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Audit and Compliance Committee - Agenda

THE UNIVERSITY OF TENNESSEE BOARD OF TRUSTEES

AUDIT AND COMPLIANCE COMMITTEE

2:00 p.m. EDT/1:00 p.m. CDT 8th Floor Conference Room

Wednesday Andy Holt Tower

April 17, 2019 1331 Circle Park

Knoxville, Tennessee 37996

AGENDA

Public Session

I. Call to Order

II. Roll Call

III. Approval of Minutes from Last Meeting—Action ............................................... Tab 1

IV. UTHSC Practice Plans .............................................................................................. Tab 2

V. NCAA Agreed-Upon Procedures (Written Report) ............................................ Tab 3

VI. 2019 Audit Plan Update (Written Report) ............................................................. Tab 4

VII. 2019 Outstanding Audit Issues (Written Report) ................................................. Tab 5

VIII. Travel Exception Report (Written Report) ............................................................ Tab 6

IX. Other Business

Note: Under the Bylaws, items not appearing on the agenda may be consideredonly upon an affirmative vote representing a majority of the total votingmembership of the Committee. Other business necessary to come before theCommittee at this meeting should be brought to the Committee Chair’s attentionbefore the meeting.

X. Adjournment

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Audit and Compliance Committee - Minutes of the Last Meeting

Page 1 of 3 Audit and Compliance Committee

March 15, 2019


MINUTES OF THE AUDIT AND COMPLIANCE COMMITTEE

SPECIAL MEETING

March 15, 2019 Knoxville, Tennessee

The Audit and Compliance Committee of The University of Tennessee Board of Trustees met by teleconference, originating from the West Wing of the Haslam College of Business in Knoxville, Tennessee, at 11:00 a.m. EDT on March 15, 2019. I. CALL TO ORDER

Ms. Amy Miles, Chair, called the meeting to order.

II. ROLL CALL

Ms. Judith A. Burns, Interim Chief Audit and Compliance Officer, called the roll, and the following Audit and Compliance Committee members were present:

Ms. Amy Miles (by telephone) Mr. D. Crawford Gallimore (by telephone) Mr. Decosta Jenkins (by telephone) Mr. John Compton

Ms. Burns announced the presence of a quorum. In compliance with the Open Meetings Act, Ms. Miles, Mr. Gallimore, and Mr. Jenkins indicated no others were present at their locations. The Secretary announced that in addition to Mr. Compton, those present in Knoxville were: Mr. David L. Miller, UT chief financial officer; members of the UT administrative staff; and a member of the local media.

III. APPROVAL OF MINUTES FROM LAST MEETING

Chair Miles asked for any corrections to the January 10, 2019, minutes. Hearing none, Mr. Jenkins moved approval of the minutes as presented, and Mr. Gallimore seconded. A roll call vote was taken, and the motion carried unanimously.

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March 15, 2019

IV. RECOMMENDATION FOR APPOINTMENT OF THE CHIEF AUDIT AND

COMPLIANCE OFFICER

Chair Miles presented the committee with a recommendation for the appointment of Mr. Brian J. Daniels as the University’s Chief Audit and Compliance Officer (CACO). She described the search process, noting characteristics of the applicant pool, the selection of eight candidates for screening interviews, followed by the selection of the top two candidates for on-campus interviews with various stakeholder groups. Mr. Compton commented on the thoroughness of the search process. Chair Miles then provided a brief overview of Mr. Daniels’ qualifications. She highlighted his career in higher education, which included time at a land-grant institution; mentioned he was active in his professional association; and emphasized the benefit of his background in information technology, as cybersecurity is a significant risk for all organizations. She then outlined the compensation and other terms of employment presented in the meeting materials.

Mr. Jenkins asked whether the proposed salary was in the 75th percentile. Mr. Miller said yes, commenting that the search committee hoped to offer compensation more toward the median salary, but current market conditions prevented that. Mr. Compton asked whether there was a contract for this position, and Mr. Miller stated there was not, that the CACO works “at will” for the audit and compliance committee. Mr. Jenkins then asked for clarification on the reporting structure for the CACO. Mr. Miller explained the position reports to the chief financial officer administratively, but to the committee functionally.

Chair Miles asked Mr. Gallimore to provide any comments resulting from his discussions with the two finalists, and he highlighted Mr. Daniels’ experience in IT security. Ms. Miles then called for a motion that the Audit and Compliance Committee recommend that the Board of Trustees adopt the following resolution:

Resolved: The Board of Trustees approve the appointment of Brian J. Daniels as the Chief Audit and Compliance Officer, effective June 1, 2019, or such other date agreed to by the Chair of the Audit

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March 15, 2019

and Compliance Committee, with the compensation and other terms of employment presented in the meeting materials.

Mr. Gallimore so moved; Mr. Compton seconded the motion. Ms. Burns called the roll, and the motion carried with all members approving.

Chair Miles then thanked members of the search committee and others who assisted with the search.

V. MEETING DATES IN 2019 AND 2020 Chair Miles then recommended dates for regular meetings of the Audit and Compliance Committee through 2020 as listed in the meeting materials. She moved approval of the dates; Mr. Gallimore seconded the motion. A roll call vote was taken, and the motion carried unanimously.

VI. ADJOURNMENT

The committee could consider no other business at this special meeting; therefore, the meeting was adjourned. Respectfully Submitted, ___________________________________ Judith A. Burns Interim Chief Audit and Compliance Officer

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Audit and Compliance Committee - UTHSC Practice Plans

UTHSC’S TRANSFORMATION OF PHYSICIAN PRACTICES

Presented to the Board of Trustees Audit and Compliance Committee

April 17, 2019

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Background of the Health Science Center

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Health Science Center

■ Six Colleges Dentistry Graduate Health Health Professions Medicine Nursing Pharmacy

■ 3,097 students

■ 1,273 residents

■ 1,713 faculty

■ 1,954 staff

• Established in 1911

• Contributes more than $2.7 billion to the Tennessee economy

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All Funds Budget

State, $134

Tuition, $40

Sponsored

Programs,

$169

Gifts/Endow, $15

Other, $21

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FY 2008 -- $380 mill FY 2018 -- $501 mill

State, $154

Tuition, $88

Sponsored

Programs,

$219

Gifts/Endow, $18

Other, $22

Excludes any practice plan income (nor VA Salaries)

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Tennessee’s Statewide Academic Health Center

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Chattanooga• Dentistry• Medicine

Nashville•Medicine•Pharmacy

Knoxville• Medicine• Dentistry• Health Professions• Pharmacy

Memphis – Main Campus• Dentistry• Graduate Health• Medicine• Health Professions• Nursing• Pharmacy

Union City•Dentistry

Bristol•Dentistry

Jackson•Medicine – Family Practice

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Hospital Relationships

The Health Science Center does not own a hospital and, therefore, doesn’t have access to hospital revenues to support academic and research growth

Our hospital relationships are disparate: Methodist Le Bonheur Healthcare

Methodist University Hospital Le Bonheur Children’s Hospital

The Regional Medical Center (county hospital) The VA Medical Center St. Francis Hospital (Tenet Healthcare) St. Jude Children’s Research Hospital Baptist Memorial Healthcare (limited)

UT Medical Center (Knoxville) Erlanger Health System (Chattanooga) St. Thomas Health (Nashville)

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Memphis

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Memphis Medical Center

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Methodist University Hospital

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History of UT Medical Group

Created in 1974 Then primarily affiliated with the Baptist Hospital System

Member (physician) owned, with historically limited campus oversight

350 faculty / physician members in 2010 Created and operated more for clinical practice

opportunities rather than to meet the academic mission of the College of Medicine

No primary care strategy Family Medicine in; then out; then….

