12-U-of-I-Bd-of-Trustees-Perf-Full

              STATE OF ILLINOIS
OFFICE OF THE AUDITOR GENERAL
WILLIAM G. HOLLAND
AUDITOR GENERAL
JANUARY 2012
PERFORMANCE AUDIT OF
certain financial and business processes
of the
university of illinois board of trustees
To the Legislative Audit Commission, the Speaker
and Minority Leader of the House of Representatives,
the President and Minority Leader of the Senate, the
members of the General Assembly, and the Governor:
This is our report of the Performance Audit of certain financial and business processes for
which the University of Illinois Board of Trustees has responsibility.
The audit was conducted pursuant to Legislative Audit Commission Resolution Number
139, which was adopted March 2, 2010. This audit was conducted in accordance with
generally accepted government auditing standards and the audit standards promulgated
by the Office of the Auditor General at 74 Ill. Adm. Code 420.310.
The audit report is transmitted in conformance with Section 3-14 of the Illinois State
Auditing Act.
WILLIAM G. HOLLAND
Auditor General
Springfield, Illinois
January 2012
SPRINGFIELD OFFICE:
ILES PARK PLAZA
740 EAST ASH • 62703-3154
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FAX: 312/814-4006
OFFICE OF THE AUDITOR GENERAL
WILLIAM G. HOLLAND
INTERNET ADDRESS: AUDITOR@MAIL.STATE.IL.US
RECYCLED PAPER • SOYBEAN INKS
Office of the Auditor General, Iles Park Plaza, 740 E. Ash St., Springfield, IL 62703 • Tel: 217-782-6046 or TTY 888-261-2887
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.
TABLE OF CONTENTS
Auditor General’s Transmittal Letter
Report Digest i
Table of Contents
Chapter One
INTRODUCTION AND Report Conclusions 1
BACKGROUND Purchasing Transactions 2
Finance and Investment Transactions 3
Construction Transactions 4
Construction Testing 4
A/E Testing 5
Introduction 6
Board of Trustees 6
Governance 8
Board Committees 8
Board Transaction Approval Levels 9
Submission of Transactions for Board Approval 12
• Recommendation 1: Failure to Submit All
Transactions to Board for Approval
13
Use of the Executive Committee 13
• Recommendation 2: Use of Executive
Committee
16
Audit Scope and Methodology 21
Report Organization 22
Chapter Two
PURCHASING Chapter Conclusions 23
TRANSACTIONS Introduction-Purchasing Approval & Processes 24
Purchase Approvals During Audit Period 27
Purchasing Transactions-Testing Results 28
Board Approvals 29
• Recommendation 3: Board Approvals 30
Sole Source Justification Forms 30
• Recommendation 4: Sole Source
Justification Forms
31
Copyright and Patent Support 31
• Recommendation 5: Copyright and Patent
Support
32
Use of Contract versus Purchase Order 32
• Recommendation 6: Use of Contract versus
Purchase Order
35
Contract Approval Routing Forms 35
• Recommendation 7: Contract Approval
Routing Forms
36
Purchasing Documentation Deficiencies 36
Procurement Evaluation Criteria 36
Maintenance of Individual Evaluations 38
Complete Procurement Evaluations 39
Evaluation Support for Board
Documentation
40
Evaluation Scoring Errors 41
Evaluation Committee Inconsistencies 43
• Recommendation 8: Purchasing
Documentation Deficiencies
44
Maintenance of Protests/Contractor
Performance Reviews
45
• Recommendation 9: Maintenance of
Protests/Contractor Performance Reviews
46
Chapter Three
FINANCE Chapter Conclusions 47
AND Introduction Finance and Investment 48
INVESTMENT Finance 48
TRANSACTIONS Financing Team-Internal 48
Conflict of Interest 49
• Recommendation 10: Conflict of Interest 50
Financing Team-External 52
Financing Process 52
Financing Transactions-Audit Period 53
Procurement of External Financing Parties 54
Financial Advisor 55
Underwriters 56
Bond Counsel 57
Issuer’s Counsel 58
Trustee/Paying Agent/Registrar 59
• Recommendation 11: Procurement of
External Financing Parties
60
Investment 62
Chapter Four
CONSTRUCTION Chapter Conclusions 65
TRANSACTIONS Construction Testing 65
A/E Testing 66
Introduction 66
Construction Contracts 67
Competitive Selection Procedures 67
Expenditures Requiring Board Approval 67
Construction Transactions 67
Construction/Capital Projects 67
University Construction Parties 68
Construction Process 70
Construction-Testing Results 72
Construction Transactions-Use of Construction
Managers
73
• Recommendation 12: Construction
Managers
75
Construction Transactions-Use of Alternates 75
• Recommendation 13: Use of Alternates 77
Construction Transactions-Failure to Maintain
Required Procurement File Documentation
77
• Recommendation 14: Failure to Maintain
Required Procurement File Documentation
78
Construction Transactions-Failure to Maintain
A/E Documentation
78
• Recommendation 15: Failure to Maintain
A/E Selection Documentation
80
Construction Transactions-Change Orders 80
• Recommendation 16: Change Orders 82
Construction Transactions-Lack of MAFBE
and Subcontractor Requirements
83
MAFBE Information 83
Subcontractor Information 84
Spreading the Work Around 84
• Recommendation 17: Lack of MAFBE and
Subcontractor Requirements
85
Architectural/Engineering Transactions 85
A/E-Testing Results 86
A/E Transactions-Qualifications Based
Selection Policy
86
• Recommendation 18: Qualifications Based
Selection Policy
90
A/E Transactions-Evaluation Problems and
External Involvement
91
Short List Evaluations 91
Interview Evaluations 92
External Involvement 93
• Recommendation 19: Evaluation Problems
and External Involvement
95
A/E Transactions-Oversight of Subcontractors
and MAFBE
95
A/E Transactions-Oversight and Evaluations of
MAFBE
97
• Recommendation 20: Oversight of
Subcontractors and MAFBE
98
EXHIBITS TITLE PAGE
Exhibit 1-1 Big Ten University Governing Board Information 7
Exhibit 1-2 State Universities Governing Board Information 7
Exhibit 1-3 Board of Trustee Meeting Dates 8
Exhibit 1-4 Board Committees-University of Illinois 9
Exhibit 1-5 Board of Trustees Authorization Levels 10
Exhibit 1-6 Board Approval Thresholds-Big Ten Universities 11
Exhibit 1-7 Board Approval Thresholds-State Universities 11
Exhibit 1-8 Executive Committee Analysis 14
Exhibit 2-1 Purchasing Process at the University of Illinois 26
Exhibit 2-2 Number of Approved Purchases at Regular Board
Meetings
27
Exhibit 2-3 Purchase Approval Summary 28
Exhibit 2-4 Inconsistencies in Evaluation Criteria 37
Exhibit 3-1 Financing Party Fees 52
Exhibit 3-2 Capital Financing Process at the University of
Illinois
53
Exhibit 3-3 Debt Financing Transactions 54
Exhibit 3-4 University Investment Levels 63
Exhibit 4-1 Construction Transaction Analysis 65
Exhibit 4-2 Construction Transaction Summary 68
Exhibit 4-3 University Construction Parties 69
Exhibit 4-4 Capital Construction Process at the University of
Illinois
72
Exhibit 4-5 Construction Manager Cases 73
Exhibit 4-6 Exceptions Relative to A/E Selection Process on
Regular Construction Projects
79
Exhibit 4-7 Requirements of University QBS Policy 89
APPENDICES TITLE PAGE
Appendix A Legislative Audit Commission Resolution Number
139
101
Appendix B Audit Methodology 105
Appendix C Purchases Approved by the Board of Trustees:
2007-2009
111
Appendix D Construction Transactions Approved by the Board
of Trustees: 2007-2009
123
Appendix E Agency Responses 137
1
Chapter One
INTRODUCTION & BACKGROUND
REPORT CONCLUSIONS
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. The Board first convened on March 12, 1867 and
consisted of 28 trustees appointed by Governor Oglesby.
The current Board consists of 13 trustees, eleven of whom have official votes. The
Governor appoints nine trustees for terms of six years, and three student representatives are
elected by the University campuses (Chicago, Springfield, and Urbana). The Governor serves as
an ex-officio member of the Board. The Board was reconstituted during the audit period. In
September 2009, the Governor appointed seven new members to the Board. Two members
retained their positions.
On March 2, 2010, the Legislative Audit Commission adopted Resolution Number 139,
which directed the Auditor General to conduct an audit of certain financial and business
processes for which the University Board has responsibility. Resolution Number 139 focused
specifically on transactions approved by the Board during the period 2007 through 2009
involving purchasing, finance and investment, and construction. The University Board requested
that the Legislative Audit Commission authorize and direct the Auditor General to conduct this
independent external audit and report its conclusions to the Board.
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 (i.e., new
capital projects, professional services contracts for capital projects, and construction
contracts).
• Approved 337 purchase transactions totaling $602 million.
These authorization levels have changed over time. In January 2010, the current Board
dramatically increased the dollar threshold for transactions that needed Board approval.
Increasing the authorization levels significantly impacts the degree of University transactions
that the Board approves. For the same population of 2007-2009 transactions:
• If the new authorization levels had been in effect, 18 percent of the same
construction related transactions, totaling $173 million, would not have needed to be
approved by the Board. Other University officials would have had approval
authority.
• The new authorization levels would have excluded 240 of the purchase transactions
(71 percent) totaling $110 million from Board oversight.
Our review found that the University did submit, to the Board for approval, the vast majority
of contracts that were above Board approval thresholds. However, we did find four instances
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
2
where contracts were not consistently submitted to the Board, a violation of Board policy. The four
contracts totaled $1.23 million.
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.
