from the variety of sources of funds. 

ECU Basic Purchasing Procedures These procedures are posted on Materials Management’s website and provide basic purchasing requirements including contracts, quotes, bids and purchase orders and the adherence to purchasing ethics.

ECU Business Manual – Materials Management – The Materials Management section of the ECU Business Manual provides detailed purchasing rules and requirements for the procurement and handling of materials, supplies, equipment and services for all departments and agencies of the university as directed by the Purchase and Contract Division of the State of North Carolina and State General Statutes.

ECU Procard Procedures – This document provides procedures, requirements and limitations for obtaining and using an ECU purchasing card (ProCard) and the consequences of misuse.

Payment Card Processing Compliance Policy This policy establishes the requirements over all payment card practices across campus to ensure the security of all payment card holder data and compliance with payment card industry security standards.

Methods of Payment This document establishes the types and methods of payment accepted by the university for the payment of tuition, fees, housing, dining and other charges that post to student accounts.

Collections on Student Accounts – This document provides specific guidance to the university’s collection efforts with regard to student accounts in accordance with the Statewide Accounts Receivable Program.

Imprest Cash Fund and Change Fund Policy This policy provides requirements for establishing, using, accounting and closing imprest cash and change funds. 

Cash and Endowment Investment Policies


3.10.3 GS147-86.10 of the General Statutes requires that “all agencies, institutions, departments, bureaus, commissions, and offices of the State… shall devise techniques and procedures for the receipt, deposit and disbursement of monies coming into their control and custody which are designed to maximize interest-bearing investment of cash and to minimize idle and nonproductive cash balances.”  The University’s Cash Management Plan is divided into three areas:  Cash Management Over Disbursements, Cash Management Over Receipts and Investment of Funds on Deposit.

Investment assets of the ECU Endowment Fund are managed by the ECU Endowment Fund Board. The foundations that are related to the university are separate 501(c) 3 entities and are discussed in ComprehensiveStandard3.2.13.  Each has its own investment committee to manage its respective endowments.  The investment committee of the largest foundation (the ECU Foundation) meets jointly with the ECU Endowment Fund Board.  These investments are managed following the standards established by the Endowment Policy and Investment Policy.  The Endowment Policy establishes the spending distribution rate and administration fee.  The investment policy covers investment objectives, goals, portfolio guidelines aimed at limiting concentration risks, responsibilities, asset allocations, benchmarks and restrictions. 

Implementation of UNC FIT Initiative

As expected, ECU’s participation in the UNC FIT initiative has strengthened its internal controls over financial reporting with improvements in training, documentation and monitoring of its internal control environment.  Within the structure of the UNC FIT program, key performance indicators (KPIs) have been identified and are designed to provide information on the timeliness and quality of financial and compliance activities on the campus.  On a monthly, basis, the campus self-reports actual performance to UNC General Administration related to these KPIs which are, in turn, measured against an acceptable standard of performance.  The results are monitored by ECU and UNC General Administration to gauge performance, reveal trends, monitor risks, highlight successful areas as well as areas that may need improvement, identify areas where resources may be needed and improve management of campus business processes.  ECU has implemented all of the baseline standards for general accounting and KPIs are reviewed monthly.  All KPIs are within the acceptable range as shown on the January 31, 2012 report. 

Assessment of Internal Controls Over Financial Reporting

Annually, Financial Services performs an Assessment of Internal Controls Over Financial Reporting  based on a review and evaluation of the university’s processes and controls over accounting and reporting objectives.  ECU recently hired a former (retired) audit manager from the North Carolina Office of the State Auditor to improve the university’s internal controls and to provide guidance in implementing process improvements resulting from implementing the UNC – FIT initiative discussed above.  The decision to create a new position for improving internal controls, during a very tough budgetary environment, reflects the university’s commitment to maintaining and improving internal controls.  Input for the ongoing assessment of internal controls is received from personnel within Financial Services as well as Materials Management, Human Resources, Contracts and Grants, Information Technology and Computing Services, Office of Internal Audit and Management Advisory Services, Health Sciences, and Student Financial Aid.  Improvement plans are developed as a part of this process.  These plans are monitored by Financial Services. 

Budgets:

The budgetary process is described in CoreRequirement2.11.1.  The University has policies and procedures over the budgetary process in its Business Manual as follows:

University Budget Policy – This policy provides for the budgeting and accounting of expenditures, receipts and fund balances for state funds, restricted contract and grant funds, restricted and non-restricted endowment, trust and special funds by use of uniform chart of accounts.


State Budget Policy – This policy provides the North Carolina General Statutes establishing the State Executive Budget Act.

University State Budget Requests – This policy provides responsibilities for budget development and budget requests.

