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This Report Digest and a Full Report are also available on the internet at www.auditor.illinois.gov
CERTAIN FINANCIAL AND BUSINESS PROCESSES
UNIVERSITY OF ILLINOIS BOARD OF TRUSTEES
PERFORMANCE AUDIT
Release Date: January 2012
SYNOPSIS
The University Board requested that the Legislative Audit Commission authorize and direct the Auditor General
to conduct this independent external audit of certain financial and business processes for which the Board had
responsibility for the period 2007-2009. The Board is the governing body of the University and has final
authority over University activity. The Board has certain authorization levels for transactions it must approve.
Our audit found:
• The Board utilized the Executive Committee during the audit period for issues that were either not urgent in
nature, or were matters that should have been discussed and voted on by the full Board.
• Purchasing Transactions: During the audit period the Board approved 337 purchases totaling $602
million based on dollar thresholds established by the Board in 2005. We specifically found:
- The University did not provide complete and accurate information to the Board related to purchasing
transactions for approval as required by Board policy.
- The criteria reviewed on evaluations were not maintained in all procurement files; and the required
evaluation criteria listed in the RFP was not always consistent with the criteria in the evaluation process.
- The University did not maintain individual evaluations for each committee member in the file.
- The University did not maintain complete evaluations for each procurement transaction in our sample.
- The University's procurement files contained evaluation scoring errors.
• Finance and Investment Transactions: During audit testing we identified a potential conflict of interest
involving a Board official that recommends firms to the full Board for financing activities. Also, the
University: utilized a two-team evaluation approach for the procurement of a financial advisor that was
outside usual University evaluation procedures; did not maintain supporting files for the procurement of all
the financing parties; utilized financing parties with which the University did not have a current
contractual agreement; and overpaid bond counsel and issuer’s counsel vendors based on an examination of
the contractual rates for those services.
• Construction Transactions: During the audit period, the University submitted, and the Board approved,
$981 million in construction related transactions. We specifically found:
- Inconsistencies, errors, and discrepancies during the review of the University’s evaluation process for
A/E professional service consultants. In addition, the over involvement of personnel external to the
evaluation committee was identified during the review of the University’s selection process for A/E
professional service consultants.
- The University was not obtaining sufficient information for contractors and subcontractors including
MAFBE information. The University was also not ensuring MAFBE information proposed in bids
was consistent with MAFBE information listed in final University contracts.
ii
iii
The Executive Committee was
utilized for issues that were not
urgent.
The University did not review and
approve sole source justification
forms.
The University inconsistently used
contracts and purchase orders as
binding agreements.
AUDIT CONCLUSIONS AND
RECOMMENDATIONS
The Board of Trustees (Board) is the governing body of the
University of Illinois (University) and has final authority over
University activity, including the proper use of funds
appropriated by the General Assembly. (report page 1)
The Board has certain authorization levels for transactions it
must approve. During the audit period of 2007-2009, for the
authorization levels in place at the time, the Board:
• Approved 202 construction related transactions totaling
$981 million.
• Approved 337 purchase transactions totaling $602
million. (page 1)
The Board utilized the Executive Committee during the audit
period for issues that were either not urgent in nature, or were
matters that should have been discussed and voted on by the
full Board. The Executive Committee is to meet and act upon
issues that cannot be postponed until the next regular
meeting of the Board. While all Board trustees are notified of
the meeting and can comment or question any item, only
Executive Committee members may vote on the issues at
hand. The Executive Committee consists of three Board
members. (pages 13-20)
PURCHASING TRANSACTIONS
During the audit period the Board approved 337 purchases
totaling $602 million based on dollar thresholds established
by the Board in 2005. We selected 25 transactions totaling
$28.5 million that were competitively procured, and an
additional 25 transactions, totaling $38.7 million, which were
sole source purchases by the University. We found:
• The University did not provide all complete and accurate
information to the Board related to purchasing
transactions for approval as required by Board policy (2
of 25 transactions tested).
• The University did not review and approve sole source
justification forms as required by University Policy.
- 11 of 25 transactions tested lacked dates on the forms.