The Executive Committee met 16 times during the audit period. Our review of the items
discussed led us to question the urgency of some items. In other cases, while Board approval
may have been needed prior to the next regularly scheduled Board meeting, many of these items
were of a non-emergency nature and/or were in process for some time, and should have been
presented for consideration at a prior Board meeting when they could have been considered by
the entire 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. Additionally, 73 change orders were
brought to the Board for approval. These change orders totaled over $48 million. Finally, the
Board also has to approve renewal recommendations to University contracts. For the period
2007-2009, 25 such approvals were granted by the Board totaling almost $12 million.
During the audit period the Board required transactions for equipment and services
purchases totaling $200,000 to be presented for Board approval. Likewise, for professional
services, purchases totaling $100,000 had to be presented for Board approval. Beginning in
January 2010, the reconstituted Board increased those transaction levels to transactions of $1
million. The increase by the current Board to an approval threshold of $1 million for equipment
has drastically decreased the number of purchases brought to the Board for approval.
During our review of University purchasing transactions, we reviewed University
documentation prepared for approval by the Board. From the population of 191 purchases that
were approved by the Board and competitively procured, we selected 25 transactions totaling
$28.5 million. This represented eleven percent of the total dollar purchases ($251 million)
competitively approved by the Board during the audit period.
We also selected 25 transactions where the purchase was considered a sole source
purchase by the University. Our sample, totaling $38.7 million, comprised eleven percent of
all the sole source transactions that were presented and approved by the Board during the audit
period.
Testing was designed to ensure the University submitted all purchase transactions and their
related change orders for approval to the Board pursuant to Board authorization dollar thresholds.
We found:
CHAPTER ONE – INTRODUCTION & BACKGROUND
3
• The University did not provide complete and accurate information to the Board
related to purchasing transactions for approval as required by Board policy.
• The University did not review and approve sole source justification forms as required by
University Policy.
• The University did not provide copyright or patent support for all applicable sole source
purchases as required.
• The University inconsistently used contracts and purchase orders as binding agreements.
Additionally, although required in University policy, the University is not always
obtaining required signatures on contractual obligations or following 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.
• 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.
• 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.
• The University did not maintain complete evaluations for each procurement transaction
in our sample.
• The University did not maintain point summaries in the procurement files that supported
Board documentation for all transactions in our sample.
• 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.
• The University's procurement files contained inconsistencies 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.
• 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.
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. The four financing methods utilized by the University included:
• Auxiliary Facilities System bond financing - $939 million;
• Certificates of Participation - $571 million;
• University of Illinois Chicago South Campus Development bond financing - $73
million; and,
• Health Services Facilities System bond financing - $61 million.
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
4
Financing activities are conducted by parties internal to the University and external
parties whose services were to be procured utilizing competitive procurement processes. 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 developed lists of applicable financing parties that could be utilized for
transactions during the period 2007-2009. While Board officials indicated that there generally
was rotation among the firms, we found that many of those firms on the lists were not utilized
by the University for the transactions. The University paid over $2.7 million in fees to five
financing parties during the audit period.
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.
At the end of the audit period, the University had over $1.1 billion of investments for
three types of funds in six types of securities. University investment programs are centralized
under University Administration. The Board develops basic University policy on investments
and delegates the execution of those policies to its administrative agents, who act under the
Board’s general supervision. The Finance and Investment Committee meets regularly to review
compliance, asset allocation, portfolio and manager performance and other policy questions.
Construction Transactions
During the audit period, the University submitted, and the Board approved, $981 million
in construction related transactions. This includes 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.
Construction Testing
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. 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.
• 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 is
CHAPTER ONE – INTRODUCTION & BACKGROUND
5
not consistently following the same steps when selecting contractors with these types of
proposals.
• 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.
• 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 are 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 is not consistently obtaining,
evaluating, or verifying these requirements when selecting construction contractors.
A/E Testing
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 during the survey phase, we tested to ensure that
selection decisions were based on State law and documented University policy. We found:
• The University was not implementing all University policies required under the QBS
Policy for Capital Professional Services, which is governed by the State of Illinois
Architectural, Engineering, and Land Surveying Qualifications Based Selection
Act.
• 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.
• 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.
• 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.
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
6
INTRODUCTION
On March 2, 2010, the Legislative Audit Commission adopted Resolution Number 139
(see Appendix A), which directed the Auditor General to conduct an audit of certain financial
and businesses processes for which the University of Illinois Board of Trustees (Board) has
responsibility. Resolution Number 139 focused specifically on transactions approved by the
Board during the period 2007 through 2009 involving purchasing, finance and investment, and
construction. The University Board requested that the Legislative Audit Commission authorize
and direct the Auditor General to conduct this independent external audit and report its
conclusions to the Board.
BOARD OF TRUSTEES
The Board is the governing body of the University and has final authority over University
activity, including the proper use of funds appropriated by the General Assembly. The Board
first convened on March 12, 1867 and consisted of 28 trustees appointed by Governor Oglesby.
Trustees that serve on the Board traditionally were elected. This process was
legislatively changed in 1995 to an appointment process by the Governor with approval of
trustees by the Illinois Senate. Trustees appointed by the Governor take office in January to
begin a term that lasts six years.
The Board was reconstituted during the audit period. In September 2009, the Governor
appointed seven new members to the Board. Two members retained their positions.
The current Board consists of 13 trustees, eleven of whom have official votes. The
Governor, who is an ex-officio member, appoints nine trustees for terms of six years, and three
student representatives are elected by the University campuses (Chicago, Springfield, and
Urbana). In 1998, statute gave the Governor the authority to appoint one of the student trustees
to have an official vote on Board matters.
The Board maintains an office at the University campus in Urbana and has seven staff
who work on compiling information for Board meetings and record keeping (i.e., filing, Freedom
of Information Act requests). The Board has five officer positions. All positions are elected for
a period of one year with the exception of the Board treasurer which is a two-year term. Current
officer positions are: Chair (Board member since September 2009), Secretary (individual has
held the position since August 1990), Treasurer (individual has held the position since July
1994), Comptroller (individual has held the position since February 2007), and Counsel
(individual has held the position since September 1997).
The University is a member institution of the Big Ten conference. Exhibit 1-1 provides
comparative information on the governing bodies, number of Board trustees, and number of
committees of these conference universities. The University is also the largest of the State of
Illinois’ public universities. Exhibit 1-2 provides the same comparative information for the eight
State universities.
CHAPTER ONE – INTRODUCTION & BACKGROUND
7
The Board, through either regular or special meetings, met a total of 45 times during the
timeframe covered by the audit directed by Resolution Number 139. A listing of the meetings is
provided in Exhibit 1-3.
Exhibit 1-1
BIG TEN UNIVERSITY GOVERNING BOARD INFORMATION
2007-2009
University Governing Body # Board Trustees # Committees
Indiana University Board of Trustees 9 5
Michigan St. University Board of Trustees 8 4
Northwestern University Board of Trustees 76 13
Ohio St. University Board of Trustees 17 7
Penn St. University Board of Trustees 32 3
Purdue University Board of Trustees 10 5
University of Iowa Board of Regents 9 6
University of Michigan Board of Regents 8 3
University of Minnesota Board of Regents 12 6
University of Wisconsin Board of Regents 18 6
University of Illinois Board of Trustees 13 14
Source: OAG summary of survey information.
Exhibit 1-2
STATE UNIVERSITIES GOVERNING BOARD INFORMATION
2007-2009
State University Governing Body # Board Trustees # Committees
Southern Illinois Board of Trustees 12 4
Illinois State Board of Trustees 9 1
Northern Illinois Board of Trustees 9 3
Eastern Illinois Board of Trustees 9 4
Western Illinois Board of Trustees 9 4
Chicago State Board of Trustees 9 4
Governors State Board of Trustees 9 5
Northeastern Illinois Board of Trustees 11 3
University of Illinois Board of Trustees 13 14
Source: OAG summary of survey information.
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
8
Governance
The Board has established a set of formal statutes which provide a detailed framework for
the following aspects of governance of the University: (a) administrative organization and
responsibilities; (b) legislative organization and functions; (c) conditions of appointment and
tenure for faculty members and administrative officers; and, (d) conditions relating to sponsored
research, gifts, grants, patents, and copyrights.
In addition to the statutes, the Board has adopted a body of regulations published under
the title “The General Rules Concerning University Organization and Procedure.” These rules
provide greater detail on the various business procedures mentioned in the statutes, specify the
conditions governing the use of University property, and describe in some detail employment
policies.
Board Committees
The current Board drastically reduced the number of Board committees, from 13 to 4
(this figure does not include the Executive Committee). While former Board trustees reported
that not all 13 committees were very active, current Board trustees indicated the reduction move
by the Board was done to back away from having the Board so intimately involved with every
Exhibit 1-3
BOARD OF TRUSTEE MEETING DATES
2007-2009
Date Type Date Type
January 18, 2007 Regular Meeting September 11, 2008 Regular Meeting
March 13, 2007 Regular Meeting October 10, 2008 Executive Committee
April 17, 2007 Executive Committee October 24, 2008 Executive Committee
May 17, 2007 Regular Meeting November 13, 2008 Regular Meeting
July 6, 2007 Executive Committee November 17, 2008 Executive Committee
July 30, 2007 Regular Meeting January 15, 2009 Regular Meeting
September 6, 2007 Regular Meeting February 3, 2009 Emergency Meeting
October 17, 2007 Executive Committee February 3, 2009 Special Meeting
November 14, 2007 Regular Meeting February 9, 2009 Executive Committee
December 3, 2007 Executive Committee March 11, 2009 Regular Meeting
January 17, 2008 Regular Meeting May 21, 2009 Regular Meeting
January 25, 2008 Executive Committee June 24, 2009 Executive Committee
February 11, 2008 Executive Committee June 25, 2009 Emergency Meeting
February 26, 2008 Executive Committee July 23, 2009 Regular Meeting
March 26, 2008 Regular Meeting September 10, 2009 Regular Meeting
April 8, 2008 Executive Committee September 24, 2009 Ad Hoc Committee
April 25, 2008 Executive Committee October 3, 2009 Special Meeting
May 7, 2008 Special Meeting October 22, 2009 Ad Hoc Committee
May 22, 2008 Regular Meeting October 23, 2009 Executive Committee
May 28, 2008 Special Meeting November 12, 2009 Ad Hoc Committee
June 27, 2008 Executive Committee November 12, 2009 Regular Meeting
July 24, 2008 Regular Meeting December 17, 2009 Academic/Student
August 14, 2008 Executive Committee
Source: OAG summary of Board information.
