UNIVERSITY OF NEVADA, RENO Food Services Internal Audit Report July 1, 2008 through June 30, 2009

UNIVERSITY OF NEVADA, RENO Food Services Internal Audit Report July 1, 2008 through June 30, 2009 GENERAL OVERVIEW The food services operation at the University of Nevada, Reno (UNR) falls administratively under the Residential Life, Housing, and Food Services (RLHFS) Department. The department is responsible for overseeing the operation which has been contracted to an outside provider, Chartwells. The contract gives Chartwells a generally exclusive right to provide food services on campus, including residential dining, catering, and various retail outlets. In return for the right to provide services, the university receives a commission from Chartwells based on sales activity. During the audit period, the university generated approximately $1.74 million in commissions. The contract does not include food services at locations affiliated with the UNR Intercollegiate Athletics Department and within the Joe Crowley Student Union. Food services at these locations are provided by other contracted vendors. There are six food service locations on campus that are operated by Chartwells, including catering. In addition, Chartwells has subcontracts with three other food providers. The workers that staff these operations are employees of Chartwells or the subcontractor. Chartwells maintains a business office on campus, which is located in the Jot Travis building. The initial contract with Chartwells was negotiated in 1999 for a five year term. A contract amendment completed in 2002 extended the term of the agreement to 2019. A second amendment was completed in 2004. The contract is currently in the process of being revised to address areas of the agreement that need to be updated. As of the close of audit fieldwork, the contract had not been finalized. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 1 of 25

SCOPE OF AUDIT The Internal Audit Department has completed a review of the university s food services operation for the period of July 1, 2008 through June 30, 2009. The scope of our review included an examination of the food services contract, accounting records, and other auditing procedures as we considered necessary. The tests included, but were not necessarily limited to, these areas. 1. Reviewing the food services contract and subsequent amendments for compliance with Nevada System of Higher Education (NSHE) contract policy and to determine whether the terms of the agreement are in compliance. 2. Testing commissions paid to the university for accuracy. 3. Testing student meal plan charges and payments for proper accountability. 4. Testing catering invoices paid by the university to determine that charges are in agreement with the documented price list. 5. Examining equipment inventories for proper accountability. 6. Reviewing cash control procedures that are utilized in the food service locations. 7. Reviewing the issuance of complimentary meals. 8. Reviewing physical access that employees have been provided to the food service locations. 9. Reviewing employee access to the internal computer application that is used in conjunction with the food service operation. In our opinion, we can be reasonably assured that the UNR food services program is operating in a satisfactory manner. However, implementation of the following recommendations would further improve the operation. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 2 of 25

FOOD SERVICES CONTRACT The food services contract that was negotiated with Chartwells and the two contract amendments were reviewed for content and adherence to the NSHE contract policy. The following observations were noted. 1. The contract requires Chartwell s to provide a minimum payment of $2,500 for each year of the agreement for student scholarships. The payments are to be paid by June 30. We noted the university did not receive a payment for June 30, 2009. As a result of this review, the payment was sent to the RLHFS Department and was deposited on August 5, 2009. The department could not locate receipts for the payments due in 2007 and 2008. We recommend a review be conducted to determine whether these payments have been received during the term of the contract. We recommend Chartwells be requested to make any payments that were not received. Correction: A review was conducted. Chartwells was invoiced on March 10 for the funds for 2007 and 2008. Payment was received on March 24. Prevention and Monitoring: We have worked with Chartwells to set up a procedure to ensure the request is made in a timely fashion on an annual basis in the future. 2. Neither the original contract nor the amendments were fully executed by the beginning of the term dates listed in the agreements. 3. The 2004 amendment did not list the Board of Regents as the contracting party. 4. The various food service areas in operation and the corresponding commission percentages paid to the university were updated in the 2002 amendment. Since this time, additional changes to the food service areas and commission rates have occurred. A contract amendment was not completed to reflect these changes. In addition, it is not (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 3 of 25

