**ED-OIG/A05F0011**

James D. Rock

Vice President

Administrative Affairs

19351 West Washington Street

Grayslake, Illinois 60030-1198

Dear Mr. Rock:

This Final Audit Report presents the results of our audit at the College
of Lake County Community College District No. 532 (College). The
objective of our audit was to determine if the College expended federal
Strengthening Institutions (SI) grant funds (P.R. P031Z010001) in
accordance with its grant agreement, federal law and regulations, and
applicable cost principles for the two years ended September 30, 2004.
We expanded our audit to cover the College's management of cash during
the full grant period of October 1, 2000, to September 30, 2004. Because
there were no findings that require resolution, you are not required to
respond to this report.

**BACKGROUND**

The College is a community college founded in 1969. It is a member of
the North Central Association and receives accreditation from the Higher
Learning Commission. As the SI grant's fiscal agent, the College, in
cooperation with the Illinois Board of Higher Education and the Illinois
Capital Development Board, received and expended \$2,775,000 in SI grant
funds for architectural design and construction costs for the University
Center of Lake County on the College's Grayslake, Illinois, campus. In
addition to the federal SI grant funds, the State of Illinois
appropriated \$11 million, the Lake County government earmarked \$3
million, and the College donated \$3 million worth of land for the
University Center.

**AUDIT RESULTS**

The College generally expended \$2,117,136 of SI grant funds in
accordance with its grant agreement, federal law and regulations, and
applicable cost principles for the period October 1, 2002, to September
30, 2004[^1].

However, the College maintained federal cash in excess of its immediate
needs during the grant period. The excess cash amounts ranged from
\$51,351 to \$198,511, and the College maintained the excess cash from 1
to 26 days. Our calculations indicated that the interest costs the
federal government incurred on the excess cash was only \$337. A College
official informed us that the College implemented an interactive system
with its bank in 2004 that should alleviate this problem in the future.
Therefore, we are not recommending any further corrective action.

**OBJECTIVE, SCOPE, AND METHODOLOGY**

## The objective of our audit was to determine if the College expended federal SI grant funds in accordance with its grant agreement, federal law and regulations, and applicable cost principles for the two years ending September 30, 2004. We expanded our audit to cover the College's management of cash during the full grant period of October 1, 2000, through September 30, 2004.

To achieve our objective we:

1.  Reviewed the OMB Circular A-133 audit reports prepared by an
    independent public accountant (KPMG) for the years ended June 30,
    2002 and 2003, and reviewed audit documentation for the year ended
    June 30, 2002.

2.  Reviewed the College's August 24, 2000, grant application (including
    budgets), grant award letters, budget changes and approvals,
    organizational charts, and financial reports for the years ended
    June 30, 2003 and 2004.

3.  Reviewed written policies and procedures and interviewed a College
    official to obtain an understanding of the processes the College
    used to provide reasonable assurance of compliance with SI grant
    requirements and applicable federal law and regulations.

4.  Reviewed various records and documents such as bank records,
    accounting records, and invoices, for transactions that totaled
    \$2,117,136 and were recorded in the College's grant accounting
    records for the period October 1, 2002, through September 30, 2004.

5.  Interviewed various College officials.

We conducted our work at the College's administrative offices in
Grayslake, Illinois, and our office in Chicago, Illinois, during
February and March 2005. We discussed the results of our audit with
College Officials on March 24, 2005.

**ADMINISTRATIVE MATTERS**

In accordance with the Freedom of Information Act (5 U.S.C. §552),
reports issued by the Office of Inspector General are available to
members of the press and general public to the extent information
contained therein is not subject to exemptions in the Act.

We appreciate the cooperation and assistance extended by your staff
during the audit. If you have any questions, please contact me at
312-886-6503.

> Sincerely,

/s/

Richard J. Dowd

Regional Inspector General

for Audit

[^1]: The College did not expend any SI grant funds during the first
    year of the grant (October 1, 2000, through September 30, 2001).
    KPMG audited federal expenditures of \$576,044 as part of the OMB
    Circular A-133 single audit for the period July 1, 2001, through
    June 30, 2002.