CHAPTER ONE – INTRODUCTION & BACKGROUND
9
action of the University. Exhibit 1-4 lists the committees of the Board during the audit period of
2007-2009, and the current committee structure that was instituted in January 2010.
A Board official indicated that in November 2009, the newly constituted Board decided
that committees should have discrete membership and that the committees should meet at
separate times from the scheduled full Board meetings. Two or three committees schedule
meetings the day before the full Board meeting; and one committee schedules its meetings about
ten days in advance of the full Board meeting.
Prior to the reorganization in November 2009, all Board trustees were members of all
committees. The committees each had a chair and a vice chair and they would convene meetings
during breaks in the scheduled full Board meetings. The meetings were brief, often lasting about
30 minutes. This process, of having all Board trustees serving on all committees, lasted for
about five years. A current Board trustee indicated that under this previous committee system,
the committees did not always have minutes, which the Board trustee indicated might have
been a red flag.
Relative to the audit period, and audit scope directed by Resolution Number 139, the
Buildings and Grounds Committee evaluated long-range plans that impact the University’s
infrastructure and facilities. It also reviewed and recommended for approval all capital projects,
appointment of architects, construction managers, and contractors for construction projects.
The Finance and Investment Committee reviewed and recommended to the Board all
policies concerning the management and control of the University’s financial resources including
oversight of debt management and bond financing, and formulation of policies and strategies for
maintaining and growing the endowment. It was also responsible for the appointment of
investment advisors, financial participants, and bond underwriters.
Board Transaction Approval Levels
The Board has certain authorization levels for transactions it must approve. These
authorization levels have changed over time. Current Board trustees and trustees from the
previous Board differ on what oversight level needs to be maintained by the Board. Exhibit 1-5
provides the changes in authorization levels over the past decade.
Exhibit 1-4
BOARD COMMITTEES – UNIVERSITY OF ILLINOIS
2007-2010
Committees 2007-2009 Committees 2010
Executive Committee University Hospital Executive Committee
Academic Affairs External Affairs Academic & Student Affairs
Athletics Governance Audit, Budget, Finance & Facilities
Budget & Audit Legal Affairs Hospital
Buildings & Grounds Strategic Planning Governance, Personnel & Ethics
Human Resources Access
Finance & Investment Technology & Economic
Development
Source: OAG summary of Board information.
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
10
Previous Board trustees reported that approval thresholds were lowered as the result of
contract concerns. They indicated that problems associated with the utilities contract, waste in
contracts brought before the Board for approval, and the suspected attempt by University
officials to divide certain contracts so as not to meet the approval threshold were several reasons
why the Board lowered the thresholds. A previous Board trustee noted that the problems
associated with awarding contracts was not seen at high dollar value contracts but at significantly
lower amounts.
A former University president stated that the thresholds were lowered the same year he
took office. He said that there was less willingness to trust management and more desire by
the Board to exercise prerogatives. The idea to lower thresholds originated with the Board.
A current Board trustee reported that there were too many transactions associated with
the lower thresholds. The trustee mentioned that the current Board is working to attain good
staff and make the Board approval process consistent with best practices. He said that while the
lower thresholds were intended for good oversight, just because a project came to the Board for
approval doesn’t mean that there was sufficient oversight. Another current trustee told auditors
that part of the reason the thresholds were raised was that the previous Board was going around
the President. This trustee also said the thresholds were pretty low.
Increasing the authorization levels significantly impacted the amount of University
transactions that the Board approves. During the audit period of 2007-2009, the Board approved
202 construction related transactions totaling $981 million (i.e., new capital projects,
professional services contracts for capital projects, and construction contracts). If the new
authorizations had been in effect, 18 percent of the same transactions, totaling $173 million,
would not have needed to be approved by the Board. Other University officials would have had
approval authority.
Likewise, with University purchases, during the audit period, the Board approved 337
purchases totaling $602 million. The new authorization levels would have excluded 240 of those
transactions (71 percent), totaling $110 million, from Board oversight.
While the University Board approval levels, as changed in 2010, are in line with other
member institutions of the Big Ten Conference, the previous Board approval levels, from 2007-
2009 are similar to other in-State public universities. We surveyed the other member institutions
of the Big Ten conference to determine what the approval levels were at those similar
Exhibit 1-5
BOARD OF TRUSTEES AUTHORIZATION LEVELS
2000-2010
Purchase
Category
Prior to
June 2000
June
2000
September
2005
January
2010
Equipment & Supplies $100,000 $500,000 $200,000 $1,000,000
Professional Services $50,000 $250,000 $100,000 $1,000,000
Professional Services
Capital Projects
$50,000 $500,000 $150,000 $1,000,000
Capital Projects $500,000 $10,000,000 $2,000,000 $5,000,000
Construction Contracts $250,000 $2,500,000 $500,000 $2,500,000
Source: OAG developed from Board information.
CHAPTER ONE – INTRODUCTION & BACKGROUND
11
institutions. Those results are summarized in Exhibit 1-6. We contacted each of the eight other
State public university Boards to compile the same information, which is presented in Exhibit 1-
7.
Exhibit 1-6
BOARD APPROVAL THRESHOLDS – BIG TEN UNIVERSITIES
2007-2009
University
Supplies/
Equipment
Prof.
Services
Prof.
Services
Capital
Capital
Projects
Construction
Contracts
Indiana University N/A N/A N/A $500,000 N/A
Michigan St. University N/A N/A N/A $1,000,000 $1,000,000
Northwestern University N/A N/A N/A N/A N/A
Ohio St. University N/A N/A N/A $4,000,000 $10,000,000
Penn St. University N/A N/A $2,000,000 N/A N/A
Purdue University $2,000,000 $2,000,000 $2,000,000 $5,000,000 $5,000,000
University of Iowa * $1,000,000 N/A $1,000,000 $1,000,000 N/A
University of Michigan N/A N/A $1,000,000 $1,000,000 $1,000,000
University of Minnesota $250,000 $250,000 N/A $500,000 $500,000
University of Wisconsin $500,000 $500,000 N/A $150,000 N/A
University of Illinois $200,000 $100,000 $150,000 $2,000,000 $500,000
Note: N/A indicates that the University does not require Board approval for this area.
Note: * indicates that the University of Iowa capital projects are for new buildings. The threshold is $2
million for all other capital projects.
Source: OAG summary of survey information.
Exhibit 1-7
BOARD APPROVAL THRESHOLDS – STATE UNIVERSITIES
2007-2009
University
Supplies/
Equipment
Prof.
Services
Prof.
Services
Capital
Capital
Projects
Construction
Contracts
Southern Illinois $100,000 $100,000 $100,000 1 $250,000 2 N/A 3
Illinois State $500,000 $500,000 $500,000 $500,000 $500,000
Northern Illinois $250,000 $250,000 $250,000 $250,000 $250,000
Eastern Illinois $250,000 $250,000 $250,000 $250,000 $250,000
Western Illinois $500,000 $500,000 $500,000 $500,000 $500,000
Chicago State 4 $250,000 $250,000 $100,000 $250,000 N/A 5
Governors State $100,000 $100,000 $100,000 $100,000 $100,000
Northeastern Illinois $100,000 $100,000 $100,000 $100,000 $100,000
University of Illinois $200,000 $100,000 $150,000 $2,000,000 $500,000
Note: N/A indicates that the University does not require Board approval for this area.
1 Approval for architectural/engineering can be obtained for a lower level.
2 Raised to $500,000 in 2009.
3 If project meets Board approval threshold, all contracts go to Board for approval.
4 Interim president lowered all thresholds to $25,000 during middle of audit period.
5 Considers a construction contract to be the same as capital project.
Source: OAG summary of survey information.
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
12
Submission of Transactions for Board Approval
During audit testing, we found that the University had not provided all contractual
agreements to the Board as required by Board policy. During our review of University construction
transactions, we requested a listing of all contractual agreements during the audit period of 2007
through 2009. Our goal was to test to ensure that the University submitted all contracts to the Board
for approval pursuant to Board authorization dollar thresholds. Previous Board trustees had
indicated that one reason approval thresholds were lowered in 2005 was a concern that not all
contracts were being submitted.
The Board sets dollar thresholds for transactions that must come before the Board for
approval. Beginning September 2005, those thresholds included: $150,000 for professional
services for capital projects (i.e., architectural and engineering services); $500,000 for construction
contracts; and, $100,000 for professional services contracts.
Our review found that the University did submit the vast majority of contracts that were
above Board approval thresholds. However, we did find four instances where contracts were not
consistently submitted to the Board, a violation of Board policy. The following exceptions were
found:
• Vendor – Utility Safety and Design:
- The contract, for capital project professional consulting services, was executed
May 15, 2007.
- The contract stated that fees will be limited to a maximum of $150,000 per fiscal
year. This is the same amount as the Board threshold for capital project
consulting services.
- The president and University counsel are required to sign contracts in excess of
$250,000. Those two officers did sign this contract.
- The University did not submit this contract to the Board for approval.
• Vendor – Hygieneering:
- The contract, for capital project professional consulting services, was executed
July 1, 2006.
- The contract, under “Fees for Professional Services” section, states that total
estimated contract value is not-to-exceed $150,000 per contract year. This is the
same amount as the Board threshold for capital project consulting services.