- 6 of 25 transactions tested lacked approval signature or
dates.
• The University did not provide copyright or patent support
for all applicable sole source purchases as required.
- 3 of 17 transactions tested did not have the copyright or
patent number on sole source form.
- 6 of 17 transactions tested had no documentation to
support the validity of the patent number in the file.
• The University inconsistently used contracts and purchase
orders as binding agreements. Additionally, although
required in University policy, the University did not always
obtain required signatures on contractual obligations or
iv
Evaluation criteria for purchases
were not always maintained in the
procurement file.
Procurement files contained
evaluation scoring errors.
follow required State recording and filing procedures.
• The Contract Approval Routing Form (CARF) was not
consistently being completed, signed, and included with each
contract document being processed as required by University
policy.
- 21 of 25 sole source transactions tested did not contain a
completed and signed CARF.
- 20 of 24 competitively procured transactions tested did
not contain a completed and signed CARF.
• The criteria reviewed on evaluations were not maintained
in all procurement files. Additionally, the required
evaluation criteria listed in the Request for Proposal
(RFP) was not always consistent with the criteria
reviewed during the evaluation process.
- 10 of 20 transactions tested had required evaluation
criteria listed in the RFP that were not consistent with
criteria reviewed by the evaluation committee.
- 2 of 20 transactions tested lacked documentation for
auditors to determine whether the criteria utilized was
consistent. These transactions totaled $6.8 million.
• The University did not maintain individual evaluations for
each committee member in the file. Additionally, University
documentation, for some transactions, did not support that the
evaluation was based on a group consensus.
- 3 of 20 transactions tested were by group consensus
although documentation did not show signatures for the
group members.
- 10 of 20 transactions tested lacked documentation to
show the evaluations for individual members of the
committee. These transactions totaled over $17
million.
• The University did not maintain complete evaluations for
each procurement transaction in our sample.
- 3 of 20 transactions tested had evaluations which were
not complete.
- 7 of 20 transactions tested lacked documentation for
auditors to determine whether the evaluation was
complete. These transactions totaled over $15 million.
• The University did not maintain point summaries in the
procurement files that supported Board documentation for all
transactions in our sample (2 of 20 transactions tested
included point totals in the files that differed from what was
presented to the Board).
• The University's procurement files contained evaluation
scoring errors. Additionally, there was no evidence in the
files to support that such errors were recognized and
addressed by the University.
- 5 of 20 transactions tested had evaluation scoring
errors.
- 5 of 20 transactions tested lacked documentation for
auditors to determine whether the evaluations were
correct. These transactions totaled over $14 million.
• The University's procurement files contained inconsistencies
v
During audit testing we identified a
potential conflict of interest
involving a Board official.
The University utilized an external
financing party that it did not have a
current contractual agreement with
and overpaid vendors for bond
counseling services.
in the identification of evaluation committee members.
Additionally, there was no evidence in the files to support that
such inconsistencies were recognized and addressed by the
University.
- 3 of 20 transactions tested had inconsistencies in the
identification of evaluation team members.
- 6 of 20 transactions tested lacked documentation for
auditors to determine whether the evaluation team
remained consistent throughout the procurement
process.
• Protest documents were not maintained in the procurement or
associated contract files as required by the Illinois
Procurement Code. Additionally, we did not see evidence
that the University conducted contractor performance
reviews.
- 49 of 49 transactions tested had no evidence that
contractor performance reviews were completed. (pages
23-46)
FINANCE AND INVESTMENT TRANSACTIONS
At June 30, 2009, the University had $1.64 billion of
financing for its infrastructure needs. Ninety-two percent of
the financing was for academic facilities, housing, and athletic
facilities.
Financing activities are conducted by parties internal to the
University and external parties whose services were to be
procured utilizing competitive procurement processes. The
University paid over $2.7 million in fees to five financing
parties during the audit period.
During audit testing we identified a potential conflict of
interest involving a Board official that recommends firms to
the full Board for financing activities. For 1 of the 11
financing transactions, a $90 million issue for auxiliary facilities
system revenue bonds in 2009, the Comptroller recommended
utilizing an underwriting firm that the Comptroller previously
worked for and in which he still had ownership interest.
