Audit & Compliance Committee February 2016 February 11, 2016 3:30 p.m. - 5:00 p.m. West Committee Room, McNamara Alumni Center

AUD - FEB 2016 1. External Auditor's Review of Completed Audit Work and NCAA Agreed Upon Procedures Docket Item Summary - Page 3 Deloitte & Touche Presentation - Page 4 A-133 Single Audit Report - Page 7 NCAA Agreed Upon Procedures Report - Page 43 Crookston Office of Higher Education Report - Page 60 Morris Office of Higher Education Report - Page 65 Duluth Office of Higher Education Report - Page 71 Twin Cities Office of Higher Education Report - Page 78

2. Update on Implementation of Human Participant Research Protection Work Plan Docket Item Summary - Page 83 Human Participant Research Protection Implementation Scorecard Page 86

3. Update on Implementation of Intercollegiate Athletics Recommendations Docket Item Summary - Page 88 Presentation Slides - Page 90

4. Compliance Program Review Preliminary Recommendations Docket Item Summary - Page 103 Institutional Compliance Function Review - Preliminary Report - Page 104 Institutional Compliance Function Review - Presentation - Page 129 Building an Effective Compliance Program - Article - Page 137

5. Internal Audit Update Docket Item Summary - Page 175 Internal Audit Update - Page 176

6. Information Items Docket Item Summary - Page 195

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BOARD OF REGENTS

DOCKET ITEM SUMMARY Audit & Compliance

February 11, 2016

AGENDA ITEM: External Auditor’s Review of Completed Audit Work and NCAA Agreed-Upon Procedures

Review

Review + Action

Action

X

Discussion

X This is a report required by Board policy. PRESENTERS:

Michael Volna, Associate Vice President & Controller Katie Knudtson, Partner, Deloitte & Touche LLP

PURPOSE & KEY POINTS The purpose of this item is to provide an update on FY 2015 audit services performed by Deloitte since the update in December 2015. Services to be discussed will include: • • • •

Federal A-133 compliance audit. MN Office of Higher Education financial aid programs examination. NCAA agreed-upon procedures engagement. Management recommendations resulting from 2015 engagements.

BACKGROUND INFORMATION The external auditors present their audit results to assist the Board with its fiduciary responsibilities and to comply with professional standards for audit firms. This report is presented to the Board of Regents Audit & Compliance Committee in conformance with the Board of Regents Policy: Board Operations and Agenda Guidelines.

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University of Minnesota Presentation to the Audit & Compliance Committee of the Board of Regents

Deloitte & Touche LLP February 11, 2016 Page 4 of 195

Summary of other 2015 audit services A-133 Single Audit • Audit report on the schedule of expenditures of federal awards for the year ended June 30, 2015, issued in November 2015 • Audit performed in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Circular A-133, including the OMB Compliance Supplement dated June 2015 • Audit required for federal expenditures in excess of $500,000 – Total University of Minnesota (the “University”) federal expenditures for the year ended June 30, 2015 were ~$1.036 billion • Identified the following as major federal programs to be tested: Major Federal Program

2015 Expenditures (in thousands)

Research and Development Cluster

$ 504,000

Student Financial Assistance Cluster

447,700

Special Education Teacher Assistance

11,700

• The University continues to qualify as a low-risk auditee • Unmodified opinions on compliance for all major programs • No significant deficiencies or material weaknesses in internal control over major programs • No material instances of noncompliance for major programs • No findings or questioned costs noted

Minnesota Office of Higher Education Financial Aid Programs examination • Compliance examination for state grants performed in connection with A-133 Single Audit • Due to changes in the audit guide from the Office of Higher Education, separate reports are required for each campus in the current year – This resulted in a significant increase in required sample sizes, with sample sizes nearly tripling • Reports issued January 25, 2016 • One finding noted – University of Minnesota – Duluth student that received aid prior to application and approval • Student aid was cancelled in January 2016 • University is in the process of returning the funds to the state of Minnesota

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Student fees agreed-upon procedures • Procedures performed for 35 student organizations (9 full-scope and 26 limited-scope) with respect to the financial affairs and accounting records of the student organizations • Funding for the student organizations comes through student tuition fees and is managaed and controlled by the Fees Committee (independent of the University) • Findings noted and communicated to management of the student organizations and student fees committee, as applicable: – Lack of underlying account reconciliations – Lack of consistency of supporting documentation • Reports planned to be issued wee of February 1, 2016

NCAA agreed-upon procedures • Procedures performed for the University of Minnesota Athletic Department’s compliance with NCAA bylaws • Report issued January 15, 2016 • Findings noted and communicated to management include: – Professional soccer game: The University hosted a professional soccer game during the reporting period, and recorded a portion of the revenues related to the event in the prior fiscal year (at the time the tickets for the event were sold) that should have been recognized in the current fiscal year, when the game occurred and revenue was earned. – Concert: A portion of revenues and expenditures for a concert hosted by the University during the reporting period were recognized in the next fiscal year and should have been recorded during the current fiscal year, when the concert occurred and revenue was earned. – Student Aid: One student received athletic aid at an out-of-state level rather than in-state level, resulting in the wrestling team exceeding their scholarship allotment by a small amount. The University notified the NCAA of the noncompliance. – Equivalency: One 5th year student was excluded from the squad lists provided by the University to the NCAA. The University notified the NCAA of the noncpmpliance, and has added the student to the squad list; however, as the student had exhausted her eligibility and was no longer counting toward the team’s scholarship limit, there was no impact on the team’s overall scholarship equivalency calculations.

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Schedule of xpenditures of Federal Awards and Schedule of Findin s and uestioned osts for the ear nded une 30, 2015, and ndependent Auditors eports



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UNIVERSITY OF MINNESOTA TABLE OF CONTENTS

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