University State Budgets This policy sets forth the Chancellor’s delegation of the administration of approved state budgets to the Vice Chancellor through the university Budget Office.

Maintenance of State Budgets – This policy establishes the responsibility of the department heads to monitor their budgets and the process for budget changes.

Grants and Contract Administration – Budget and Expenditure Reports – This policy provides guidance on the availability, purpose and use of budget and expenditure reports for grants and contract administration.

The UNC Board of Governors approved the 2011-2012 budget in its August 12, 2011 minutes.  The approved allocations for current operations are in Appendix I and the approved allocations for capital improvements are in Appendix J.

Internal Audit and Enterprise Risk Management

ECU’s Office of Internal Audit and Management Advisory Services (OIAMAS) reports functionally to the Audit Committee of the ECU Board of Trustees and administratively to the Chancellor.  The Internal Audit staff follow the professional standards established by the Institute of Internal Auditors (IIA), the Information Systems Audit and Control Association (ISACA), and the Association of Certified Fraud Examiners (ACFE). 

The OIAMAS employs a director and six staff auditors.  Each fiscal year the director develops an audit plan that is submitted to the Chancellor and the Audit Committee of the ECU Board of Trustees for approval.  The approved plan is submitted to the University of North Carolina General Administration (UNC-GA) for presentation to the Board of Governors Audit Committee.  The audit plan is based, in part, on a comprehensive risk assessment that considers the following factors:  internal control structure, external regulations, financial impact, complexity of operations, prior engagement findings, and length of time since last engagement. The plan also considers requests from management and tips received on the institution’s Fraud, Waste, and Abuse Hotline website.  The OIAMAS provides copies of all audit reports, as they are issued, to the ECU Board of Trustees Audit Committee and to UNC-GA.  In the fall of each year, the OIAMAS submits an annual report to the Chancellor, the Audit Committee, and to UNC-GA of audit work completed during the previous fiscal year.

Since 2009, the university has employed an Assistant Vice Chancellor of Enterprise Risk Management who provides leadership and management experience to provide an enterprise approach to identify and manage the university’s strategic, financial, operational, regulatory compliance, and reputational risks. An example is the Enterprise Risk Management in Higher Education eSymposium held on October 12, 2011. 

External Audit

The external financial audit is performed each year by the North Carolina Office of the State Auditor in accordance with the authority of General Statute 147.  The audit is conducted in accordance with auditing standards generally accepted within the United States of America and Government Auditing Standards issued by the Comptroller General of the United States.  Included with the financial audit report is the auditor’s report on internal control over financial reporting and compliance.  The state auditor’s most recent financial audit and management letter for fiscal year ended June 30, 2011 provide evidence that appropriate controls are in place.  Historically, findings have been few and have always been addressed immediately. 

The University has a review process in place should a finding occur as in the 2010 financial audit.  The OIAMAS performs a review of corrective action taken and determines if satisfactory progress has been made towards resolution of the audit finding.  The OIAMAS issues a follow-up letter to the University of North Carolina General Administration summarizing the results of its review within ninety days of the issuance of the audit report or the management letter.  The OIAMAS continues to follow-up and report progress until corrective action and resolution are complete.

ECU Financial Audit Report 2011
ECU Financial Audit Report 2010
ECU Financial Audit Report 2009
ECU Financial Audit Report 2008
ECU Financial Audit Report 2007
Management Letter 2011
Management Letter 2010
Management Letter 2009
Management Letter 2008
Management Letter 2007

Insurance

ECU is protected for losses from employee dishonesty and computer fraud.  This coverage is with a private insurance company and is handled by the North Carolina Department of Insurance.  The university provides medical malpractice insurance for Brody School of Medicine faculty physicians and independently licensed allied health providers (Nurse Practitioners, Certified Registered Nurse Anesthetists, Certified Nurse Midwives, and Physician Assistants).  The institution also carries a shared blanket policy for all other ECU Physicians’ employees.  The medical malpractice liability insurance  is with a private insurance company with coverage of $3,000,000 per occurrence, $5,000,000 annual aggregate, and a $200,000 deductible; as well as an excess policy in the amount of $ 10,000,000.  Insurance coverage on ECU-owned property is discussed in ComprehensiveStandard3.11.1.