Minimal dean’s tax8

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UTMG Struggled to Breakeven

The group did not have a large ancillary service base Most ancillary services were run in and by the hospitals

Key disciplines have been historically separate from HSC involvement in their management: Orthopedic Surgery through the Campbell Clinic Neurology / Neurosurgery through Semmes-Murphey

Spinal Institute Cancer through Boston Baskin Cancer Group Radiology is segregated in multiple groups mostly hospital

based

RESULT Minimal, if any, financial support to the academic mission

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2008 -- How to move the HSC forward with the looming health care changes.

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Priorities for HSC

Programmatic Development Faculty recruitment Building research and education missions

Centers-of-Excellence Areas where UTHSC can excel and that meet an important

medical need in the community Programs that achieve national stature and recognition

(USNWR rankings, etc.) Multidimensional development: clinical, research and

educational aspects

Closer ties between physician practices and the UTHSC

Developing a sustained revenue stream for UTHSC

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A First Effort with our Pediatricians

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UT Le Bonheur Pediatric Specialists Our first effort was to separate our pediatricians

from our faculty practice plan and partner with Le Bonheur Children’s Hospital A member of the Methodist Healthcare System

Controlled about 80% of inpatient activity of the hospital in 2010

New CEO who understood the value of a strong academic relationship

ULPS became effective January 1, 2011 Moved 90+ faculty / physicians from UTMG

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ULPS Joint Governance

Newly formed 501(c)(3) corporation Board of Directors

UT Representatives Dean and CFO Le Bonheur Representatives CEO and CFO Other Members (8 in total) will represent the physicians Non-voting member from St. Jude Children's Research

Hospital

Entry into Hospital Management: Joint recruitment of a new Chair of the Department of

Pediatrics who would also serve as the Pediatrician-in-Chief for Le Bonheur Children’s Hospital Now division chiefs also serve as Pediatric Surgeon-in-

Chief and Radiologist-in-Chief

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Financial Support to Academic Mission In support of the academic mission and its long-term growth and

development, Le Bonheur will make annual Base Mission Support payments to UTHSC First call on these funds is to support practice plan deficits 50 / 50 with the hospital Initially, this amount was $5 million With agreed annual increases, for FY 2019 it is $6.15 million

In addition, a Program Growth Supplement payment may be made to support specific faculty or programs There is no requirement for this payment But has been used to support physician growth in many areas

HOWEVER, in no event will UT be obligated to reimburse ULPS for amounts exceeding the level total Mission Support payments

Currently, the Hospital provides ~$17 million per year to UTHSC, all for support of the practice plan deficits This is in addition to the $17 million provided to ULPS directly from the hospital

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ULPS Today

Recruitment of high-caliber physician faculty with focus on quality and outcomes Faculty providers have grown from 90 to over 200

since inception

Enhancement of research Research in Pediatrics has grown from $5 mill in

2007 to $10 mill in 2017

Stabilized clinical salaries 8 Centers of Excellence with USN&WR

Recognition cardiology/heart surgery, GI surgery, neonatology,

neurology/neurosurgery, nephrology, orthopedics, pulmonology, and urology

Much closer ties to St. Jude Children’s Research Hospital

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A Second Effort with Cancer

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UT West Cancer Center Shortly after ULPS was implemented, there were

opportunities to change the cancer group relationship in partnership with Methodist Healthcare

Partnership (not a formal practice plan): Methodist Healthcare, UTHSC, and The West Clinic Initial plan to hire new faculty:

3 surgical oncologists 1 cancer researcher

Faculty have now grown from 9 since inception Plus 18 affiliated faculty

Base Mission Support: $5 million annually from Methodist

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UT West Cancer Center The partnership provides for joint governance of

cancer care activities – both inpatient and outpatient – with equal representation between the three parties. Does not include direct oversight or management of the

physician group The cancer group affiliates with the HSC to manage

residents and fellows

Currently, the partnership as it exists is being terminated effective 12.31.2019 West Clinic is moving forward to a new, national

relationship – Oncology One Discussions are underway between UTHSC, Methodist and

oncology physicians

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A Move Toward Stronger Integration with the Methodist Healthcare System

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A New Master Affiliation Agreement with Methodist UT representation on Methodist Le Bonheur

Healthcare Board Chancellor and a member of the UT Board of Trustees

New branding agreement for both Le Bonheur and Methodist University hospitals

Formation of UT Methodist Physicians Provides UT rights to protect mission While allowing Methodist to build larger physician network

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UT Methodist Physicians

Non-profit 501(c)(3), wholly-owned subsidiary (Limited Liability Company) of Methodist Healthcare Similar board structure to ULPS

4 UT reps (including Exec Dean and CFO)

4 Methodist reps 4 physician reps

Special fit among multiple hospital owned/controlled practices Hybrid model with faculty & community

physicians working side-by-side

Select specialties Transplantation, cardiology, surgery, internal

medicine, infectious disease, otolaryngology, gastroenterology, endocrinology, and hematology

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Department

Department

Methodist Physician Organization

Employed Physicians

Contracted Practices

UTMP

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Key Provisions

Methodist assumes full financial risk for UTMP New financial arrangement

Programmatic Investment in academic mission (in addition to ULPS and West support) $3.25 million annually

Performance-based variable payment based on total system health care margin Received $9.5 million in 2016 (for CY 2015) Expect to receive $2.5 million in 2019 for (CY 2018)

Moved about 50 UTMG adult multi-specialty physicians to the new practice Also provides for some Methodist employed physicians to

move. Currently about 130 providers total (90 faculty)

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Expanded Relationship with Regional One Health

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Regional One Health(formerly The Regional Medical Center or “The MED”)

As the affiliation with Methodist moved forward, in 2014 it was time to strengthen the relationship with Regional One Health Shelby County Hospital The longest standing affiliation for the College of

Medicine

Rewrote the Master Affiliation Agreement and created UT ROP

Provides for Base Mission Support $3 million annually

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Separate 501(c)3 corporation Similar board structure – 8 members including:

Executive Dean Executive Vice Chancellor

ROH assumes full financial risk of the plan Currently, 100 faculty/physicians Specialties include:

Anesthesiology Ob/Gyn and Maternal Fetal Medicine Trauma Surgery / Burn Center Emergency Medicine Urology Radiology

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Recent Efforts

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Pathology

For a number of years, pathology faculty have been a part of several different groups; many times hospital based.

With a new department chair, we began looking at a new relationship with Methodist’s pathology group – Memphis Pathology Group. Formalized last summer with a new affiliation for

MPG to be referred to as UT Memphis Pathology Group (UT MPG).

About 10 faculty initially affected.

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For many years, the HSC has operated a Family Medicine clinic in Jackson, TN Jackson-Madison County Hospital has a long-standing relationship

with the HSC which they would like to expand In keeping with our efforts to affiliate faculty practice plans with

partner hospitals, a move toward a joint physician plan is a first step toward strengthening the relationship

Also, in the process of selling the UT facility to the hospital.