The University reported it competitively procured the services
of the external financing parties utilized during transactions
within the audit period. We found that the University:
• utilized a two-team evaluation approach for the
procurement of a financial advisor that was outside usual
University evaluation procedures;
• did not maintain supporting files for the procurement of all
the financing parties;
• utilized financing parties with which the University did not
have a current contractual agreement; and
• overpaid bond counsel and issuer’s counsel vendors based
on an examination of the contractual rates for those
services. (pages 47-62)
vi
University QBS policy incorrectly
included construction managers in
the policy during the audit period.
No University policy on selection of
alternate bids.
CONSTRUCTIONS TRANSACTIONS
During the audit period, the University submitted, and the
Board approved, $981 million in construction related
transactions. This included both general construction
contracts and contracts for professional services for
architectural and engineering (A/E) services. Given the high
risk associated with the construction area, we selected two
samples for fieldwork testing, one of general construction
contracts and the other for A/E contracts.
Testing was designed to ensure the University maintained all
applicable documentation, that decisions were properly
documented and supported and that all transactions were
submitted for approval to the Board pursuant to Board
authorization dollar thresholds. Additionally, given the
information obtained from University officials, we tested to
ensure that selection decisions were based on State law and
documented University policy.
Construction Testing
We found:
• During the audit period, the University’s Qualifications
Based Selection (QBS) policy for capital professional
services incorrectly included “construction managers”
in the procurement policy with the selection of architects
and engineers.
- 5 of 5 transactions tested that contained a construction
manager had insufficient documentation to support the
selection of that manager.
• There was no University policy regarding the selection of
construction contractors with bid proposals containing base
and alternate bid prices. As a result, the University did not
consistently following the same steps when selecting
contractors with these types of proposals.
- 9 of 15 transactions tested showed the University
deviated from the original alternates requested after the
submission of bid proposals for at least one division of
the project.
- 9 of 15 transactions tested showed the University was
inconsistently designating bidders as responsive or
non-responsive when selecting construction contractors
with bid proposals requesting base and alternate bids.
• The University failed to maintain solicitation and
procurement bulletin documentation in all construction
transactions reviewed. Additionally, the University failed to
maintain signed contractual agreements in the files for all
construction transactions.
- 1 of 24 transactions tested did not contain the Invitation
for Construction Bid. This transaction totaled $1.1
million.
- 1 of 24 transactions tested did not contain procurement
vii
The University processed negotiated
settlements as change orders.
The University did not implement all
University policies required under
QBS.
bulletin documentation. This transaction totaled $4
million.
- 3 of 25 transactions tested did not contain a division
contract or required signature.
• The University failed to maintain adequate
documentation to support the process for selecting
Professional Services Consultants associated with
construction transactions reviewed.
• According to construction documentation reviewed on
the west interior renovation to Memorial Stadium, the
University processed payments for negotiated settlements
as change orders. Change orders need to be approved in
writing by the University prior to work being completed.
Additionally, change orders for an electrical contractor
were strung out as four individual change orders resulting
in the University not having to seek Board approval due
to the individual payments being below the Board
approval threshold. Finally, some change orders
reviewed were for items which would appear to be, or
should have been, part of the original bid for which the
contractor was awarded University business.
• There were no University policies detailing Minority and
Female Business Enterprise (MAFBE), subcontractor, or
“spreading the work around” requirements for
construction transactions. As a result, the University was
not consistently obtaining, evaluating, or verifying these
requirements when selecting construction contractors.
- 22 of 24 transactions tested showed the University did
not obtain adequate MAFBE information. The
information was either not provided or could not be
broken down by prime contractor or subcontractor(s).
These transactions totaled $117 million.
- 21 of 24 transactions tested showed the University
failed to obtain adequate subcontractor information.