- The University did not submit this contract to the Board for approval.
• Vendor – LCM Architects:
- The contract, for capital project professional consulting services, was executed
July 1, 2006.
- The contract, under “Fees for Professional Services” section, states that total
estimated contract value is not-to-exceed $150,000 per contract year. This is the
same amount as the Board threshold for capital project consulting services.
- The University did not submit this contract to the Board for approval.
• Vendor – MTS Systems Corporation:
- A purchase order was printed August 7, 2009, for technology and installation
services.
CHAPTER ONE – INTRODUCTION & BACKGROUND
13
- The purchase order totaled $775,800.
- No contract was executed for these services.
- The University did not submit this contract to the Board for approval.
A University official explained that the 4th exception was initially a construction project that
was under the $2 million Board approval level. Another University official indicated that it was an
upgrade which a since retired purchasing director did not think had to go before the Board.
However, the technology and installation activities would have been a construction contract over the
Board approval level of $500,000.
For the other three exceptions, other capital project professional services agreements,
including a May 2007 agreement with Intelligent Systems Services, contained the exact same
language as the three professional services agreements detailed above. The agreement with
Intelligent Systems Services, also for $150,000, was submitted to the Board for approval on
May 17, 2007. Failure to consistently submit all contracts to the Board is a violation of Board
policy and weakens oversight ability of the Board over University transactions.
Use of the Executive Committee
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.
According to information maintained on the Board website, the Board maintains an
Executive Committee, which meets and acts upon issues that cannot be postponed until the
next regular meeting. Executive Committee meetings are called pursuant to Article IV, Section 2
of the Board’s Bylaws.
During Executive Committee meetings, the chair indicates that the “sole” purpose of the
meeting is to consider “urgent” business that “must be approved” before the next regular Board
meeting. 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. Documentation showed that Executive Committee
meetings are open to the public.
The Executive Committee met 16 times during the audit period for the sole purpose to
consider items that were deemed urgent for carrying on the business of the University and that had
FAILURE TO SUBMIT ALL TRANSACTIONS TO BOARD FOR APPROVAL
RECOMMENDATION
NUMBER
1
The University should be consistent and take the steps necessary to
ensure that all University transactions that meet or exceed Board
thresholds are submitted for approval.
UNIVERSITY
RESPONSE
The University will establish or enhance procedures to improve
consistency, ensuring that all University transactions that meet or exceed
Board thresholds are submitted for approval.
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
14
to be approved prior to the full Board’s next regular meeting. Exhibit 1-8 provides an analysis of
when the Executive Committee met during the audit period, a comparison to the previous and
next full Board meeting dates, the number of non-voting trustees that attended the Executive
Committee meeting and the number of “urgent” items on the agenda.
Our review of the items discussed led us to question the urgency of some items. In other
cases, while Board approval may have been needed prior to the next regularly scheduled Board
meeting, many of these items were of a non-emergency nature and/or were in process for some
time, and should have been presented for consideration at a prior Board meeting when they could
have been considered by the entire Board. Additionally, the Office of the Chief Procurement
Officer at the University publishes a Procurement Handbook that contains a chart that details the
deadlines for the submission of purchases to be sent to the Board. The following items acted on
during Executive Committee meetings on the following dates are noted:
• April 17, 2007 – Sale of farms in DeKalb County.
• July 6, 2007 – Appointment of new directors to Prairieland Energy in anticipation of
the resignation of three directors.
Exhibit 1-8
EXECUTIVE COMMITTEE ANALYSIS
2007-2009
Previous
Full-Board
Meeting Date
#
Days
Executive
Committee
Meeting
Date
Next
Full-Board
Meeting
Date
#
Days
# Non-Exec
Board
Members in
Attendance
#
Urgent
Items
03/13/07 35 04/17/07 05/17/07 30 2 2
05/17/07 50 07/06/07 07/30/07 24 2 1
09/06/07 41 10/17/07 11/14/07 28 4 1
11/14/07 19 12/03/07 01/17/08 45 2 2
01/17/08 8 01/25/08 03/26/08 61 1 10
01/17/08 25 02/11/08 03/26/08 44 1 1
01/17/08 40 02/26/08 03/26/08 29 1 2
03/26/08 13 04/08/08 05/22/08 44 1 3
03/26/08 30 04/25/08 05/22/08 27 0 1
05/22/08 36 06/27/08 07/24/08 27 1 4
07/24/08 21 08/14/08 09/11/08 28 1 2
09/11/08 43 10/24/08 11/13/08 20 5 1
11/13/08 4 11/17/08 01/15/09 59 1 1
01/15/09 25 02/09/09 03/11/09 30 3 3
05/21/09 34 06/24/09 07/23/09 29 3 4
09/10/09 43 10/23/09 11/12/09 20 2 1
Note: In addition to the meetings above, the Executive Committee met in closed session on 10/10/08
to discuss University employment matters.
Source: OAG summary of Board information.
CHAPTER ONE – INTRODUCTION & BACKGROUND
15
• October 17, 2007 – Amended varsity football coaches contracts. The current
contracts were effective through January 2010.
• December 3, 2007 – Appoint interim chancellor for the Chicago campus. The
previous chancellor was retiring on December 31, 2007.
• January 25, 2008 – Actions taken 8 days after a full-Board meeting.
- Approved $1.03 million contract for chilled water extension. Construction to
begin January 2008.
- Approved $1.5 million contract for field turf installation. Construction to begin
January 2008.
- Approved $2 million contract for Memorial Stadium development. Construction
to begin February 2008.
- Approved $35.3 million contracts for residence hall project. Construction to
begin February 2008.
- Approved $563,000 contract for elevator upgrades. Construction to begin
February 2008.
- Approved $15 million budget for Huff Hall addition project. No date given for
bidding.
- Approved $4 million budget for School of Social Work build-out project. No date
given for bidding.
- Approved budget increase and award $1.1 million contract for plumbing project.
No construction date given.
- Approved lease for space starting February 1, 2008.
- Approved $21.8 million in purchases and change orders.
• February 11, 2008 – Approved $7.3 million in purchases and change orders.
• February 26, 2008 – Approved $2.3 million contract for Memorial Stadium
development. Construction to begin March 2008. Approved $1.4 million in
purchases.
• April 8, 2008 – Approved honorary degree for May 11, 2008 commencement
ceremony. Awarded distinguished service medallion. Approved new degree at
Chicago campus.
• April 25, 2008 – Approved $548,000 in purchases.
• June 27, 2008 – Employed architects for Olgesby Hall elevator project and Gregory
Hall remodeling. No dates given for projects. Approved $5.6 million in purchases
and change orders.
• August 14, 2008 – Appointed interim dean at Urbana for someone leaving August 15,
2008. Approved a lease in Chicago that had been in effect since 1991 and expired
June 30, 2008.
• October 24, 2008 – Discussed personnel matter in executive session.
• November 17, 2008 – Approved agreement for variable-to-fixed interest rate swap.
• February 9, 2009 – Approved appointment of vice chancellor in Chicago for someone
that had been serving since November 2004. Added $8.5 million project to bond
purchase approved in January 2009. Approved $8.5 million budget increase for
Chicago campus construction project.
• June 24, 2009 – Appointed interim dean at the Chicago campus for someone
resigning July 15, 2009. Approved tuition rate increase for academic year 2010.
Approved tuition and fee increases for fiscal year 2010.
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
16
According to a former Board Trustee and former University President, once a call has been
made for a meeting of the Executive Committee, University campus officials often times added
additional items that may not be urgent in nature to the agenda that the officials want the Board to
consider.
A former Board Chairman indicated that the Executive Committee should be used as a
last resort. He reported the Board members wanted to hold off on those types of meetings to get
every Board trustee involved at a full Board meeting. However, a former University President
reported to us that the Board was tough on him in terms of business needing to be done right
away. The former President added that as a result, he was hard on management. He said that if
the Board agreed to meet in Executive Committee meeting, they decided to add other non-urgent
issues because they would already be meeting.
Executive Committee meetings on issues that are not urgent in nature violate the Board
Bylaws. Additionally:
• when the Executive Committee takes action (votes) on issues, there is less scrutiny
than what takes place in front of the full Board. The input of all Board members is
limited.
• during Executive Committee meetings from 2007-2009, there were eight meetings
where only one or fewer non-voting trustees participated in the Executive Committee
meetings.
• millions of dollars in projects were approved during Executive Committee meetings.
USE OF EXECUTIVE COMMITTEE
RECOMMENDATION
NUMBER
2
The Board should ensure that only truly urgent actions are considered
during Executive Committee meetings. Additionally, the Board should
work with University officials to ensure that non-emergency routine items
are ready for consideration at regularly scheduled Board meetings.
BOARD
RESPONSE
All Executive Committee meetings held during the audit period were
called by the Chair of the Board via proper “notice” as provided in the
Open Meetings Act and conducted in accordance with this Act. The
meetings also followed provisions of the Board of trustees Bylaws
(Article IV). The meetings were all convened in open session and
accessible by the public. The Executive Committee has all the authority
of the full Board. The Chair of the Executive Committee or any two
members can determine whether a need exists to call a meeting of this
committee. All other trustees may participate as non-voting participants.
Executive Committee meeting action items and minutes were provided to
the Auditor General in May 2010. The University believes it
documented the urgency of the matters considered by the Executive
Committee in the actions items presented in these meetings and in the
minutes of the meetings. For example:
CHAPTER ONE – INTRODUCTION & BACKGROUND
17
BOARD
RESPONSE
(continued)
• April 17, 2007 – The Executive Committee approved the life safety
fire alarm and high rise sprinkler projects for Urbana campus
residence halls and the sale of farmland. The meeting’s minutes
state “the sole purpose of this meeting is to consider two items that
are urgent for carrying on the business of the University and must be
approved by the board prior to the next regular meeting of the
board,” and “it was important for the contract to be approved to
permit construction to begin as soon as possible in order to have the
work completed before the students who will live in the residence
halls arrive in August for the start of the fall 2007 semester.”