Effective April 1st, our faculty/physicians in Jackson joined the West TN Medical Group Wholly owned subsidiary of the hospital Affiliation creates an Academic Practice Operations Committee to

provide shared oversight. 4 members from UT and WTMG

VC/CFO and 3 physicians from UTHSC 12 faculty affected

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Legacy Practice Plan Remains --Streamlined

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UT Medical Group becomesUniversity Clinical Health Specialties associated with multiple hospitals

Family Medicine Pathology Ophthalmology Plastic Surgery Dermatology

Provides the mechanism to develop programs without the need for hospital support Programs customized to address unmet medical

needs Multidisciplinary approaches

Nephrology Neurology Psychiatry Hematology Addiction Medicine

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Notable UCH Initiatives

Mobile Stroke Unit First ever with a full-size CT Scanner

Center for Addiction Science 1st National Research Center Designation from the

Addiction Medicine Foundation

Juvenile Assessment Center / Adverse Childhood Experiences

Primary Care Initiatives

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UCH Unique Capabilities Programmatic emphasis – serving the city

and the region Opportunity for faculty innovation in ways

not possible for hospital-based practice plans Run by the physicians for the physicians (with

outstanding business leadership)

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Transformation Overview

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Other

UTMP~90 faculty

Transformation of Faculty Practice Plan

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Methodist

Other

UTMP

ULPS>240 faculty

MethodistLe BonheurUT West

~10 faculty

UT ROP~100 faculty

Legacy UTMG~100 faculty

West TN UT Med~15 faculty

UT MPG~15 faculty

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Faculty Growth

350

200

10

70100

80

12 150

50

100

150

200

250

300

350

400

UCH ULPS UT West UTMP UT ROP UCH WTUT Med UT MPG

Faculty/Physicians

460

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w-RVU Growth

0

200

400

600

800

1,000

1,200

1,400

ULPS UT West UTMP UT ROP UCH

Thou

sand

s

2012 2013 2014 2015 2016 2017

TOTAL2012 = 1,886,2812017 = 2,690,089

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Net Patient Revenue

$0

$50

$100

$150

$200

$250

$300

ULPS UT West UTMP UT ROP UT MPG UCH

Mill

ions

2012 2013 2014 2015 2016 2017

TOTAL2012 = $205.6 m2017 = $430.3 m

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Mission Support Payments

$0

$5

$10

$15

$20

$25

$30

$35

2011 2012 2013 2014 2015 2016 2017 2018 2019 Proj

Mill

ions

ULPS UT West UTMP UT ROP UCH MLH Var

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TOTAL2012 = $4.6 m2018 = $28.1 m

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QUESTIONS ? ?

Thank You

Anthony A. FerraraVice Chancellor / CFO

UT [email protected]

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mailto:[email protected]

Audit and Compliance Committee - NCAA Agreed-Upon Procedures (Written Report)

January 23, 2019 Mr. Randy Boyd, Interim President The University of Tennessee Dear Mr. Boyd: Transmitted herewith is the report on the results of certain agreed-upon procedures applied to the statements of revenues and expenses of the intercollegiate athletic programs at the University of Tennessee. Sincerely,

Deborah V. Loveless, CPA, Director Division of State Audit cc: Ms. Amy Miles Chairman of the Audit Committee Ms. Judy Burns Acting Chief Audit and Compliance Officer Office of Audit and Compliance

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Independent Accountants’ Report on the Application of Agreed-upon Procedures Mr. Randy Boyd, Interim President The University of Tennessee We have performed the procedures enumerated below, which were agreed to by institution management, solely to assist you in evaluating whether the accompanying statements of revenues and expenses of the University of Tennessee’s Intercollegiate Athletics Programs are in compliance with the National Collegiate Athletic Association (NCAA) Bylaw 3.2.4.15 for the year ended June 30, 2018. The institution’s management is responsible for the statements of revenues and expenses (statements) and the statements’ compliance with those requirements. The sufficiency of these procedures is solely the responsibility of the management of the institution. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Exceptions totaling the lesser of $50,000 or 10% of the line item total to which an agreed-upon procedure has been applied have not been reported. The procedures that we performed and our findings are as follows:

Agreed-upon Procedures Related to the Statements of Revenues and Expenses

Procedure Results Revenues Obtain the summary of revenues and expenses

for or on behalf of intercollegiate athletics programs for affiliated and outside organizations prepared by the institution. Recalculate the addition of the amounts on the summary and compare the summary information with the amounts on the statement.

There were no reported revenues or expenses for or on behalf of university athletic departments at affiliated or outside organizations.

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Obtain the statements of revenues and expenses of the athletic programs and related notes for the year ended June 30, 2018, as prepared by management. Ensure the amounts reported on the statements agree to the institution’s general ledger.

No exceptions noted.

Compare and agree each operating revenue

category reported in the statements during the reporting period to supporting schedules provided by the institution. If a specific reporting category is less than 4% of the total revenues at that campus, no other procedures were performed for that specific category.


Compare and agree a sample of operating

revenue receipts from the operating revenue supporting schedules to adequate supporting documentation.


At each campus, compare each major revenue

account over 10% of the total revenues to prior-period amounts. Obtain and document management’s explanation for any variations greater than 10%. Report the analysis as a supplement to the final Agreed-upon procedures report.

No exceptions noted. See the supplements to this report.

At Chattanooga, compare tickets sold during

the reporting period, complimentary tickets provided during the reporting period, and unsold tickets to the related revenue reported by the institution in the statement and the related attendance figures and recalculate totals. At Knoxville, review the home football and basketball ticket reports prepared by an independent CPA firm and compare amounts in the reports to the campus statement.

No exceptions noted. At Martin, since ticket revenue was less than 4% of campus revenues, this procedure was not performed.

Compare and agree student fees reported by the

institution in the statements to student enrollments during the same reporting period and recalculate totals.

No exceptions noted. At Knoxville, since student fees were less than 4% of campus revenues, this procedure was not performed.

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If the athletics department is reporting that an allocation of student fees should be countable as generated revenue, recalculate the totals of their methodology for supporting that they are able to count each sport. Tie the calculation to supporting documents such as seat manifests, ticket sales reports, and student fee totals.

The institution does not report in this manner; therefore, this step was not performed.

Compare direct state or other governmental

support recorded by the institution during the reporting period with state appropriations, institutional authorizations, and/or other corroborative supporting documentation and recalculate totals.

As the institution does not receive direct state or other governmental support specific to athletics, this step was not applicable.

Compare the direct institutional support

recorded by the institution during the reporting period with the institutional supporting budget transfers documentation and other corroborative supporting documentation and recalculate totals.

No exceptions noted. At Knoxville, since there was no direct institutional support, this procedure was not performed.

Compare the transfers back to institution with

permanent transfers back to institution from the athletics department and recalculate totals.

Since no transfers back to institution exceeded 4% of revenues at any campus, this procedure was not performed.

Compare the indirect institutional support

recorded by the institution during the reporting period with expense payments, cost allocation detail, and other corroborative supporting documentation and recalculate totals.

At Knoxville, no indirect institutional support (categories 6 and 36 on the statement) was reported by the university, as university management determined that most other Southeastern Conference member institutions do not report in this category, and they wanted their statement to be comparable. Chattanooga and Martin decided to report in the same manner. The NCAA agreed-upon procedures handbook states that the university should “input [the] value of costs covered and services provided by the institution to athletics but not charged to athletics including: administrative services provided by the university to athletics, but not charged such as

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Human Resources, Accounting, and Information Technology; facilities maintenance; security; risk management; and utilities.”

Select a sample of settlement reports for away

games during the reporting period and agree each selection to the institution’s general ledger and/or the statements and recalculate totals.

No exceptions noted. At Knoxville and Chattanooga, since guarantee revenues were less than 4% of campus revenues, this procedure was not performed.

Select a sample of contractual agreements

pertaining to revenues derived from guaranteed contest during the reporting period and compare and agree each selection to the institution’s general ledger and/or the statements and recalculate totals.

No exceptions noted. At Knoxville and Chattanooga, since guarantee revenues were less than 4% of campus revenues, this procedure was not performed.

Any contributions of moneys, goods, or

services received directly by an intercollegiate athletics program from any affiliated or outside organization, agency, or group of individuals (two or more) not included elsewhere (e.g., contributions by corporate sponsors) that constitutes 10% or more in aggregate for the reporting year of all contributions received for intercollegiate athletics during the reporting periods shall be disclosed in the notes to the statements of athletics department revenues and expenses. Obtain and review supporting documentation for each contribution and recalculate totals.