 

Documentation

Reference Title

Location

2011-2012 Year Internal Audit Plan

2011-2012 Year Internal Audit Plan

Administration and Finance division

Administration and Finance Org Chart March 2012

Angela Wilson, Director of Systems Coordination

Angela Wilson - Resume

Anne Jenkins, Associate Vice Chancellor for Financial Services

Anne Jenkins - Resume

Appendix I – Current Operations

Appendix I  2011-2012 Allocations - Current Operations

Appendix J – Capital Improvements

Appendix J  2011-2012 Allocations - Capital Improvements

Assessment of Internal Controls Over Financial Reporting

Assessment of Internal Controls June 30, 2011

Assistant Vice Chancellor of Enterprise Risk Management

Assist VC for Enterprise Risk Management Job Description

August 12, 2011 Minutes

UNC Board of Governors Minutes August 12, 2011

Business Services Website

Business Services Website

Carol Fornes, CPA, DHS Controller

Carol Kelsey Fornes - Resume

Cash Management Over Disbursements

3.10.4 Cash Management Over Disbursements

Cash Management Over Receipts

3.10.4 Cash Management Over Receipts

Collections on Student Accounts

Collections on Student Accounts

Comprehensive Standard 3.2.8

ComprehensiveStandard3.2.8

Comprehensive Standard 3.2.13

ComprehensiveStandard3.2.13

Comprehensive Standard 3.10.4

ComprehensiveStandard3.10.4

Comprehensive Standard 3.11.1

ComprehensiveStandard3.11.1

Core Requirement 2.11.1

CoreRequirement2.11.1

David Price, Financial Director

David Price - Resume

Dee Bowling, CPA, MSA, Student Financial Services Director

Dee Bowling - Resume

DHS Administration and Finance Website

DHS Administration and Finance Website

ECU Basic Purchasing Procedures

3.10.4 ECU Basic Purchasing Procedures

ECU Business Manual – Materials Management

3.10.4 Business Manual - Materials Management

ECU Financial Audit Report 2007

ECU Financial Audit Report 2007

ECU Financial Audit Report 2008

ECU Financial Audit Report 2008

ECU Financial Audit Report 2009

ECU Financial Audit Report 2009

ECU Financial Audit Report 2010

ECU Financial Audit Report 2010

ECU Financial Audit Report 2011

ECU Financial Audit Report 2011

ECU Procard Procedures

3.10.4 ECU Procard Procedures

ECU Spending Guidelines

3.10.4 ECU Spending Guidelines

Endowment Policy

Endowment Policy

eSymposium

ERM eSymposium Agenda

Financial Services Org Chart

Financial Services Org Chart 2-22-12 

Gary Vanderpool, Executive Associate Vice Chancellor for HS Administration and Finance

Gary R Vanderpool - Resume

Grants and Contract Administration – Budget and Expenditure Reports

3.10.4 Grants and Contracts Administration

Imprest Cash Fund and Change Fund Policy

3.10.4 IMPREST_CASH_AND_CHANGE_FUNDS

Investment of Funds on Deposit

3.10.4 Investment of Funds on Deposit

Investment Policy

Investment Policy

Kathie Hall, Director of Grants and Contracts

Kathie Hall - Resume

Kevin Carraway, Director of Materials Management

Kevin Carraway - Resume

KPIs – January 31, 2012

xlviewer

Maintenance of State Budgets

3.10.4 Maintenance of State Budgets

Management Letter 2007

Audit Management Letter YE June 30, 2007

Management Letter 2008

Audit Management Letter YE June 30, 2008

Management Letter 2009

Audit Management Letter YE June 30, 2009

Management Letter 2010

Audit Management Letter YE June 30, 20010

Management Letter 2011

Audit Management Letter YE June 30, 20011

Materials Management Website

Materials Management Website

Medical Malpractice Insurance

Medical Malpractice Insurance

Methods of Payment

Method of Payment

Nancy Phelps, Budget Director

Nancy Phelps - Resume

North Carolina Law 147-86.10

3.10.3 GS147-86.10

Office of Grants and Contracts Website

Office of Grants and Contracts Website

OIAMAS Annual Report 2010-2011

OIAMAS Annual Report FY 2010-2011

OIAMAS Follow-up on Finding – March 9, 2011

OIAMAS FollowUp on Finding-Issued-03 09 11

OIAMAS Follow-up on Finding – Nov 18, 2011

OIAMAS 2nd FollowUp on Finding-Issued-11 18 11

OIAMAS website

OIAMAS website

Payment Card Processing Compliance Policy

Payment Card Processing Compliance Policy

Sherrilyn Johnson, CPA, Financial Director

Sherrilyn Johnson - Resume

State Budget Policy

3.10.4 State Budget Requests

UNC FIT

3.10.4 UNC FIT

University Budget Policy

3.10.4 University Budget Policy

University State Budget Requests

3.10.4 University State Budget Requests

University State Budgets

3.10.4 University State Budgets

Vice Chancellor for Administration and Finance

Vice Chancellor for Administration and Finance Position Description