• July 6, 2007 – The Board appointed three new directors to
Prairieland Energy, Inc. because of the “anticipation of the
resignation or removal of three exiting directors.” The minutes of
this meeting state “the sole purpose of this meeting is to consider an
item that is urgent for carrying on the business of the University and
must be approved by the Board prior to the next regular meeting of
the Board.”
• October 17, 2007 – On recommendation of the Urbana chancellor,
the varsity football coach employment contract was amended.
(Football coaches are not paid from State monies.) The minutes of
the meeting state “the sole purpose of the meeting is to consider an
item that is urgent for carrying on the business of the University and
must be approved by the Board prior to the next regular meeting of
the Board.”
• December 3, 2007 – the chancellor of the Chicago campus was
scheduled to retire on December 31, 2007. An interim chancellor for
the Chicago campus had not been identified by the date of the
November 2007 Board meeting and it was critical to have the interim
chancellor approved by the Board by January 1, 2008, the start date
for the interim chancellor. The meeting’s minutes state “the sole
purpose of this meeting is to consider items that are urgent for
carrying on the business of the University and must be approved by
the Board prior to the next regular meeting of the Board.”
• January 25, 2008 – Action taken to approve certain contracts,
budgets and leases eight days after the January 2008 Board meeting
was because the Chairman of the Buildings and Grounds Committee
was absent from the Board meeting and these items (all Building and
Grounds Committee items) were deferred because of his absence.
These items should have been considered at the January 2008 Board
meeting. Thus, receiving approval for the items on the next earliest
date was appropriate. Many of the items approved were construction
projects for which construction was to begin before the scheduled
March 2008 Board meeting date as documented in the listing of
contracts approved. The minutes of the meeting of the Executive
Committee state “the sole purpose of this meeting is to consider
items that are urgent for carrying on the business of the University
and must be approved by the Board prior to the next regular meeting
of the Board.”
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
18
BOARD
RESPONSE
(continued)
• February 11, 2008 – Committee minutes state “to consider items that
are urgent for carrying on the business of the University.”
• February 26, 2008 – Construction contract for Memorial Stadium.
The recommendation in the item for action indicates that
construction was to begin in March 2008. Minutes of the committee
meeting state “to consider items that are urgent for carrying on
business of the University.”
• April 8, 2008 – Approvals of non-monetary items in preparation for
the May 2008 commencement (honorary degrees, distinguished
service medallion). The May 2008 Board meeting was scheduled
after the commencement ceremonies. The minutes of the Executive
Committee meeting state “The sole purpose of this meeting is to
consider items that are urgent for carrying on the business of the
University and must be approved by the Board prior to the next
regular meeting of the Board.”
• April 25, 2008 – Approved $548,000 in purchases. The Committee
minutes state these purchases were to “address damage caused by a
fire this winter in the College of Pharmacy building….purchases are
urgent due to the need for a spectrometer for continuing research and
the restoration is also needed in order to resume work in the affected
areas of the building.” The minutes of the meeting state “the sole
purpose of this meeting is to consider an item that is urgent for
carrying on the business of the University and must be approved by
the Board prior to the next regular meeting of the Board.”
• June 27, 2008 – Approved certain projects and $5.6 million in
purchases and change orders. The minutes of the meeting document
that certain items “were necessitated by the need to comply with the
Americans with Disabilities Act….remodeling of some residence
halls that must be initiated immediately as well as the critical state of
the Rare Book and Manuscript Library….urgent to address the
presence of mold in some of the valuable books and materials.” The
minutes state that “the sole purpose of this meeting is to consider
four items that are urgent for carrying on the business of the
University and must be approved by the Board prior to the next
regular meeting of the Board.”
• August 14, 2008 – Minutes of the Executive Committee document
“the sole purpose of the meeting is to consider two items that are
urgent.”
• October 24, 2008 – Self-explanatory. Personnel matter (executive
compensation) discussed in executive session. This meeting was
attended (in person or via telephone) by a number of other Board
members. Minutes state “item that is urgent for carrying on business
of the University….”
CHAPTER ONE – INTRODUCTION & BACKGROUND
19
BOARD
RESPONSE
(continued)
• November 17, 2008 – Approval of an interest rate swap novation
because of the bankruptcy of the swap counterparty on a University
interest rate swap contract. The bankruptcy constituted a
Termination Event for the swap and had to be dealt with
immediately. The change of counterparty could not be delayed and
required immediate approval by the Board. The urgent nature of the
action approved was documented in the minutes and the items stating
the University risks incurred because of the counterparty bankruptcy
and the need to transfer to a new counter party. The minutes of this
meeting state “the sole purpose of this meeting is to consider an item
that is urgent for the carrying on the business of the University.”
• February 9, 2009 – Minutes of the meeting document the purpose of
the Executive Committee meeting was “to consider three items that
are urgent for carrying on the business of the University.”
• June 24, 2009 – Critical to approve tuition for the upcoming
academic year (09-10). The tuition decision had been deferred
pending the finalization of the 2009 State legislative and budgetary
session and could not be delayed to the July 2009 Board meeting.
The minutes of this meeting stated “the sole purpose of this meeting
is to consider items that are urgent for carrying on the business of the
University and must be approved by the Board prior to the next
regular meeting of the Board” and that the Executive Committee was
used “due to the fact that a decision was needed in order to inform
students and their families of what the University’s tuition and fees
would be for the next academic year and this vote could not wait
until the next regular meeting of the Board.”
Additional items may have been added for consideration by the
Executive Committee, but the primary reason for an Executive
Committee meeting was the urgency of a certain matter(s).
We appreciate learning of the expectation for specific documentation of
why an urgent need exists for calling an Executive Committee meeting
of the Board of Trustees. In the future, whenever it is necessary to call
and conduct an Executive Committee meeting, we will provide the facts
about the urgency for such a meeting in the recommendation presented
or in the minutes of the particular meeting of the Executive Committee.
Auditor Comment #1
In its response, the Board states that the “University
believes it documented the urgency of the matters
considered by the Executive Committee in the action
items presented in these meetings and in the minutes
of the meetings.” Based on our examination of the
documentation presented, we disagree.
(continued on next page)
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
20
Auditor Comment #1 (continued)
The Board response to our recommendation provided
examples of how the items we questioned were
“urgent” enough to call for an Executive Committee
meeting. Several of the meeting minutes cited by the
Board in its response contain a generic statement,
such as “the sole purpose of this meeting is to
consider an item that is urgent for carrying on the
business of the University and must be approved by
the Board prior to the next regular meeting of the
Board.” Absent further details as to why the action
item could not wait until the next Board meeting,
auditors do not concur that the urgency of the matter
was adequately documented.
With respect to some of the Board examples we note:
• The “urgent” nature of the amendment to the
varsity football coach employment contract at the
October 17, 2007 meeting was questioned by
auditors. This was the only item on the agenda.
The meeting minutes did not provide an
explanation as to why this item could not wait
until the next full Board meeting 28 days later on
November 14, 2007. The varsity football coach
was still under contract for another 26 months at
the time this “urgent” issue needed to be brought
before the Executive Committee.
• The Board stated that the actions necessitating the
January 25, 2008 Executive Committee meeting
were due to the absence of the Chairman of the
Building and Grounds Committee at the previous
full Board meeting eight days earlier on January
17, 2008. The actions involved more than $60
million in University construction and purchasing
approvals. The Board does not cite any bylaw,
rule or policy that showed that Board business
shall be deferred until a single member of the
Board was available. In its response, the Board
does note that these items “should have been
considered at the January 2008 Board meeting.”
The Board admitted that additional items may also
have been added to the agendas. Adding items that
are not urgent in nature to the agenda violates the
Boards own bylaws and increases the perception that
there is less accountability when the full Board is not
officially involved.
CHAPTER ONE – INTRODUCTION & BACKGROUND
21
AUDIT SCOPE AND METHODOLOGY
This audit was conducted in accordance with generally accepted government auditing
standards and the audit standards promulgated by the Office of the Auditor General at 74 Ill.
Adm. Code 420.310. The audit methodology for our fieldwork testing is presented in Appendix
B. Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
The audit objectives for this audit were those as delineated in Resolution Number 139
(see Appendix A), which directed the Auditor General to conduct a management audit of certain
financial transactions the Board approved during 2007 through 2009. The audit objectives were
to determine if the transaction approvals complied with State law and Board policies and
procedures. The majority of fieldwork for the audit was completed between July 2010 and May
2011.
In conducting the audit, we reviewed applicable State laws, administrative rules and
University and Board policies pertaining to financial, finance and investment, and construction
transactions. We reviewed compliance with those laws and rules to the extent necessary to meet
the audit’s objectives. Any instances of non-compliance we identified or noted are included in
this report.
We also reviewed internal controls and assessed audit risk relating to the audit’s
objectives. A risk assessment was conducted to identify areas that needed closer examination.
Any significant weaknesses in those controls are included in this report.
During the audit, we met with staff at each of the University campuses (Chicago,
Springfield, and Urbana) in the purchasing and construction areas. Additionally, we met with
University officials responsible for finance and investment activities at the Urbana campus. The
University centralized all finance and investment activity at the Urbana campus.
We provided all members of the previous Board and current Board the opportunity to
offer their opinions on the audit issue areas through an interview process which was strictly
voluntary. Four trustees from the previous Board and seven trustees from the current Board
provided information for the audit. Additionally, we reached out to two former University
presidents, the former Chancellor of the Urbana campus and the Associate Chancellor of the
Urbana campus.
In order to obtain comparative data on Board size, committee structure, and transaction
approval levels, we conducted two surveys: one of Big Ten member institutions, and the other of
all other State public universities. Results of those surveys are presented in Chapter One of this
report.