There were no exceptions noted at Chattanooga. There were no contributions that met this criterion at Knoxville or Martin; therefore, this step was not performed.

Compare the in-kind contributions recorded by

the institution during the reporting period with a schedule of in-kind donations and recalculate the totals.

Since in-kind contributions were less than 4% of revenues at each campus, this procedure was not performed.

Obtain the summary of revenues from affiliated

and outside organizations (the “Summary”) as of the end of the reporting period from the institution and select a sample of funds for compensation and benefits from the Summary and compare and agree each selection to supporting documentation and/or the

No coaches or staff are paid by an affiliated or outside organization; therefore, this step was not performed.

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institution’s general ledger and recalculate totals.

Obtain and inspect agreements for the institution’s total media rights as reported in the statement. Compare and agree the media rights revenues to a summary statement of all media rights identified, if applicable, and the institution’s general ledger and recalculate the totals. Ledger totals may be different for total conference distributions if media rights are not broken out separately.

No exceptions noted. Only Knoxville had media rights revenue.

Compare the amounts recorded in the revenue

and expense reporting to general ledger detail for NCAA distributions and other corroborative supporting documents and recalculate totals.

No exceptions noted. At Knoxville, since NCAA distributions were less than 4% of campus revenues, this procedure was not performed.

Obtain and inspect agreements related to the

institution’s conference distributions and participation in revenues from tournaments during the reporting period. Compare and agree the related revenues to the institution’s general ledger and/or statements and recalculate totals.

No exceptions noted. At Chattanooga and Martin, since conference distributions were less than 4% of campus revenues, this procedure was not performed.

Compare the amount recorded in the revenue

reporting category to a general ledger detail of program sales, concessions, novelty sales, and parking as well as any other corroborative supporting documents and recalculate totals.

Since program sales, concessions, novelty sales, and parking revenues were less than 4% of revenues at each campus, this procedure was not performed.

Obtain and inspect agreements related to the

institution’s participation in revenues from royalties, licensing, advertisements, and sponsorships during the reporting period. Compare and agree the related revenues to the institution’s general ledger and/or the statement and recalculate totals.

No exceptions noted at Knoxville. At Chattanooga and Martin, since revenues from royalties, licensing, advertisements, and sponsorships were less than 4% of campus revenues, this procedure was not performed.

Inspect sports camp contract(s) between the

institution and person(s) conducting institution sports camps or clinics during the reporting period. Obtain schedules of camp participants and select a sample of individual camp participant cash receipts from the schedule of sports camp participants. Agree each selection

Since sports camp revenues were less than 4% of revenues at each campus, this procedure was not performed.

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with the institution’s general ledger, and/or the statements and recalculate totals.

Obtain and inspect the institution’s endowment agreements. Compare the classification and use of endowment and investment income reported in the statements during the reporting period to the uses of income defined within the related endowment agreement and recalculate totals.

Since endowment income was less than 4% of revenues at each campus, this procedure was not performed.

Obtain and inspect agreements related to the institution’s revenues from post-season bowl participation during the reporting period. Compare and agree the related revenues to the institution’s general ledger and/or the statements and recalculate totals.

The institution did not participate in a post-season bowl. Therefore, this step was not performed.

Expenses Compare and agree each operating expense

category reported in the statements during the reporting period to supporting schedules provided by the institution. If a specific reporting category is less than 4% of the total expenses at that campus, no other procedures were performed for that specific category.


Compare and agree a sample of expenses from

the operating expense supporting schedules to adequate supporting documentation.


At each campus, compare each major expense

account over 10% of the total expenses to prior-period amounts. Obtain and document management’s explanation for any variations greater than 10%. Report the analysis as a supplement to the final Agreed-upon procedures report.

No exceptions noted. See the supplements to this report.

At each campus, select a sample of students from the listing of institutional student aid recipients during the reporting period. Data should be captured by the institution through the creation of a squad/eligibility list for each sponsored sport. Obtain individual student-

No exceptions noted at Knoxville and Martin. At Chattanooga, for 4 of 25 students tested (16%), the amount of aid on the Compliance Assistant (CA) system was not estimated and reported

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account detail for each selection and compare total aid in the institution’s student system to the student’s detail in Compliance Assistance (CA) or the institution report that ties directly to the NCAA Membership Financial Reporting System. Confirm information for each student selected was reported accurately in either the NCAA’s CA software or entered directly into the NCAA Membership Financial Reporting System using the appropriate criteria. Recalculate totals.

properly based on a review of the institution’s Banner student system.

Obtain and inspect visiting institutions’ away-

game settlement reports received by the institution during the reporting period and agree related expenses to the institution’s general ledger and/or the statements Recalculate totals. Obtain and inspect contractual agreements pertaining to expenses recorded by the institution from guaranteed contests during the reporting period. Compare and agree related amounts expensed by the institution to the institution’s general ledger and/or statements. Recalculate totals.

Since guarantee expenses were less than 4% of expenses at each campus, this procedure was not performed.

Obtain and inspect a listing of coaches

employed by the institution and related entities during the reporting period. Select a sample of coaches’ contracts that must include football and men’s and women’s basketball from the listing. Compare and agree the financial terms and conditions of each selection to the related coaching salaries, benefits, and bonuses recorded by the institution and related entities in the statements during the reporting period. Obtain and inspect payroll summary registers for the reporting year for each selection. Compare and agree payroll summary registers from the reporting period to the related coaching salaries, benefits and bonuses paid by the institution and related entities expense recorded by the institution in the statements during the reporting period. Compare and agree the totals recorded to any employment contracts executed for the sample section and recalculate totals.


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Obtain and inspect a listing of coaches employed by third parties during the reporting period. Select a sample of coaches’ contracts that must include football and men’s and women’s basketball from the listing. Compare and agree the financial terms and conditions of each selection to the related coaching other compensation and benefits paid by a third party and recorded by the institution in the statements during the reporting period. Obtain and inspect reporting period payroll summary registers for each selection. Compare and agree related payroll summary register to the coaching other compensation and benefits paid by third-party expenses recorded by the institution in the statements during the reporting period. Recalculate totals.

No employees were employed by third parties during the reporting period; therefore, this step was not performed.

Select a sample of support staff/administrative

personnel employed by the institution and related entities during the reporting period. Obtain and inspect reporting period summary payroll registers for each selection. Compare and agree related summary payroll register to the related support staff/administrative salaries, benefits and bonuses paid by the institution and related entities expense recorded by the institution in the statements during the reporting period. Recalculate totals.


Select a sample of support staff/administrative

personnel employed by third parties during the reporting period. Obtain and inspect reporting period payroll summary registers to the related support staff/administrative other compensation and benefits expense recorded by the institution in the statements during the reporting period. Recalculate totals.

No employees were employed by third parties during the reporting period; therefore, this step was not performed.

Select a sample of employees receiving

severance payments by the institution during the reporting period and agree each severance payment to the related termination letter or employment contract and recalculate totals.

No exceptions noted at Knoxville. At Chattanooga and Martin, since there were no severance payments, this procedure was not performed.

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Compare and agree the institution’s recruiting policies to existing institutional- and NCAA-related policies. Obtain general ledger detail and compare to the total expenses reported and recalculate totals.

Since recruiting expenses were less than 4% of expenses at each campus, this procedure was not performed.

Compare and agree the institution’s team travel

policies to existing institutional- and NCAA-related policies. Obtain general ledger detail and compare to the total expenses reported and recalculate totals.

No exceptions noted. At Chattanooga, since team travel expenses were less than 4% of campus revenues, this procedure was not performed.

Obtain a listing of debt service schedules, lease

payments, and rental fees for athletics facilities for the reporting year. Compare a sample of facility payments including the top two highest facility payments to additional supporting documentation (e.g. debt financing agreements, leases, rental agreements). Compare amounts recorded to amounts listed in the general ledger detail and recalculate totals.