indicated in the original contract or the amendments whether the commission rates are applied to gross or net sales activity. We noted the commissions paid at some food service locations are based on gross sales and at other locations on net sales. 5. The manner in which catering commissions are calculated is not addressed in the original contract or in the amendments. We were informed catering commission paid to the university consist of 10% of the gross sales amount less certain charges such as additional labor, rentals, and tips. Charges for student catered events are also not considered when calculating the commission. 6. The contract states utility increases are not to be greater than the utility cost component associated with a specific Consumer Price Index (CPI). We noted that the index cited does not have a utility cost component. Based on our review, utility increases have been based on the CPI index cited. 7. The Request for Proposal (RFP) that was issued for the food services contract states that the contracted vendor would provide meal plans to the university for the purpose of monitoring the food service operation. The meal plans are not addressed in the contract. The RFP does not specify whether the meal plans are to be provided to the university on an annual basis or whether it is a one-time allotment. We also noted the majority of the meal plans are not used and that the amount allocated by Chartwells could be reduced. 8. The contract requires Chartwells to accrue two percent of net sales (gross sales less tax) for maintenance and replacement of food services equipment. We noted the accrual does not include sales that are generated by Chartwells three subcontractors. The contract does not address whether subcontractor sales should be included in the maintenance accrual. This issue was noticed during an examination of the accrual documentation, (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 4 of 25

provided by Chartwells, for one month of the audit period. The net sales reported were reduced by approximately $113,000 for the month to account for subcontractor sales. This reduced the maintenance accrual by $2,260. For items two through eight above, we recommend these issues be reviewed by university personnel and addressed in the revised food services contract that is currently being negotiated. Corrections: Items 2 through 8 were reviewed. Item 3 and updated commission rates from item 4 were included in the new revised food service contract. Items 2, 5, 6, 7, and defining that all commissions are based on net sales (gross sales less tax) from item 4 will be included in the revised food service contract as amendments to be completed by December 31, 2010. For item 8, the revised food service contract will be amended by December 31, 2010 to allow for negotiations concerning a maintenance and replacement accrual fund with subcontractors. Prevention and Monitoring: Any future changes in pricing, commission calculations, or contract terms will be included as amendments. 9. The contract states Chartwells is not to authorize or permit the use of university facilities by third parties without written consent of an appropriate university representative. Chartwells has subcontracted with two third party organizations to provide food services on campus. Such services involve the use of university facilities. These agreements were not formally approved by the university. We were informed the RLHFS Department was informed of the vendors and provided a verbal authorization. We recommend the use of university facilities be approved in writing, as required. Correction: An approval form is being developed and will be in place by June 30, 2010. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 5 of 25

Prevention and Monitoring: Any future use of space by subcontractors will be approved in writing in advance by the Associate Director for Housing Operations and Dining Services and will be kept on file for review. 10. The contract requires the university to conduct a full audit after the close of each contract year to ensure compliance with all terms of the contract. We were informed that such an audit is not performed. We recommend compliance with this requirement. If it is determined that it is not necessary to perform a review of this nature each year, we recommend the contract be revised to allow for the audit to be conducted at the university s discretion. Correction: The new contract states, The University may conduct a full audit after the close of each contract year to ensure compliance with all terms of the contract. Prevention and Monitoring: We will consult with campus administration annually to determine if an audit should be performed. CATERING According to the food services contract and university policy, all food and beverage service provided on campus with a cost of $50 or more must be provided by the Chartwells catering service, with limited exceptions. Catering prices for most food, beverage, and rental items is provided in a published menu. We examined a sample of 43 catering transactions, incurred by various university departments during the audit period, to determine whether the services were provided by Chartwells, as required, and whether the departments were charged correctly. The following exceptions were noted. 1. For two transactions, the price charged for a food item, as noted in the catering contract, was greater than the price listed in the catering menu. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 6 of 25

