Crowe Horwath’s Letter to
College of DuPage Audit Committee
Regarding Internal Control Deficiencies
Presented by:
William J. Kresse, M.S., J.D., CPA, CFF, CFE,
CrFA, CGMA, Esq.
Independent Financial Expert, COD Audit Committee
Governors State University, College of Business
The Crowe Horwath
Management Advisory Letter
Crowe Horwath (“Crowe”) provided the
Audit Committee with a management
advisory letter listing deficiencies in
internal controls at College of DuPage.
 FOURTEEN deficiencies were reported.
 This presentation focuses on the most
important three deficiencies.

Background
Crowe was not engaged to identify or to
express an opinion on COD internal
controls.
 Crowe found these deficiencies during
the course of its financial statement
audit.
 And, Crowe does not express an
opinion on internal controls.
 Additional important control deficiencies
may exist that Crowe did not find.

Definition
 “Control
Deficiency”
“A control deficiency exists when the design
or operation of a control does not allow
management or employees, in the normal
course of performing their assigned
functions, to prevent or detect and correct
misstatements on a timely basis.”
Sources: Crowe letter to COD, AICPA
A deficiency is a weakness.
“Importance” vs. “Materiality”
Importance: Trust, stakeholders,
relationships, compliance and
reputation.
 Materiality: A specified dollar amount
selected that is relative to the overall
financial size of the underlying entity.
 All material issues are important, but
not all important issues are material.

“Clean” versus “________”
“Unmodified” / “Clean” audit report
generally means no material issues.
 “Clean” audit report can point to,
include, or express important issues.
 Crowe’s letter pointed to 14 important
deficiencies that they came across
during the course of the audit.

Note

Crowe was primarily interested in
possible misstatements that would have
a material impact on COD’s financial
statements.
Deficiency: Conflicts of Interest
Findings:
 “[C]urrent conflict of interest policy only
addresses trustee[s], … neglecting key
officers and Foundation board
members.”
 “Currently no process to positively
confirm that all potential conflicts have
been disclosed to the appropriate
parties”

Deficiency: Investment Policy
Findings:
 “[M]anagement was not effectively
monitoring compliance with the
investment policy established by the
Board ….
 [T]he College recognized a $2 million
loss on an investment … outside of the
investment policy’s parameters….”

Deficiency: Purchasing &
Inventory Controls
Finding:
 “Lack of appropriate and effective
controls over purchasing and physical
inventory” at Waterleaf and potentially
other auxiliary business operations.

Recommendations:
Conflicts of Interest
“[A]mend … Conflict of Interest policy to
require annual statements signed by
each trustee and principal officer ….
 [P]roactively monitor… Foundation
Board [for] conflicts ….
 Consider having this compliance
process managed by the audit
committee….”

Recommendations:
Investment Policy
“Implement reporting controls to allow
for appropriate monitoring of
compliance with board policy….
 [P]reventative controls to avoid the
purchase of unauthorized investments
[in the first place].”

Recommendation:
Purchasing & Inventory Controls

“[E]valuate the College’s purchasing
and inventory controls over auxiliary
business operations throughout the
campus.”
Status: Conflicts of Interest

COD management agree with Crowe’s
recommendation, and inter alia, have
developed appropriate policy
modifications, and have reviewed
approximately 70 Statements of
Economic Interest.
Status: Investment Policy

COD management agree with Crowe’s
recommendation, and inter alia, have
liquidated any investment in violation of
the Board investment policy, and have
implemented stronger controls over
investment policy monitoring.
Status:
Purchasing & Inventory Control

COD management agree with Crowe’s
recommendation, and inter alia, have
implemented additional controls over
the remaining inventory at the nowclosed Waterleaf restaurant, and are
identifying additional areas of
improvement.
Additional Control Deficiencies

Bond Premium Amortization
 User Access Controls
 Access Level Review
 Third Party Administrator Controls
 Reclassification of Held Checks
 Account Reconciliation Reviews
 Payroll Controls
 Perkins Funds Purchase Controls
 OMB Circular A-110 Controls
 Bid Document Retention Policy
 P-Card Transaction documentation
Constant Vigilance…
COD’s issues are now well established
 As is its path back
 These 14 deficiencies remind all that
compliance is a CONSTANT concern
 Identification – Solution –
Implementation
 For continued student success and
enhanced taxpayer credibility