We also surveyed, via email, 269 University staff at all campuses in the purchasing,
finance and investment, and construction areas to determine whether: they had any contact with
Board members during the audit period; the contact was to acquire information on the part of the
PERFORMANCE AUDIT: BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
22
Board member or impart information; the individuals informed their superiors of the contact;
and, the contact changed any aspect of the selection or purchasing process. Unfortunately, we
received only 57 responses (21 percent) which all indicated they had no contact with any Board
member during the audit period. Some individuals that we surveyed, which documentation
showed did interact with Board members during the audit, elected not to answer our survey.
We tested multiple samples of transactions processed during the audit period in
purchasing, finance and investment, and construction. Our methodology is detailed in Appendix
B and the results reported throughout this report.
REPORT ORGANIZATION
The remainder of this report is organized into the following chapters:
• Chapter Two examines the University purchasing process and results of our testing.
• Chapter Three examines the University finance and investment process and results
of our testing.
• Chapter Four examines the University construction process and results of our
testing.
• Appendices presenting Resolution Number 139, our Audit Methodology, a listing of
Purchases Approved by the Board from 2007-2009, a listing of Construction
Transactions Approved by the Board from 2007-2009, and Agency Responses are
provided at the end of the report.
23
Chapter Two
PURCHASING TRANSACTIONS
CHAPTER CONCLUSIONS
During the audit period the Board approved 337 purchases totaling $602 million based
on dollar thresholds established by the Board in 2005. Additionally, 73 change orders were
brought to the Board for approval. These change orders totaled over $48 million. Finally, the
Board also has to approve renewal recommendations to University contracts. For the period
2007-2009, 25 such approvals were granted by the Board totaling almost $12 million.
During the audit period the Board required transactions for equipment and services
purchases totaling $200,000 to be presented for Board approval. Likewise, for professional
services, purchases totaling $100,000 had to be presented for Board approval. Beginning in
January 2010, the reconstituted Board increased those transaction levels to transactions of $1
million. The increase by the current Board to an approval threshold of $1 million for equipment
has drastically decreased the number of purchases brought to the Board for approval.
During our review of University purchasing transactions, we reviewed University
documentation prepared for approval by the Board. From the population of 191 purchases that
were approved by the Board and competitively procured, we selected 25 transactions totaling
$28.5 million. This represented eleven percent of the total dollar purchases ($251 million)
competitively approved by the Board during the audit period.
We also selected 25 transactions where the purchase was considered a sole source
purchase by the University. Our sample, totaling $38.7 million, comprised eleven percent of
all the sole source transactions that were presented and approved by the Board during the audit
period.
Testing was designed to ensure the University submitted all purchase transactions and their
related change orders for approval to the Board pursuant to Board authorization dollar thresholds.
We 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 University did not review and approve sole source justification forms as required by
University Policy.
• The University did not provide copyright or patent support for all applicable sole source
purchases as required.
• The University inconsistently used contracts and purchase orders as binding agreements.
Additionally, although required in University policy, the University is not always
obtaining required signatures on contractual obligations or following required State
recording and filing procedures.
PERFORMANCE AUDIT – BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
24
• 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.
• 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.
• 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.
• The University did not maintain complete evaluations for each procurement transaction
in our sample.
• The University did not maintain point summaries in the procurement files that supported
Board documentation for all transactions in our sample.
• 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.
• The University's procurement files contained inconsistencies 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.
• 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.
INTRODUCTION – PURCHASING APPROVAL & PROCESSES
According to the University’s Policies and Procedures, the Board has delegated the
responsibility and authority for purchasing to the Comptroller, except where the authority to
purchase specific items has been assigned to another officer or committee. Purchase
recommendations are submitted to the Board at regularly scheduled meetings or at Executive
Committee meetings for activities which cannot wait until the next full meeting of the Board.
Departments are required to submit properly approved purchase requisitions to the
Purchasing Division to authorize initiation of the purchasing process according to established
procedures. To provide for the orderly transaction of University business, the following (with
dollar thresholds in effect during the audit period) are included in the University’s approval
requirements:
• Professional Services Purchases of $100,000 or more - The Executive Assistant
Vice Presidents for Business and Finance (Chicago and Urbana campuses) and the
CHAPTER TWO – PURCHASING TRANSACTIONS
25
Assistant Vice President for Business and Finance (Springfield campus) refer all
transactions of $100,000 or more for professional services to the University
Comptroller, by way of the Senior Associate Vice President for Business and
Finance, as a recommendation to the Board for approval. The Board must also
approve change orders of more than $50,000.
• Commodities, Equipment, and Services other than Professional Service
Purchases of $200,000 or more - The Executive Assistant Vice Presidents for
Business and Finance (Chicago and Urbana campuses) and the Assistant Vice
President for Business and Finance (Springfield campus) refer all purchases of
$200,000 or more to the University Comptroller, by way of the Senior Associate Vice
President for Business and Finance, as a recommendation to the Board for approval.
The Board must also approve change orders of more than $50,000.
• Emergency Board Approval Purchases - Upon recommendation from the
University Comptroller, the President may approve purchases not more than
$1,000,000 that require immediate action before the next Board meeting and report
the action to the Board. The President makes a reasonable effort to consult with
individual members of the Executive Committee before giving this approval. For
emergency purchase transactions more than $1,000,000, the President makes a
reasonable effort to contact all Board members before giving this approval.
The buyer prepares a Board Purchase Recommendation form and forwards it to the
Director of Purchasing. All campus recommendations are then packaged and sent to the campus
(Executive) Assistant Vice President for Business and Finance and the University Chief
Procurement Officer for approval. The Senior Vice President’s office is responsible for
compiling recommendations from all three campuses into an agenda for the Board meeting. This
agenda is sent to the Board office to be distributed to Board members. After the meeting, the
Board office sends an email with the approved agenda items to the Director of Purchases and the
Director’s Secretary. The Director’s Secretary then emails the buyers to notify them of all
recommendations that have been approved so orders can be issued. The Director’s Secretary
maintains a file of the approved Board agendas by fiscal year. Our initial review of Board
meeting documentation showed that the Purchase Recommendations are often discussed with
certain Board members.
Exhibit 2-1 presents the purchasing process at the University. Purchase
recommendations for equipment above $200,000, during the audit period, were submitted for
Board approval.
PERFORMANCE AUDIT – BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
26
Exhibit 2-1
PURCHASING PROCESS AT THE UNIVERSITY OF ILLINOIS
Source: OAG summary of University information.
Required
documents
requested from
department
Request
submitted to
Purchasing
Appropriate
process
initiated and
department
notified.
Appropriate
documents
prepared
Bulletin
Posting
Document
processed
according to
method
Contractor
selected
Purchasing
prepares
recommendation
'------1'0... To Board for
Contract
prepared
Contract
negotiated as
applicable
Contract
executed
approval
Legal
Review
Contract
start date
established
CHAPTER TWO – PURCHASING TRANSACTIONS
27
Approximately one-week prior to the regular Board meeting, trustees receive meeting
information that includes the purchase recommendations and supporting detail for the purchases.
The purchase recommendations are presented by campus. Information provided to the Board
states that “The Board action recommended in this item complies in all material respects with
applicable State and federal laws, University of Illinois Statutes, The General Rules Concerning
University Organization and Procedure, and Board of Trustees policies and directives.”
From a University perspective, the purchasing directors have proposed and the Vice
President and Chief Financial Office recommends, with the concurrence of the President, the
Board approve the individual purchases. The Board votes on all purchases as one roll call vote.
The detailed information submitted for Board review includes: the unit purchaser, the
item, cost, vendor selected, selection procedure (competitive selection or sole source), and what
the equipment will be utilized for at the University.
The increase by the current Board to an approval threshold of $1 million for equipment
has drastically decreased the number of purchases brought to the Board for approval. Exhibit
2-2 presents the number of purchases approved at regularly scheduled Board meetings from 2007
through July 2010. The new approval thresholds went into effect after the January 2010 Board
meeting.
Some of the current and former trustees we spoke with indicated that they thought the
University had submitted all purchases that were required to be submitted to the Board for
approval.
Purchase Approvals During Audit Period
During the audit period the Board approved 337 purchases totaling $602 million based
on dollar thresholds established by the Board in 2005. Additionally, 73 change orders were
brought to the Board for approval. These change orders totaled over $48 million. Finally, the
Board also has to approve renewal recommendations to University contracts. For the period
2007-2009, 25 such approvals were granted by the Board totaling almost $12 million.
Purchasing is submitted to the Board for approval by campus or from university
administration. Administration purchases are meant for use University-wide. The Urbana
Exhibit 2-2
NUMBER OF APPROVED PURCHASES AT REGULAR BOARD MEETINGS
January 2007 – July 2010
Date Approved Date Approved Date Approved Date Approved
01/18/07 14 03/26/08 23 03/11/09 3 03/10/10 6
03/13/07 23 05/22/08 16 05/21/09 49 05/20/10 5
05/17/07 40 07/24/08 15 07/23/09 15 07/22/10 3
07/30/07 15 09/11/08 21 09/10/09 9
09/06/07 13 11/13/08 19 11/12/09 15
11/14/07 7 01/15/09 9 01/21/10 14
Note: Italics indicates approvals under $1 million threshold.
Source: OAG summary of Board information.
PERFORMANCE AUDIT – BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
28
campus requested approval for 45 percent (or 152 purchases) of the purchases during the audit
period. However, the $356 million cost for those 152 purchases amounted to 59 percent of the
total approved by the Board.