2. According to the catering menu, bar set-up fees are waived when bar purchases exceed $250. We noted three transactions in which bar purchases exceeded $250 but a set-up fee was charged. 3. The bartender fees charged for four transactions did not agree with the rate that is included in the catering menu. We were informed the differences were due to a fee increase which had not yet been reflected in the menu. For items one through three above, we recommend that the RLHFS Department work with Chartwells personnel to ensure charges are based on the prices and fees that are listed in the catering menu. Charges should not be assessed until they have been approved and updated in the menu. Correction: Procedures outlining where discounts or additional charges are appropriate have been formalized and included in the catering menu. New charges will not be assessed until they have been approved and updated in the menu. Prevention and Monitoring: The Accounting Assistant II in the Housing Office will periodically check catering invoices to review the charges being assessed. 4. For three transactions, corkage fees were charged at different rates. The catering menu does not include corkage fees. 5. According to catering personnel, two hours of labor are included in the pricing of catered functions that require attendants. If the event time exceeds two hours, additional labor is charged at the rate of $20 per hour for each attendant. This information is not provided in the catering menu. We also noted ten occasions in which the fee was incorrectly applied based on the event times that were indicated on the catering contracts. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 7 of 25

6. According to catering personnel and as documented on the catering contracts, a 15% gratuity is charged. We were also informed that labor charges are excluded when calculating the gratuity amount. This information is not provided in the catering menu. In addition, four of the transactions tested did not charge a gratuity at the 15% rate. Eight other transactions included labor charges in the gratuity calculation. For items four through six above, we recommend the RLHFS Department review these charges with Chartwells personnel and that formal rates be developed and approved by both parties. Once completed, we recommend the charges be included in the catering menu and that they be consistently applied. Correction: Procedures outlining how charges are assessed were reviewed and have been formalized and put in writing. They have been included in our on-line catering menu. These procedures will be used for all future charges and will be applied consistently. Prevention and Monitoring: The Accounting Assistant II in the Housing Office will periodically check catering invoices to review the charges being assessed. 7. Five transactions included charges for items such as china, glass, plates and flatware. We were informed these charges are now included in the meal price; however, on rare occasions they may be assessed for events that have special needs. The rates for these charges are not documented. 8. Five transactions included credits for "disposable consideration". The credit is applied when disposable cups, plates, or napkins, that do not require cleaning, are used at events. The method used to determine the credit is not documented. We noted the credit amounts varied in the five transactions reviewed even though similar disposable items were used. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 8 of 25

For items seven and eight above, we recommend these charges/credits be reviewed and approved by the RLHFS Department and Chartwells. Once completed, we recommend the charges/credits be documented on an internal price list to ensure they are consistently applied. Correction: We met with Chartwells and reviewed the charges and credits. Rental rates for china, glassware, flatware, etc. have been determined and put in writing. Rates for disposable consideration for events have been established and put in writing. These rates will be used for all future charges and will be applied consistently. Prevention and Monitoring: The Accounting Assistant II in the Housing Office will periodically check catering invoices to review the charges being assessed. 9. During this review, a catering guidelines document was in the process of being developed by the Chartwells catering service. The guidelines include relevant information for campus departments to refer to when using catering services. We recommend the guidelines be completed and approved by the RLHFS Department and made available on the catering website. Correction: The catering guidelines have been completed and the website was updated to reflect the changes. Prevention and Monitoring: The Associate Director for Housing Operations and Dining Services will notify the Support Operations Coordinator of any changes, and the website will be updated promptly. 10. As previously indicated, there are a limited number of circumstances under which university departments can use an outside caterer. Some of these exceptions require the approval of Chartwells. We noted a record of the requests is not maintained. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 9 of 25

We recommend that the RLHFS Department obtain the exception requests from Chartwells, both approved and denied, and maintain them for record keeping purposes. Correction: All responses to requests for exceptions are now done via email. Those emails are now printed and maintained in a notebook. Prevention and Monitoring: Future responses to requests for exceptions will be agreed upon by the Catering Director and the Associate Director for Housing Operations and Dining Services. Responses will be done via email by the Catering Director, printed, and maintained in a notebook. EQUIPMENT INVENTORY A review of the equipment inventory assigned to the various food service areas was performed to determine whether items listed on the equipment inventory reports were physically present and whether there were other items that met the $5,000 reporting threshold that were not included on the reports. The sensitive equipment inventory maintained in the food service areas was also reviewed. The following exceptions were noted. 1. Four items listed on the inventory reports could not be located. We recommend the location of these items be determined. If the items cannot be located or were transferred to another location, the purchasing department should be notified so the necessary adjustments can be made to the equipment inventory system. In the future, we recommend the department coordinate all transfers and disposals of equipment through the purchasing department. Correction: The four items have been located and the room numbers corrected on the inventory. BCN Purchasing will be notified when equipment is moved from one location to another. Food Services will complete the on-line Surplus Property form when equipment needs to be disposed of. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 10 of 25