No exceptions noted at Knoxville and Chattanooga. At Martin, debt service payments, reported in line 34 of the statement, were understated by $502,777.28. Line 6a, reporting the amount of the debt paid by the university and not charged to the athletic department, was reported as $186,411, instead of $200,777.28. The statement was corrected.

Additional agreed-upon procedures At each campus, compare and agree the sports

sponsored as reported in the NCAA Membership Financial Reporting System to the Calculation of Revenue Distribution Equivalencies Report from Compliance Assistance or equivalent supporting equivalency calculations from the institution.


At each campus, obtain the institution’s Sports

Sponsorship and Demographics Forms Report for the reporting year. Validate that the countable sports reported met the minimum requirement as set forth in the bylaws. Once countable sports have been confirmed, ensure that the institution has properly reported these sports as countable for revenue distribution purposes within the NCAA Membership Financial Reporting System.


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At each campus, for Pell grants, agree the total

number of Division I student-athletes who, during the academic year, received a Pell grant award and the total value of these Pell grants reported in the NCAA Membership Financial Reporting System to a report, generated out of the institution’s financial aid records, of all student-athlete Pell Grants.

No reportable exceptions noted.

Other reporting items Obtain general ledger detail and compare to the

total expenses reported as excess transfers to institution or conference realignment expenses to validate the existence of the transaction and accuracy of recording. Recalculate totals.

These categories were not reported; therefore, this step was not performed.

Obtain repayment schedules for all outstanding

intercollegiate athletics debt during the reporting period. Recalculate annual maturities (consisting of principal and interest) provided in the schedules obtained. Agree the total annual maturities and total outstanding athletic debt to supporting documentation and the institution’s general ledger, as applicable.


Agree the total outstanding institutional debt to

supporting documentation and the institution’s audited financial statements (if available), or the institution’s general ledger.


Obtain a schedule of all athletics-dedicated

endowments maintained by athletics, the institution, and affiliated organizations. Agree the fair value in the schedules to supporting documentation, the general ledger, and audited financial statements, if available.

No reportable exceptions noted.

Agree the total fair value of institutional

endowments to supporting documentation, the institution’s general ledger, and audited financial statements, if available.


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Obtain a schedule of athletics-related capital expenses made by athletics, the institution, and affiliated organizations during the reporting period. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate the existence of the transaction and accuracy of recording. Recalculate the totals.

No exceptions noted at Knoxville. Since there were no athletics-related capital expenses at Chattanooga or Martin, this step was not performed.

This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying statements of revenues and expenses of the University of Tennessee’s Intercollegiate Athletics Programs for the year ended June 30, 2018. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the institution’s management and is not intended to be and should not be used by anyone other than the institution’s management.

Sincerely,

Deborah V. Loveless, CPA, Director Division of State Audit

January 23, 2019

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Revenues1 Ticket sales 35,938,796$ 2 Direct state or other government support - 3 Student fees 1,000,000 4 Direct institutional support - 5 Less: transfers to institution (894,908) 6 Indirect institutional support -

6a Indirect institutional support -athletic facilities debt service, lease and rental fees - 7 Guarantees 3,010,470 8 Contributions 34,107,827 9 In-kind 1,596,886

10 Compensation and benefits provided by a third party - 11 Media rights 33,480,201 12 NCAA distributions 2,702,043 13 Conference distributions (non-media and non-bowl) 9,541,926 14 Program, novelty, parking, and concession sales 5,506,466 15 Royalties, licensing, advertisement, and sponsorships 14,094,743 16 Sports camp revenues 906,895 17 Athletics restricted endowment and investments income 2,228,044 18 Other operating revenue 325,726 19 Bowl revenues -

Subtotal operating revenues 143,545,115

Expenses20 Athletic student aid 14,530,654 21 Guarantees 3,120,400 22 Coaching salaries, benefits, and bonuses paid

by the university and related entities 21,843,304 23 Coaching salaries, benefits, and bonuses paid

by a third party - 24 Support staff/administrative compensation, benefits,

and bonuses paid by the university and related entities 25,770,210 25 Support staff/administrative compensation, benefits,

and bonuses paid by a third party - 26 Severance payments 13,768,071 27 Recruiting 3,220,244 28 Team travel 8,041,157 29 Sports equipment, uniforms, and supplies 4,367,249 30 Game expenses 5,201,736 31 Fund raising, marketing, and promotion 7,220,869 32 Sports camp expenses 271,736 33 Spirit groups 807,284 34 Athletic facilities, debt service, leases, and rental fees 16,877,235 35 Direct overhead and administrative expenses 13,759,806 36 Indirect institutional support - 37 Medical expenses and insurance 1,611,841 38 Memberships and dues 72,811 39 Student-athlete meals (non-travel) 2,306,734 40 Other operating expenses 7,239,155 41 Bowl expenses -

Subtotal operating expenses 150,030,496

Excess (deficiency) of revenues over (under) expenses (6,485,381)$

The accompanying notes are an integral part of this statement.

Other reporting items:

50 Excess transfers to institution -$ 51 Conference realignment expenses -$ 52 Total athletics related debt 127,796,821$ 53 Total institutional debt 715,603,593$ 54 47,362,402$ 55 621,845,197$ 56 Total athletics related capital expenditures 13,441,532$

Value of institutional endowments

The University of Tennessee at KnoxvilleDepartment of Intercollegiate AthleticsStatement of Revenues and Expenses

For the Year Ended June 30, 2018

Value of athletics dedicated endowments

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Revenues1 Ticket sales 804,217.80$ 2 Direct state or other government support - 3 Student fees 4,472,078.94 4 Direct institutional support 8,815,327.39 5 Less: transfers to institution - 6 Indirect institutional support -

6a Indirect institutional support -athletic facilities debt service, lease and rental fees - 7 Guarantees 660,000.00 8 Contributions 1,599,910.98 9 In-kind 204,726.25

10 Compensation and benefits provided by a third party - 11 Media rights - 12 NCAA distributions 868,198.00 13 Conference distributions (non-media and non-bowl) 50,000.00 14 Program, novelty, parking, and concession sales 43,250.79 15 Royalties, licensing, advertisement, and sponsorships 629,369.88 16 Sports camp revenues 434,940.89 17 Athletics restricted endowment and investments income 145,370.76 18 Other operating revenue 92,177.98 19 Bowl revenues -

Subtotal operating revenues 18,819,569.66

Expenses20 Athletic student aid 5,132,090.06 21 Guarantees - 22 Coaching salaries, benefits, and bonuses paid -

by the university and related entities 4,177,135.15 23 Coaching salaries, benefits, and bonuses paid


and bonuses paid by the university and related entities 3,437,888.74 25 Support staff/administrative compensation, benefits,

and bonuses paid by a third party - 26 Severance payments - 27 Recruiting 340,162.15 28 Team travel 622,445.53 29 Sports equipment, uniforms, and supplies 612,100.76 30 Game expenses 403,318.52 31 Fund raising, marketing, and promotion 1,035,646.44 32 Sports camp expenses 233,673.16 33 Spirit groups 242,815.98 34 Athletic facilities, debt service, leases, and rental fees 352,570.68 35 Direct overhead and administrative expenses 408,967.42 36 Indirect institutional support - 37 Medical expenses and insurance 156,210.16 38 Memberships and dues 39,097.00 39 Student-athlete meals (non-travel) - 40 Other operating expenses 1,625,447.91 41 Bowl expenses -

Subtotal operating expenses 18,819,569.66

Excess (deficiency) of revenues over (under) expenses -$


Other reporting items:50 Excess transfers to institution -$ 51 Conference realignment expenses -$ 52 Total athletics related debt 1,389,423.00$ 53 Total institutional debt 97,197,004.41$ 54 3,833,263.01$ 55 154,311,867.26$ 56 Total athletics related capital expenditures -$