Purchases referred to the Board for approval have been procured using competitive
bidding procedures under the Illinois Procurement Code, sole source selection methods, or are
exempt from competitive procurement (i.e., purchase of care). The Chicago campus procured 51
percent of its purchases during the audit period utilizing sole source selection. It should be
noted that many items the Chicago campus procured were equipment for the Hospital, which
often have only one supplier. Exhibit 2-3 provides purchase approval information, by campus
and selection process. Additionally, Appendix C provides a complete listing of the 337 Board
approved purchases with information on the vendor, unit purchaser, Board approval date, type of
selection, and cost.
The University must also seek Board approval for change orders to existing purchase
contracts. During the period 2007-2009, the Board granted 73 approvals of over $48 million in
change orders. The breakdown by campus was:
• Chicago: 47 change orders $29,989,078
• Urbana: 21 change orders $10,444,503
• Administration: 5 change orders $7,665,826.
Some purchase contracts executed by the University contain renewal clauses. Contracts
with renewal clauses included providing stints, balloons and catheters to treat patients with
vascular related maladies to snow removal. During the period 2007-2009, the Board granted 25
approvals of almost $12 million in contract renewals. The breakdown by campus was:
• Chicago: 12 renewals $6,697,803
• Urbana: 13 renewals $5,087,988.
PURCHASING TRANSACTIONS – TESTING RESULTS
During our review of University purchasing transactions, we reviewed University
documentation prepared for approval by the Board. From that population of 191 purchases that
were approved by the Board and competitively procured, we selected 25 transactions totaling
Exhibit 2-3
PURCHASE APPROVAL SUMMARY
2007-2009
Campus
# Purchases
Approved
$ Amount
Approved
Competitive
Selection
Sole Source
Selection
Exempt
Purchases
Urbana 152 $356,082,552 100 48 4
Chicago 146 $199,612,377 63 74 9
Administration 36 $45,091,282 25 10 1
Springfield 3 $1,077,694 3 0 0
Total 337 $601,863,905 191 132 14
Source: OAG summary of Board and University information.
CHAPTER TWO – PURCHASING TRANSACTIONS
29
$28.5 million. This represented eleven percent of the total dollar purchases ($251 million)
competitively approved by the Board during the audit period.
We also selected 25 transactions where the purchase was considered a sole source
purchase by the University. Our sample, totaling $38.7 million, comprised eleven percent of
all the sole source transactions ($343 million) that were presented and approved by the Board
during the audit period.
Testing was designed to ensure the University submitted all purchase transactions and
their related change orders for approval to the Board pursuant to Board authorization dollar
thresholds. Results of our testing are presented below.
Board Approvals
The University has not provided complete and accurate information to the Board
related to purchasing transactions for approval as required by Board policy. During the audit
we tested a sample of transactions to ensure that the University submitted accurate
information related to purchase transactions to the Board. In 8 percent of the transactions
tested (2 of 25), we found that the University failed to submit an applicable change order to
the Board or provided inaccurate information to the Board on the type of procurement.
Specifically:
• For a purchase requested by the Risk Management Unit of the University and
approved by the Board on May 22, 2008, we found:
- The original purchase amount approved by the Board was $313,500 for a three-year
period with an additional approved cost of $104,500 per year for the period
FY09-FY11.
- A June 30, 2010 change order of $4,387,460 for medical malpractice
insurance “was not taken to the Board” according to University officials. The
change order was over the $50,000 threshold for Board approval as required by
Board policy.
• For a $175,000 purchase requested by the Medical Center in Chicago and approved
by the Board on September 11, 2008, we found:
- According to University documentation provided to the Board, “Competitive
bidding procedures were followed in accordance with the Illinois Procurement
Code” for this purchase transaction.
- However, University documentation from the purchasing file showed this
purchase item was procured as a sole source procurement.
- The University supplied inaccurate information to the Board when it sought the
approval of consulting services related to a comprehensive space program based
on the strategic needs of the University of Illinois Medical Center at Chicago.
The Board sets dollar thresholds for transactions that must come before the Board for
approval. Beginning September 2005, those thresholds included $50,000 for change orders. In
addition, it is expected that the University provide the Board with accurate information during
the approval process so appropriate oversight can be provided.
PERFORMANCE AUDIT – BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
30
According to the University, the $4,387,460 change order was not submitted due to
requirements in General Rules, Article II, Section 4. However, General Rules, Article II, Section
4 states, “The requirement for specific board approval above dollar amounts the Board of
Trustees may specify does not apply to…farm leases, purchases of food products, grain,
livestock, fertilizer, natural gas, generic commodities purchased on joint bids with other State
institutions.” Auditors do not see a correlation between medical malpractice insurance and the
University’s citation to a requirement in the University’s General Rules referencing farm related
examples and commodities. Regarding the 2nd bullet point above, the University concurred and
stated, “This is a sole source purchase…the reference in the Board document is in error.” We
note that documentation submitted to the Board for approval is developed by University staff.
Failure to submit purchasing transactions to the Board including change orders that meet
threshold requirements is a violation of Board policy. Additionally, failure to provide accurate
information to the Board weakens the Board’s oversight ability over University transactions.
BOARD APPROVALS
RECOMMENDATION
NUMBER
3
The University should take the steps necessary to ensure that all
University purchasing transactions that meet or exceed Board thresholds
are submitted to the Board for approval and contain accurate
information.
UNIVERSITY
RESPONSE
The University will establish or enhance procedures to ensure that all
University purchasing transactions that meet or exceed Board thresholds
are submitted to the Board for approval within the requirements of the
Board of Trustees General Rules and that all recommendations contain
accurate information.
Sole Source Justification Forms
The University has not reviewed and approved sole source justification forms as required by
University Policy. During our review of the sole source procurements approved by the Board
during the audit period we tested to ensure that a sole source purchase transaction was necessary,
and that the purchase could not be made through another vendor. We reviewed if the University
submitted all documentation required for sole source purchases and whether the University
maintained sole source justification forms. While all 25 files in our sample either contained, or the
University subsequently provided, the sole source justification forms, we did note the following
inconsistencies:
• 44 percent of the transactions reviewed (11 of 25) contained a written or electronic
signature but did not contain the date signed on the forms. Verification of review and
approval was achievable for these transactions but timeliness was not.
• 24 percent of the transactions reviewed (6 of 25) contained no written or electronic
signature or date signed on the forms. Verification of review, approval, and timeliness
was not possible for these transactions.
University Policy requires the requisitioning department to complete a sole source
justification form and submit it to their campus division if they believe they have a sole source
procurement. The policy further notes “Purchasing will review the information to determine if the
CHAPTER TWO – PURCHASING TRANSACTIONS
31
procurement meets the requirements of a sole source purchase.” In addition, the University’s
Procurement Handbook contains an appendix with an example of a Sole Source Justification Form.
This example contains boxes for the approval signature and date.
Purchasing officials at the Chicago campus identified the Sole Source Justification Form as
a required standard document for sole source purchases. An approval signature and date on this
required standard document is required to verify review and approval by the appropriate campus.
Failure of the Purchasing Division to review the sole source justification form and
determine if the procurement meets the requirements of a sole source purchase is a violation of
University policy. Additionally, verification of review, approval, and timeliness of sole source
justification forms is not supportable without an approval signature and date signed on the form.
SOLE SOURCE JUSTIFICATION FORMS
RECOMMENDATION
NUMBER
4
The University should take the steps necessary to ensure that all
University sole source justification forms are reviewed and that the
procurement meets the requirements of a sole source purchase. As part
of this review, the University should verify their review through an
approval signature and date signed on the sole source justification form.
UNIVERSITY
RESPONSE
In July of 2010, the University established enhance procedures and
revised the sole source justification form to ensure that all University
sole source justification forms are reviewed and that the procurement
meets the requirements of a sole source purchase. As part of this review,
the University verifies their review through an approval signature and
date signed on the sole source justification form. The form now contains
an appropriate signature, printed name, date, telephone number and
email address for both the agency representative and the State
Procurement Officer.
Copyright and Patent Support
The University has not provided copyright or patent support for all applicable sole source
purchases as required. During our review of University sole source purchases between 2007
through 2009 that met the approval thresholds required by the Board, 17 were listed as a sole source
due to the reason “item or service is copyrighted or patented and is not available except from the
holder of the copyright or patent.” We reviewed whether or not the University submitted all
documentation required for sole source purchases, which would include a sole source justification
form containing a copyright or patent number as well as support for the copyright or patent number
in the file. We noted the following exceptions:
• 18 percent of the sole source purchases tested (3 of 17) did not have the copyright or
patent number included on the Sole Source Justification Form. Two of the three
transactions also had no documentation to support the validity of the copyright or
patent number in the file. These transactions totaled $4.8 million.
• 35 percent of the sole source purchases tested (6 of 17) had the copyright or patent
number listed on the sole source justification form but did not have documentation
PERFORMANCE AUDIT – BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
32
to support the validity of this number in the file. These transactions totaled $9.6
million.
University Policy requires the requisitioning department to complete a sole source
justification form and submit it to their campus division if they believe they have a sole source
procurement. The University’s Procurement Handbook contains an appendix with an example of a
Sole Source Justification Form. This example contains lines to include the patent or copyright
number. In the four cases that did not include the copyright or patent number on their form, the
Sole Source Justification forms did not contain these lines. The policy further notes “Purchasing
will review the information to determine if the procurement meets the requirements of a sole source
purchase.” It is unclear how the University can determine if an “item or service is copyrighted or
patented and is not available except from the holder of the copyright or patent” without the
copyright or patent number on the Sole Source Justification Form and/or documentation to support
the validity of such numbers in the file.
According to the Urbana campus Purchasing Division, “Buyers are to request the
information from the vendor and then verify the information…Whenever reasonable, a copy should
be printed and placed in the file. Copyright and/or patent numbers should be included or attached
as a list to the Sole Source Justification Form.” Also, the Chicago campus reported that the Sole
Source Justification Form “should include the appropriate copyright or patent numbers.” In
addition, “policy and general practice is that the file is updated with a copy of the patent
documentation pulled from an online search of the US Patent/trademark databases.”