Prevention and Monitoring: The Associate Director for Housing Operations and Dining Services will ensure that the annual inventory reflects all appropriate changes. 2. Four items were located that appeared to meet the $5,000 reporting threshold that were not included on the inventory reports and did not have asset tags. Two of these items were identical to other equipment that was tagged and listed on the inventory reports. 3. The equipment located in the catering kitchens was not listed on the inventory reports. Several of these items appeared to meet the $5,000 reporting threshold. For items two and three above, we recommend the department work with the BCN Purchasing Department to determine whether these items had an acquisition cost of $5,000 or more and whether they should be included in the inventory system. If so, we recommend the necessary updates be made to the inventory system and that asset tags be affixed to the equipment. Correction: Two of the items in #2 now have inventory tags, and tags were requested for the other two from BCN Purchasing on April 6. We will review all equipment in the Food Services locations and determine if uninventoried equipment meets the $5,000 threshold. If the equipment meets the $5,000 threshold, we will contact BCN Purchasing to request the equipment be added to the inventory system and obtain an inventory tags. Prevention and Monitoring: The Associate Director for Housing Operations and Dining Services will review new purchases and request inventory tags for any items costing at least $5000. Copies of associated purchase orders will be maintained in a tickler file until inventory tags have been received an affixed. 4. Fourteen items did not have asset tags. We were informed that due to excessive heat and cleaning of the equipment, the stickers do not stay affixed. 5. Asset tags were affixed to two items; however, due to the extreme conditions mentioned above, the asset numbers were no longer identifiable. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 11 of 25

For items four and five above, we recommend replacement tags be obtained from the Business Center North (BCN) Purchasing Department and affixed to these items. We recommend that the department inquire as to whether a more durable asset tag is available for use. Correction: Replacement tags were requested for all items from BCN Purchasing on March 31. The replacement tags will be affixed to the equipment as soon as we receive them from BCN Purchasing. We will investigate a more durable method of marking equipment, e.g. engraving, and implement that on all items on the inventory list that require it either by June 30, 2010 or as replacement tags are required after that. Prevention and Monitoring: As we perform the annual equipment inventory review, we will ensure that equipment is properly tagged or engraved with the property tag number. 6. Food services equipment is listed under multiple location codes in the equipment inventory system. The actual location of the equipment frequently differs from the location indicated by the report. For instance, the location code for one report is listed as Food Services/Juniper Hall. None of the equipment items in the report, however, are located in Juniper Hall. Some food services equipment is also commingled with other items such as computers. We recommend RLHFS Department staff work with the purchasing department to consolidate all food services equipment into one report. Correction: Food services equipment has all been consolidated to one reporting location code. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 12 of 25

7. A sensitive equipment list is maintained by the RLHFS Department. On an annual basis, an employee tours the department s facilities and conducts an inventory of the equipment. The review does not consider sensitive equipment that may be maintained in food service areas. We recommend food service areas be included in the inventory process and that any such equipment noted in these areas be included on the sensitive equipment list. Correction: The department s sensitive equipment list includes computers in the food service area. Food Service areas will be examined for additional items that fit this category, and the identified equipment will be added to the sensitive equipment list. This review will be completed and the sensitive equipment list updated by August 31, 2010. Prevention and Monitoring: The Associate Director for Housing Operations and Dining Services will review new purchases. New purchases that fit this category will be listed on the sensitive equipment list. COMMISSIONS The RLHFS Department receives a monthly commission payment from Chartwells. Included with the payment is a sales and commissions report showing the sales activity for each food service location and the corresponding commissions that were earned. We noted the department does not receive documentation from Chartwells to support the figures in the report. We subsequently obtained one of the monthly sales and commissions reports and traced one week of activity from the report to the cash register tapes and other relevant supporting documentation for each of the nine food service locations. For each location, minor variances were noted in the sales figures indicated in the supporting documentation versus those that were reflected in the sales and commissions report. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 13 of 25