The University of Tennessee at ChattanoogaDepartment of Intercollegiate AthleticsStatement of Revenues and Expenses

For the Year Ended June 30, 2018


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Revenues1 Ticket sales 171,525.00$ 2 Direct state or other government support - 3 Student fees 2,183,442.04 4 Direct institutional support 6,439,772.08 5 Less: transfers to institution - 6 Indirect institutional support -

6a Indirect institutional support -athletic facilities debt service, lease and rental fees 200,777.28 7 Guarantees 910,000.00 8 Contributions 669,299.41 9 In-kind 170,793.50

10 Compensation and benefits provided by a third party - 11 Media rights - 12 NCAA distributions 663,092.00 13 Conference distributions (non-media and non-bowl) 184,810.00 14 Program, novelty, parking, and concession sales 119,690.97 15 Royalties, licensing, advertisement, and sponsorships 159,137.47 16 Sports camp revenues - 17 Athletics restricted endowment and investments income 128,399.11 18 Other operating revenue 2,100.00 19 Bowl revenues -

Subtotal operating revenues 12,002,838.86

Expenses20 Athletic student aid 4,249,435.65 21 Guarantees 51,382.20 22 Coaching salaries, benefits, and bonuses paid

by the university and related entities 2,630,662.18 23 Coaching salaries, benefits, and bonuses paid


and bonuses paid by the university and related entities 1,521,845.59 25 Support staff/administrative compensation, benefits,

and bonuses paid by a third party - 26 Severance payments - 27 Recruiting 207,103.62 28 Team travel 767,097.59 29 Sports equipment, uniforms, and supplies 602,620.67 30 Game expenses 166,361.45 31 Fund raising, marketing, and promotion 36,550.71 32 Sports camp expenses - 33 Spirit groups 37,493.15 34 Athletic facilities, debt service, leases, and rental fees 689,188.28 35 Direct overhead and administrative expenses 63,571.98 36 Indirect institutional support - 37 Medical expenses and insurance 310,497.15 38 Memberships and dues 4,840.00 39 Student-athlete meals (non-travel) 93,837.29 40 Other operating expenses 570,351.35 41 Bowl expenses -

Subtotal operating expenses 12,002,838.86

Excess (deficiency) of revenues over (under) expenses -$


Other reporting items:50 Excess transfers to institution -$ 51 Conference realignment expenses -$ 52 Total athletics related debt 5,088,671.73$ 53 Total institutional debt 61,369,753.97$ 54 5,989,604.16$ 55 34,958,862.11$ 56 Total athletics related capital expenditures -$


The University of Tennessee at Martin

Statement of Revenues and ExpensesFor the Year Ended June 30, 2018

Department of Intercollegiate Athletics


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THE UNIVERSITY OF TENNESSEE INTERCOLLEGIATE ATHLETIC DEPARTMENTS

NOTES TO THE STATEMENTS OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2018

NOTE 1. CAPITAL ASSETS The intercollegiate athletic departments at Knoxville, Chattanooga, and Martin are required to follow all University of Tennessee policies and procedures for acquiring, approving, and disposing of capital assets as set forth by the Board of Trustees. A university purchase order must be issued for purchases of $10,000 or more. These purchases shall be based upon the principle of competitive bidding. Requisitioning and approving of purchases will begin in the respective athletic department and will then be forwarded to the purchasing department for bidding and the issuance of a purchase order. Capital assets, which include property, plant, equipment, software, and library holdings, are reported in the statement of net position at historical cost or at acquisition value at date of donation, less accumulated depreciation/amortization. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets’ useful lives are not capitalized. A capitalization threshold of $100,000 is used for buildings, land improvements, and infrastructure. Equipment and software are capitalized when the unit acquisition cost is $5,000 or greater and the estimated useful life is one year or more. The capitalization threshold for additions and improvements to infrastructure and land improvements is also $100,000. The capitalization threshold for additions and improvements to buildings is $100,000, provided that amount exceeds 20% of the book value of the building. These assets, with the exception of land, are depreciated/amortized using the straight-line method over the estimated useful lives of the assets, which range from 5 to 40 years. NOTE 2. LONG-TERM DEBT Knoxville Long-term debt activity related to athletic department assets, for the year ended June 30, 2018, was as follows: Beginning

Balance

Additions

Reductions Ending Balance

Long-term debt: Bonds $137,835,195.19 $31,649,831.03 $44,949,172.69 $124,535,853.53 Unamortized bond

premium

5,201,772.33

- 5,201,772.33

- Revolving credit facility 4,721,687.82 7,228,955.09 8,689,675.53 3,260,967.38 Total TSSBA indebtedness

$147,758,655.34

$38,878,786.12 $58,840,620.55

$127,796,820.91

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NOTES TO THE STATEMENTS OF REVENUES AND EXPENSES (CONT.) FOR THE YEAR ENDED JUNE 30, 2018

Debt service requirements to maturity for bonds payable at June 30, 2018, for athletic related debt, are as follows:

Year ending June 30

Principal

Interest

2019 $ 11,171,982.55 $ 5,767,347.81 2020 11,624,955.07 5,262,284.00 2021 6,614,425.83 4,827,729.98 2022 6,902,074.48 4,495,708.62 2023 7,292,640.40 4,149,697.38

2024-2028 35,940,412.07 15,466,413.55 2029-2033 28,317,338.36 7,079,430.67 2034-2038 14,914,136.87 1,829,200.89 2039-2040 1,757,887.90 88,951.94

$124,535,853.53 $48,966,764.84 Chattanooga Long-term debt activity related to athletic department assets, for the year ended June 30, 2018, was as follows: Beginning

Balance

Additions Reductions

Ending Balance

Long-term debt: Bonds $1,509,534.00 $ - $120,111.00 $1,389,423.00 Total TSSBA indebtedness $1,509,534.00 $ - $120,111.00 $1,389,423.00


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Year ending

June 30

Principal

Interest

2019 $ 121,880.00 $ 39,402.70 2020 124,976.00 36,902.51 2021 128,886.00 33,873.85 2022 131,827.00 30,627.59 2023 135,295.00 27,137.77

2024-2028 746,559.00 70,356.65 $1,389,423.00 $238,301.07

Martin Long-term debt activity related to athletic department assets, for the year ended June 30, 2018, was as follows: Beginning

Balance

Additions Reductions

Ending Balance

Long-term debt: Bonds $4,603,782.38 $559,193.30 $742,303.95 $4,420,671.73 Revolving credit facility 970,000.00 - 302,000.00 668,000.00 Total TSSBA indebtedness $5,573,782.38 $559,193.30 $1,044,303.95 $5,088,671.73


Year ending June 30

Principal

Interest

2019 $ 140,084.27 $ 176,609.69 2020 144,615.82 172,057.81 2021 148,874.37 167,535.57 2022 152,509.43 163,552.19 2023 151,496.41 157,457.39

2024-2028 852,945.28 690,728.22 2029-2033 963,754.00 493,430.71 2034-2038 668,431.37 324,014.08 2039-2043 819,686.27 168,633.07 2044-2045 378,274.51 16,075.68

$4,420,671.73 $2,530,094.41

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NOTE 3. CONTRIBUTIONS No single donor or small group of donors gave more than 10% of the reported contributions at the University of Tennessee at Knoxville campus or at the University of Tennessee at Martin campus. At the University of Tennessee at Chattanooga campus, $500,000 of the reported contributions (31%) were from the estate of a single donor.