The 21 transactions totaled $115 million. (pages 65-
85)
A/E Testing
We found:
• The University was not implementing all University
policies required under the Qualifications Based
Selection (QBS) Policy for Capital Professional Services,
which is governed by the State of Illinois Architectural,
Engineering, and Land Surveying Qualifications Based
Selection Act.
- 23 of 25 transactions tested showed the University did
not retain sufficient documentation to support
representatives for all required areas on the evaluation
committee.
- 15 of 25 transactions tested showed the evaluation
committee members did not remain consistent.
- 15 of 25 transactions tested showed the interview
viii
15 of 25 transactions to determine a
“short list” of firms contained
scoring or ranking inconsistencies.
The firms were awarded $19.4
million in University business.
12 of 25 transactions for the
“interview evaluations” contained
scoring or ranking inconsistencies.
The firms were awarded $13.8
million in University business.
Personnel external to the evaluation
committee influenced the selection of
winning vendors.
selection criteria developed by the committee was not
included in the interview notification letter.
- 22 of 25 transactions tested lacked individual
evaluation forms for each committee member during
the short list and/or interview evaluations.
- 8 of 25 transactions tested showed the evaluation
committee did not determine the final selection criteria
for interviews.
- 24 of 25 transactions tested lacked a written executive
summary.
- 2 of 25 transactions tested showed the amount paid to
professional service consultants was significantly
greater than the contracts approved by the Board.
• Inconsistencies, errors, and discrepancies were identified
during the review of the University’s evaluation process
for A/E professional service consultants. In addition, the
over involvement of personnel external to the evaluation
committee was identified during the review of the
University’s selection process for A/E professional
service consultants.
- 15 of 25 transactions tested contained scoring or
ranking inconsistencies for short list evaluations.
After a review of the proposals by all submitting
vendors, the University creates a short list of 3-5
vendors to continue in the evaluation process. These
transactions totaled $19.4 million.
- 8 of 25 transactions tested contained at least one
calculation error for short list evaluations. These
transactions totaled $11.9 million.
- 7 of 25 transactions tested showed the file
documentation did not support the same selection
recommendation as the evaluation committee for the
short list evaluation.
- 12 of 25 transactions tested contained scoring or
ranking inconsistencies for interview evaluations.
These transactions totaled $13.8 million.
- 13 of 25 transactions tested contained at least one
calculation error for interview evaluations.
- 5 of 25 transactions tested showed the file
documentation did not support the same selection
recommendation as the evaluation committee for the
interview evaluation.
- 9 of 25 transactions tested showed the selection of the
winning contractor was influenced by involvement
from personnel external to the evaluation
committee. These transactions totaled $15.7 million.
In 2 of the 9 transactions the involvement was from
personnel on the Board.
• The University was not obtaining sufficient information for
contractors and subcontractors including MAFBE
information. The University was also not ensuring MAFBE
information proposed in bids was consistent with MAFBE
information listed in final University contracts.
ix
MAFBE was not consistently used as
criterion nor was it being scored
and/or consistently ranked by
evaluators.
- 7 of 25 transactions tested showed the subcontractor’s
percentage of work in the contract was greater than the
contractor’s percentage of work in the contract. These
transactions totaled $12.7 million.
- 4 of 25 transactions tested showed the MAFBE
subcontractors’ names in the bid were different than in
the contract.
- 13 of 25 transactions tested showed the MAFBE
percentages did not remain comparable for winning
contractors.
• The University’s oversight in evaluating MAFBE and
workload criteria during the short list and interview
process needs to be strengthened. MAFBE was not
consistently being included as a criterion during such
evaluations. In addition, MAFBE was not being scored
and/or ranked consistently by evaluators. (pages 86-98)
RECOMMENDATIONS
This audit report contains 20 recommendations. Eighteen of
the recommendations were directed towards the University
and its practices. The other two recommendations were
directed towards the Board of Trustees. The University and
Board generally agreed with the recommendations. Appendix
E to the report contains the full agency responses.
___________________________________
WILLIAM G. HOLLAND
Auditor General
WGH:MJM
AUDITORS ASSIGNED: This Performance Audit was
performed by the Office of the Auditor General’s staff.