Verification of a sole source purchase with a copyright or patent is not possible without a
thorough review of the copyright or patent number. Additionally, failure of a campus Purchasing
Division to review the sole source justification form and determine if the procurement meets the
requirements of a sole source purchase is a violation of University policy.
COPYRIGHT AND PATENT SUPPORT
RECOMMENDATION
NUMBER
5
The University should take the steps necessary to ensure that all
University sole source justification forms are thoroughly completed and
include the copyright or patent numbers when applicable. The University
should also thoroughly review all sole source purchases justified by a
copyright or patent number and verify these numbers with the support for
such review in their files.
UNIVERSITY
RESPONSE
The University has established and enhanced procedures to document
that sole source justification forms are reviewed and the procurement
comports with the requirements of a sole source purchase, including
verification and documentation of copyright information.
Use of Contract versus Purchase Order
The University inconsistently used contracts and purchase orders as binding agreements.
Additionally, although required in University policy, the University is not always obtaining required
signatures on contractual obligations or following required State recording and filing procedures.
CHAPTER TWO – PURCHASING TRANSACTIONS
33
During our review of University purchasing transactions, we reviewed 25 sole source
purchases and 24 competitive purchases between 2007 through 2009 that met the approval
thresholds required by the Board. Testing was designed to ensure the procurement files contained a
fully executed contract as required by University policy Section 2.3. University officials reported
they consider purchase orders to be contractual obligations. Although this may be acceptable, the
University is not following the same procedures required for contracts according to University
policy. We noted the following exceptions:
• None of the procurement files with a purchase order/lack of contract contained the
signatures required by University policy.
• Based on documentation in the files, it was unclear whether those same sampled
purchases were routed to University Payables and then to the Illinois State Comptroller
as required by University policy and the Illinois Procurement Code.
• Sole Source Sample Exceptions:
- 8 percent of the transactions tested (2 of 25) did not contain a contract or a purchase
order. These transactions totaled $7.7 million.
- 68 percent of the transactions tested (17 of 25) did not contain signatures from
the University or the other party/parties on the contract or the purchase order.
These transactions totaled $18.8 million.
- Auditors reviewed Urbana campus purchasing files on September 29, 2010 and
the files did not contain the information noted above. After follow up with the
University the auditors, in April 2011, delivered potential audit findings to the
University. In mid-June 2011 the University then supplied some contractual
documentation, documentation that was not contained in the purchasing files
during our fieldwork site visit.
• Competitive Procurement Sample Exceptions:
- 4 percent of the transactions tested (1 of 24) did not contain a contract or a
purchase order. This transaction totaled $436,500.
- 4 percent of the transactions tested (1 of 24) were missing one required University
signature on the contract. This transaction totaled $250,000.
- 33 percent of the transactions tested (8 of 24) did not contain signatures from
the University or the other party/parties on the contract or the purchase order.
These transactions totaled $6.1 million.
University policy Section 2.2 states, “Purchase orders – The Director of Purchases or
delegates sign all purchase orders and issue them upon proper approval of the purchase, except
where limited purchasing authorization has been assigned to a particular unit….” Additionally,
University policy Section 2.3, states that a fully executed contract is required before any products
are obtained or services performed. Contracts are considered fully executed when they have the
signatures of the other party/parties entering into the contract, the signature of the University
Comptroller (or delegate), and are attested to by the Secretary of the Board of Trustees (or delegate).
An original of all fully-executed contracts, regardless of funding type must be forwarded to
University Payables, Contracts Processing Section within seven (7) calendar days after execution, in
order to meet state filing requirements. The contract will be recorded, imaged, reported and filed
with the Illinois State Comptroller and/or the Illinois Secretary of State. The Illinois Procurement
Code (30 ILCS 500/20-80) states, “Whenever…a contract liability…exceeding $10,000 is incurred
by any State agency, a copy of the contract, purchase order, grant, or lease shall be filed with the
PERFORMANCE AUDIT – BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
34
Comptroller within 15 days thereafter….” Finally, the 2005 Accounting Bulletin from the Director
of State Accounting for the Comptroller’s Office states, in section 124.1 – Contract Signature
Authority – Every contract or contract modification that is required to be filed with the
Comptroller’s Office shall bear (a) the signature of the head of the agency and (b) if that authority to
sign the head of the agency’s name is delegated, also the signature of the person actually signing the
document. In addition, the Bulletin states at 124.6 – Every contract signature must be dated below
the actual signature.
Auditors followed up with the three campuses regarding the inconsistent use of contracts
and purchase orders. Urbana purchasing staff reported, “Purchase Orders are binding contractual
obligations. The determination as to whether to use a Purchase Order and a two-party signed
contract or just a Purchase Order is based on the judgment of the Procurement Officer. . . .”
Chicago purchasing staff reported, “Generally, for purchase of services, a contract is required. …
For purchases of commodities or goods, a purchase order is required, so there is no additional
contract or CARF included in the file – the purchase order is a contract including University terms
and conditions…and specific details related to the particular purchase.” And Springfield
purchasing staff reported, “In these straight forward procurement situations purchase order is
sufficient. We do consider the Purchase Order as a contract with the vendor as it contains our
certifications and our terms and conditions.” Auditors agree that purchase orders contain
University contract language such as terms and conditions; however, auditors question whether the
purchase orders are considered fully executed and/or binding contractual obligations without
required signatures and necessary State records/files.
The University is not ensuring the consistent use of purchase orders and/or contracts in
procurements. Additionally, there are no written procedures in University policy that allow for
the substitution of purchase orders in place of contracts or any associated changes in contractual
requirements that are acceptable as a result. Further, there is increased risk in allowing the
Procurement Officer to make the determination as to whether a Purchase Order and a two-party
signed contract or just a Purchase Order may be used in a transaction. Without required signatures
from the University and other party/parties, the purchase order is not considered “fully executed”
according to University policy. In addition, the lack of signatures may result in the University
losing the legal basis that holds both parties to the terms and conditions found in the purchase order.
In cases with multiple purchase orders associated with the procurement of a good or service, the
terms and conditions individually apply to each purchase. Therefore, the University may have little
legal basis to ensure that the vendor completes the procurement as defined in the RFP/bid.
CHAPTER TWO – PURCHASING TRANSACTIONS
35
USE OF CONTRACT VERSUS PURCHASE ORDER
RECOMMENDATION
NUMBER
6
The University should establish controls to ensure the consistent use of
purchase orders and contracts within and across campuses through
formal written procedures in University policy. The University should
also ensure required signatures on contractual obligations are obtained
and State recording /filing requirements are met.
UNIVERSITY
RESPONSE
The University will establish or enhance procedures through written
policy in the use of purchase orders and contracts. The University will
also review existing policy regarding required signatures on contractual
obligations to take into consideration the use of purchase orders as a
binding contractual obligation.
Contract Approval Routing Forms
The Contract Approval Routing Form (CARF) is not consistently being completed, signed,
and included with each contract document being processed as required by University policy.
During our review of University purchasing transactions, we reviewed 25 sole source purchases and
24 competitive purchases between 2007 through 2009 that met the approval thresholds required by
the Board. Testing was designed to ensure that each purchasing procurement file contained a CARF
as required by University policy. The following exceptions related to the CARF were noted:
• 84 percent of the sole source purchases sampled (21 of 25), did not contain this
completed and signed CARF document. Specifically:
- 19 of 25 files did not contain a CARF.
- 2 of 25 files contained a CARF but at least one signature was missing.
- Four files did contain a fully executed CARF.
• 83 percent of the competitive purchases sampled (20 of 24), did not contain this
completed and signed CARF document. Specifically:
- 10 of 24 files sampled did not contain a CARF.
- 10 of 24 files sampled contained a CARF but at least one signature was missing.
- Four files did contain a fully executed CARF.
Auditors reviewed Urbana campus purchasing files on September 29, 2010 and the files
did not contain the information noted above. After follow up with the University, the auditors, in
April 2011, delivered potential audit findings to the University. In mid-June 2011 the University
then supplied some documentation, documentation that was not contained in the purchasing
files during our fieldwork site visit.
Section 2.3 of the University policy states “A Contract Approval/Routing Form (CARF)
must be completed for each contract, signed by the appropriate individuals, and included with
the contract documents submitted for processing. Contracts must be routed in hard copy with a
CARF for final approval processing.” Section 2.3 also defines Non-Standard Contracts and
states that non-standard contracts “include agreements, contracts, purchase orders,…A Contract
Approval/Routing Form (CARF) must accompany all non-standard contracts.” The Contract
Approval/Routing Form (CARF) has designated signature sections with guidance as to when the
individuals must sign/approve the purchase on the Form.
PERFORMANCE AUDIT – BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS
36
Procurement Rules state that written determinations required under Article 20 of the
Procurement Code shall be placed in the contract files maintained by the Chief Procurement Officer.
The Rules further state “all other procurement records shall be placed in the contract files
maintained by the SPO.” (44 Ill. Adm. Code 4.2080)
Auditors followed up with the applicable campuses regarding the use of a CARF. The
Urbana campus stated, “While this form is often maintained in the file, it is not required. The
purpose of the form is solely to keep track of the contract during the process to obtain signatures.”
The Chicago campus reported, the CARF is “used for service contracts. …Generally, for purchase
of services, a contract is required….Our procedures have recently been updated since early 2010 so
that all files will include the contract checklist….” The University’s opinion is that purchases
processed on Purchase Orders are not subject to completion of a CARF as the Purchase Order is a
non-standard University contract on a form approved by the Office of General Counsel.
Failure to complete, sign, and include a CARF with each contract document being
processed is a violation of University policy.
CONTRACT APPROVAL ROUTING FORMS
RECOMMENDATION
NUMBER
7
The University should ensure the Contract Approval Routing Form
(CARF) is consistently being co