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2018 2017Actual Actual $ Difference % Difference

Operating revenues:Ticket sales 35,938,796$ 36,781,724$ (842,928)$ -2.3%Contributions 34,107,827 33,455,709 652,118 1.9%Media rights 33,480,201 32,065,693 1,414,508 4.4%

10% of Revenues 14,354,512$

Operating expenses:Coaching salaries, benefits, and bonuses paid by the university and related entities 21,843,304$ 20,832,052$ 1,011,252 4.9%Support staff/administrative compensation, benefits, and bonuses paid by the university and related entities 25,770,210 23,081,998 2,688,212 11.6% (1)Athletic facilities, debt service, leases, and rental fees 16,877,235 19,851,117 (2,973,882) -15.0% (2)

10% of Expenses 15,003,050$

(1) The increase of $2,688,212 was caused by a number of factors including, but not limited to, increases in football program support staff and several areas of student-athlete welfare such as sports medicine, sports science, and strength and conditioning. Additionally, the university instituted a 3% across-the-board salary increase, which factors into the overall support staff increase. (2) The decrease of $2,973,882 is due to significant savings realized from certain debt refundings.

Supplementary InformationAnalysis of Current to Prior-Year Expenses

The University of Tennessee at Knoxville 3

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Operating revenues:Student fees 4,472,078.94$ 4,477,571.14$ (5,492.20)$ -0.1%Direct institutional support 8,815,327.39 7,896,740.98 918,586.41 11.6% (1)

10% of Revenues 1,881,956.97$

Operating expenses:Athletic student aid 5,132,090.06$ 5,033,957.62$ 98,132.44$ 1.9%Coaching salaries, benefits, and bonuses paid by the university and related entities 4,177,135.15 4,161,365.63 15,769.52 0.4%Support staff/administrative compensation, benefits, and bonuses paid by the university and related entities 3,437,888.74 3,168,073.63 269,815.11 8.5%

10% of Expenses 1,881,956.97$

(1) Direct institutional support for football increased $367,807.58 and direct institutional support for basketball increased $409,195.09. Direct institutional support represents operating expense amounts funded by the university that were not funded by other athletic department revenues.

The University of Tennessee at ChattanoogaSupplementary Information

Analysis of Current to Prior-Year Expenses

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Operating revenues:Student fees 2,183,442.04$ 2,148,450.04$ 34,992.00$ 1.6%Direct institutional support 6,439,772.08 5,760,022.15 679,749.93 11.8% (1)

10% of Revenues 1,200,283.89$

Operating expenses:Athletic student aid 4,249,435.65$ 3,918,060.11$ 331,375.54$ 8.5%Coaching salaries, benefits, and bonuses paid by the university and related entities 2,630,662.18 2,520,368.72 110,293.46 4.4%Support staff/administrative compensation, benefits, and bonuses paid by the university and related entities 1,521,845.59 1,364,621.73 157,223.86 11.5% (2)

10% of Expenses 1,200,283.89$

(1) Direct institutional support for football increased $656,141.24. Direct institutional support represents operating expense amounts funded by the university that were not funded by other athletic department revenues.(2) In fiscal year 2017, the athletics director position, with a salary of $150,000, was not filled from July 2016 to February 2017. Additionally, in November 2017, a new position of communications assistant III, with a salary of $31,384 was created.

The University of Tennessee at MartinSupplementary Information

Analysis of Current to Prior-Year Expenses

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Audit and Compliance Committee - 2019 Audit Plan Update (Written Report)

1


AGENDA ITEM SUMMARY

DATE: April 17, 2019 COMMITTEE: Audit and Compliance ITEM: 2019 Audit Plan Update TYPE: Written Report PREPARED BY: Judith A. Burns, Interim, Chief Audit and Compliance Officer Background As required by the International Standards for the Professional Practice of Internal Auditing, a risk-based audit plan is developed each year and approved by the Audit and Compliance Committee. The 2019 plan was approved in January 2019 and includes five areas of work.

Area Description

Required Audits required by statute, administrative policy, or agreements with management

Risk-Based Planned engagements based on our risk assessment

Unplanned Special projects and investigations

Prior Year Audits in progress from the prior year

Other Value-added work and consulting

The status of the plan as of March 31, 2019, is attached.

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2

2019 Audit Plan UT System and System Administration Engagements Required Self-Assessment of Controls In Progress Required Complete College Tennessee Act Scheduled Required E-commerce Pre-Approvals In Progress Required Effort Reporting Scheduled Required Audit Follow-Up In Progress Required President's Office Scheduled Risk-Based Conflict of Interests In Progress Risk-Based Security Plan Assessments In Progress Risk-Based General and Application Controls—ANDI Scheduled Risk-Based General and Application Controls—K@TE Scheduled Prior-Year Renewal and Replacement Funds In Progress Prior-Year Complete College Tennessee Act In Progress Prior-Year Payroll Data Analytics In Progress Prior-Year Effort Reporting In Progress Prior-Year Procurement Card Fraud Review In Progress Prior-Year Discounts for Dependents Complete UT Knoxville Engagements Required Chancellor's Office Scheduled Required Athletics NCAA Compliance—Eligibility Scheduled Required HIPAA Security—Vine School Health Center In Progress Required WUOT Radio Center (External Audit Assist) Scheduled Risk-Based Emergency Management In Progress Risk-Based Athletics Debit Cards for Student Travel In Progress Risk-Based Export Controls In Progress Risk-Based Key Business Controls Assessment In Progress Risk-Based Registrar—Banner Interface Security Audit In Progress Risk-Based UTSI—IT Security Department Audit In Progress Risk-Based Student Life—IT Security Departmental Audit In Progress Risk-Based Theatre—IT Security Departmental Audit Scheduled Prior-Year Renewal and Replacement Funds In Progress Prior-Year Bursar’s Office Reconciliation Process Complete Prior-Year Research Compliance In Progress

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3

UT Health Science Center Engagements Required Programs for Minors In Progress Risk-Based Office of Sponsored Programs Scheduled Risk-Based Clery Act Compliance Scheduled Risk-Based University Health Services Revenue Scheduled Risk-Based College of Dentistry Inventory Scheduled Risk-Based Key Business Controls Assessments In Progress Risk-Based Cash Controls In Progress Risk-Based Collaborative Research Network Awards In Progress Prior-Year Renewal and Replacement Funds In Progress Investigation College of Pharmacy Grant Accounting In Progress UT Chattanooga Engagements Required Athletics NCAA Compliance: Eligibility Scheduled Required WUTC Radio Station (External Assist) Scheduled Risk-Based Clery Act Compliance Scheduled Risk-Based Office of Financial Aid Scheduled Risk-Based Key Business Controls Assessment Scheduled Risk-Based IT Security Policy Audit Complete Risk-Based University Housing Scheduled Prior-Year Renewal and Replacement Funds In Progress Prior-Year Programs for Minors In Progress Prior-Year Athletics NCAA Compliance: Recruitment In Progress Prior-Year WUTC Radio Station Complete UT Martin Engagements Required Chancellor’s Office Scheduled Required Athletics NCAA Compliance: Eligibility Scheduled Required OVC Special Assistance Funds Scheduled Risk-Based Summer Camp Cash Receipts In Progress Risk-Based IT Security Policy In Progress Prior-Year Renewal and Replacement Funds In Progress UT Institute of Agriculture Engagements Required Extension County Offices Scheduled Risk-Based Lone Oaks Farm In Progress Risk-Based Entomology and Plant Pathology--IT Security Scheduled Prior-Year Extension County Offices In Progress Prior-Year Renewal and Replacement In Progress

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4

UT Institute of Public Service Risk-Based UT Tennessee Language Center Scheduled Prior-Year Renewal and Replacement Funds In Progress

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Audit and Compliance Committee - 2019 Outstanding Audit Issues (Written Report)

1


DATE:

COMMITTEE:

ITEM:

TYPE:

PREPARED BY:

April 17, 2019

Audit and Compliance Committee

2019 Outstanding Audit Issues

Written Report

Judith A. Burns, Interim Chief Audit and Compliance Officer

The attached report provides a list of the open audit issues, as well as issues resolved since the last report, presented at the January 10, 2019, Audit and Compliance Committee meeting. The report includes only issues deemed the most significant by the Office of Audit and Compliance. Currently, there are 19 significant issues to be addressed by management. Management is aware of the issues and is working to implement corrective actions.

