Overview
In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor (OSA) has conducted a performance audit of certain activities of Northern Essex Community College (NECC) for the period July 1, 2018 through June 30, 2020.
We conducted this performance audit in accordance with generally accepted government auditing standards. 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.
Below is a list of our audit objectives, indicating each question we intended our audit to answer; the conclusion we reached regarding each objective; and, if applicable, where each objective is discussed in the audit findings.
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Objective |
Conclusion |
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No; see Finding 1 |
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Yes |
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No; see Findings 3 and 4 |
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No; see Finding 2 |
In our prior audit, we found that NECC did not do the following:
- conduct a complete annual inventory or inventory testing
- designate an inventory coordinator
- ensure the proper recording of required fixed asset information.
To achieve our audit objectives, we gained an understanding of NECC’s internal control environment related to the objectives by reviewing college policies and procedures, as well as conducting inquiries with NECC’s staff members and management. We also reviewed, and tested the operating effectiveness of, internal controls regarding fixed asset inventory, asset surplus disposal, and P-Card expenditures. To obtain sufficient, appropriate audit evidence to address our audit objectives, we conducted further audit testing as follows.
Fixed Asset Inventory
To determine whether NECC had taken the necessary measures to address the fixed asset inventory issues found in our prior audit, we interviewed the college’s vice president of administration and finance and its director of procurement.
To determine whether NECC properly recorded the required information on its fixed asset inventory list and whether the list was accurate, we obtained NECC’s fixed asset inventory list as of March 2, 2021 from Banner, NECC’s electronic accounting system. We performed two tests. First, we analyzed the fixed asset inventory list to determine whether all required information (purchase date, description, cost, tag number, and location) was on the list for assets purchased during the audit period. Second, we selected a nonstatistical judgmental sample of 40 of the 487 assets purchased during the audit period. We physically examined1 each asset in our sample to verify that it existed, was properly labeled with a tag number, and was accurately recorded on the fixed asset inventory list. We also selected an additional nonstatistical, judgmental sample of 40 assets from NECC’s Lawrence, downtown Haverhill, and main Haverhill campuses and verified their locations and the accuracy of the fixed asset inventory list data.
We asked NECC officials whether an annual inventory or inventory testing of fixed assets had been performed during our audit period and whether an inventory coordinator had been designated.
To determine whether disposals of surplus information technology (IT) and non-IT fixed assets were performed in accordance with 802 CMR 3, we requested and received documentation for all 20 IT and non-IT fixed asset disposals that occurred during our audit period. We selected a judgmental sample of 10 disposals and examined NECC supporting documentation (completed Declaration of Surplus Property Forms and email correspondence between NECC and the State Surplus Property Office) for evidence that NECC obtained approval from the State Surplus Property Office to dispose of assets. For assets in our sample of 20 that NECC had determined to have no value, we reviewed the Surplus Property Disposal Requests for Worthless Equipment/Furniture for approval by the NECC vice president of administration and finance.
Chapter 647 Compliance
To determine whether NECC submitted Chapter 647 reports for any variances, losses, shortages, or thefts of funds or property, we interviewed the college’s vice president of administration and finance. We examined OSA records of Chapter 647 report submissions and determined that NECC had not submitted any Chapter 647 reports during the audit period. We interviewed NECC’s director of public safety and risk management / chief of police to request incident reports and daily crime logs related to loss of property or funds. We examined the contract with the third-party security vendor with which NECC contracted during the audit period to confirm that the contract contained a requirement to maintain incident reports and daily crime logs. We determined whether NECC’s internal control plan complied with CTR requirements, including that of annual updates.
P-Card Expenditures
To determine whether P-Card expenditures were supported by adequate documentation and restricted to college-related business in accordance with NECC’s policies and procedures, we obtained a list of all NECC’s P-Card transactions for the audit period from Banner. Total P-Card activity for the audit period consisted of 6,938 P-Card transactions, totaling $1,320,785. We selected a nonstatistical, judgmental sample of 100 P-Card transactions for testing. We examined NECC’s supporting documentation (Travel Authorization Forms, original detailed vendor receipts, detailed explanations of charges, Lost/Missing Receipt Forms, Travel Reimbursement Forms, and/or preapproval documentation for food purchases) to validate the nature and business purpose of the expenditures. We also reviewed the monthly Citibank statements for the selected expenditures for supervisors’ authorization signatures.
We used nonstatistical sampling methods for our audit objectives and did not project the sample results to any of the population.
Data Reliability
We reviewed certain general information system controls (including access controls, security management, configuration management, segregation of duties, and contingency planning) over Banner to determine the reliability of the data therein.
To determine the accuracy of NECC’s fixed asset inventory list, we selected a judgmental sample of 40 IT and non-IT assets and traced them from the fixed asset inventory list to their physical locations to verify their existence, tag numbers, and descriptions. To determine the completeness of the list, we selected a judgmental sample of 40 assets from different locations on NECC campuses and traced the assets to the list. We also analyzed the Banner data for duplicate records.
We assessed the reliability of Banner P-Card transaction data by judgmentally selecting 20 transactions from the Banner data and tracing them to supporting documentation, including NECC’s monthly Citibank statements. We verified the date, vendor name, and amount for each transaction. To determine the completeness of the data, we selected 20 transactions from NECC’s monthly Citibank statements. We compared the monthly Citibank statements with the Banner transaction data. In addition, we compared the Banner transaction data from the audit period to Citibank’s list of transactions to determine the completeness of the Banner transaction data.
Based on the data reliability procedures described above, we determined that the data obtained for our audit period were sufficiently reliable for the purposes of our audit work. During this process, we noted that NECC had an information-security training program; however, it is not mandated for all employees (see Other Matters).
| Date published: | June 30, 2021 |
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