In addition to this report, members of senior leadership, including the president, chancellors, chief financial officer, chief operating officer, treasurer, and chief business officers, are periodically (three to four times per year) provided a report of other open issues. If our office determines that an issue reported to management has not been resolved timely, the Committee will be notified as part of this report.

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The University of Tennessee Outstanding Audit Issues

as of March 31, 2019

2

Audit Subject Description Report Date Expected Completion Date

System HIPAA Program Management

HIPAA Compliance The HIPAA privacy officer, working in conjunction with the HIPAA security officer, should establish monitoring procedures and provide recommendations, establish data safeguards to ensure HIPAA compliance across the UT System, and identify and provide required training to persons with HIPAA responsibilities.

8/14/17 10/1/19

System Phishing Security Controls

Workstation Administrative Access

UT System Administration users have administrative access to their workstations. Administrative access on workstations should be removed where possible.

11/29/17 7/1/19

System Phishing Security Controls

Workstation Vulnerability and Threat Mitigation

UT System Administration lacks formal processes and procedures for workstation vulnerability and threat mitigation. Management should harden workstations against attacks, monitor checklist settings, and monitor patch status.

11/29/17 7/1/19

System Contract Payment Monitoring

Vendor Payment Monitoring

The University has not implemented consistent vendor payment monitoring. Ineffective monitoring may cause the University to be overcharged, as evidenced by the approximately $64,000 in overpayments noted. Management should create specific guidelines for vendor payment monitoring and provide training.

11/1/17 5/23/19

System IT Security Policy Compliance

IT Security Risk Assessment

UTSA does not have a current IT security risk assessment. Management should complete the risk assessment project begun earlier in the year.

12/10/18 4/30/19

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3



Incident Response Plan

A formal incident response plan is not in place. Management should develop and seek approval of an incident response plan.

12/10/18 6/28/19


Application System Security Plans

Application system security plans are not in place. Management should create such plans for critical information systems.

12/10/18 6/28/19

UTK IT Security Policy Compliance

Security Controls Assessment

There is not a process in place to assess the campus program and baseline security controls. The Office of Information Technology should develop a process to assist UTK units in building and maintaining security plans.

10/29/18 12/31/19

UTK College of Social Work IT Security

Information Security Program Plan and System Security Plans

The College of Social Work has existing security controls but lacks a formal information security program plan. The college also has application systems that process sensitive student information. These applications do not have a system security plan. The college should work with the Office of Information Technology to develop an information security program plan and system security plans for the applications that process sensitive data.

10/29/18 6/30/19


Contingency Management Plan

While the College of Social Work has informal processes for contingency planning, a formally documented contingency management plan is not in place as required by University Policy IT0128. The college should work with the Office of Information Technology to develop and implement a contingency management plan.

10/29/18 6/30/19

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4



Configuration Management Plan

While the College of Social Work has informal processes for configuration management, a formally documented configuration management plan is not in place as required by University Policy IT0125. The college should create a configuration management plan.

10/29/18 6/30/19

UTC IT Security Policy Audit Configuration Management

Baseline configurations and configuration change control documentation are not retained as required by University Policy IT0125. Management should follow the process for configuration management as outlined in policy.

3/19/19 6/28/19

UTC IT Security Policy Audit Security Control Assessment

UTC does not assess the implementation of application security controls. Management should develop a process for assessing control implementation.

3/19/19 6/28/19

UTIA IT Security Policy Compliance

Application Security Plans

Application system security plans are not in place. Management should develop the application system security plans.

11/15/18 12/30/19


IT Security Risk Assessment

UTIA does not have a current IT security risk assessment. Management should implement a risk assessment process.

11/15/18 7/31/19


Security Program The IT security program plan has not been reviewed and updated in five years. Management should review the plan and make necessary updates.

11/15/18 4/30/19

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5


UTM Financial Aid Financial Aid Selection Criteria

The Financial Aid and Scholarships Office (FASO) substantially changed the selection criteria for three scholarships without formal approval documentation. The FASO should develop a standard procedure for changing aid criteria.

10/30/18 10/1/19

UTM Financial Aid Scholarship Selection Process

Two scholarships are awarded to potential recipients through recommendations or requests rather than using a standard application process. This process does not allow all eligible students an equal opportunity to obtain the aid. The Financial Aid and Scholarships Office should develop a process to allow all students to be considered through a documented application process.

10/30/18 10/1/19

UTM Athletics NCAA Compliance

Monitoring Off-Campus Recruiting

The control for monitoring contacts of prospective UTM student-athletes was ineffective. Coaches should complete required forms, and Athletics Compliance should monitor to ensure completion and that potential identified violations are addressed.

11/29/18 8/31/19

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The University of Tennessee Audit Issues Implemented

December 1, 2018 – March 31, 2019

6

Audit Subject Description

UTK VolCard Office Vulnerability Management Plan

VolCard Office management has not documented a formal vulnerability management plan.

UTK VolCard Office Contingency Management Plan The VolCard Office lacks a formal contingency plan.

UTK College of Social Work IT Security Vulnerability Management Plan

The College of Social Work (SWORPS) does not have a vulnerability management plan.

UTK Athletics NCAA Compliance Contact Monitoring Athletics Compliance did not perform initial follow-up on a phone number that had been inaccurately recorded in and flagged by the system that provides support for recruiting activities. Athletics Compliance should formalize and document monitoring procedures to review potential violations flagged by the system and to ensure that potential violations identified by the system have been addressed or resolved in a timely fashion.

UTHSC IT Security Policy Compliance Security Management Program Implementation procedures for three IT policy areas are not defined. Management should define the implementation procedures.

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Audit and Compliance Committee - Travel Exception Report (Written Report)

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THE UNIVERSITY OF TENNESSEE OFFICE OF THE CHIEF FINANCIAL OFFICER

D{IVld L. Miller Clie f Fr.oanclal OrfLCer

MEMORA .NDUM

TO:

FROM:

,DATE:

Audit Comm·ttee Mr. John Compton , Chair of the Bo,ard of Trustees Ms. Amy Miles, Chair, Audrt and Comp liance Committee

Mr. David Miller ~1'1' Apri l 1, 2019

SUBJECT : Travel Exception Report

T,he Boa d of Trustee's policy on trave l requires the university to report to the Audit and Compliance Committee any travel exceptions approved on behalf of the President, employees in the President's Office, senior-level administrators, or the Chief Financlal Officer. For the quarters, ended December 31, 2018 , and March 31, 2019, one exception was approved in accordance with this policy.

Due to a fami ly medical situation, Mr. Anthony Haynes, Vice President of Government Relations and Advocacy, cancelled his attendance to the SEC Government Relations Conference. Mr. Haynes was reimbursed $309'.96 in· airfare, which can be used for a future business trip.

If you have any quest ions, please let me know.

Cc: Mr. Randy Boyd Ms. Judy Bums Mr. Anthony Haynes Mr. Mark Paganelli

709A Andy Ht,lt Tower • 133 Cirde Pam. Drive • Knoxvme, TN 379-96•0174 • 86'5·974· 1763 • 865 -974 ·9080 http:/ /flnancc.tcnnossco ,.odu

the university of tennessee knoxville, tennessee 37996 … · uthsc practice plans ... the audit...

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