We recommend the department compare the sales data received from Chartwells to the sales information that is contained in the internal computer application. Since the catering function is not maintained in this system, we recommend the department request the necessary documentation. We recommend the information be reviewed to ensure the sales and commissions report is accurate. Correction: The RLHFS Support Operations manager will be consulted to help obtain the appropriate internal computer application reports by June 30, 2010 to enable comparison with retail sales data received from Chartwells. Campus Audit will be consulted to help obtain the appropriate documentation by June 30, 2010 to enable comparison with the catering sales data received from Chartwells. Prevention and Monitoring: Sales data received from Chartwells will be compared with information obtained from available internal computer applications and other documentation by the Accounting Assistant II in the Housing Office. While reviewing the catering documentation, we also noted that hosted bar sales were deducted from catering sales and thus, were not included in the catering commission. For the week reviewed, the total amount of hosted bar sales deducted was $3,103 resulting in $310 less in commissions. We recommend the department review the catering commissions that were paid during the 2008-2009 fiscal year for proper calculation. We recommend Chartwells be requested to correct any discrepancies. Correction: A review of fiscal 2008-2009 s event invoices and commissions is scheduled to be completed by July 31, 2010. Any discrepancies will be corrected, and Chartwells will pay any balance owed to the University. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 14 of 25

KEY ISSUANCE The RLHFS Department is responsible for issuing keys to the food service areas to both Chartwells and university employees. The department maintains a key issuance form for each employee who has been issued keys. We reviewed six of the forms on file and noted two were not signed by Chartwells employees to document their understanding of the terms related to key issuance. We recommend the forms be signed by the employees and that greater care be taken to ensure signatures are obtained at the time keys are issued. Correction: All forms are now signed by staff to whom keys have been issued. Prevention and Monitoring: New keys are issued by the Associate Director for Housing Operations and Dining Services. In the future no keys will be issued without the employee s signature. The department utilizes two key issuance forms, one for Chartwells employees and one for university employees. We noted both of the forms contain a line requesting the person s social security number. Of the six forms reviewed, two contained social security numbers. According to Nevada Revised Statutes, a person shall not include and a governmental agency shall not require a person to include their social security number on any document that is recorded, filed or otherwise submitted to a governmental agency on or after January 1, 2007. We recommend the form be modified so that it does not request social security numbers. We also recommend social security numbers be deleted from the forms that currently include this information. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 15 of 25

Correction: The forms have been modified. Social Security Numbers have been deleted. In addition, the RFP for the food services contract states Chartwells will provide the university with an updated list of the names of all food service employees on a monthly basis. We were informed that Chartwells notifies the department of personnel changes periodically; however, a list is not being submitted to the department each month. An updated list would allow the department to ensure a Key Issuance Form is on file for all current Chartwells employees and that keys have been returned for all terminated employees. We recommend the RLHFS Department request an updated list of food service employees each month. We recommend copies of the lists be maintained in the key issuance binder and that they be compared to the forms on file. Correction: Chartwells has provided the employee list for March 2010 and will provide lists for each subsequent month. Food services will compare this list with the key issuance forms to make sure forms were completed for all employees who have a key and keys were returned from former employees. This list is filed with the key issuance forms. The comparison will be completed by July 31, 2010. Prevention and Monitoring: In the future the Associate Director for Housing Operations and Dining Services will issue no keys to anyone not appearing on the employee list. The Associate Director for Housing Operations and Dining Services will compare the list to the forms on file to ensure a form has been signed by all employees. We will also verify that keys have been returned for any employee form still on file but no longer on the list. COMPLIMENTARY MEALS As previously mentioned, Chartwells provides the university with six complimentary meal plans for the purpose of monitoring the food that is serviced at the various locations. We (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 16 of 25

noted three RLHFS employees are the primary users of the meal plans. One of the employees uses a meal plan on a daily basis and two employees an average of once per week. The frequent use of the meal plans may create a taxable fringe benefit for these employees. We recommend employee usage logs be submitted to the BCN Payroll Department for evaluation and determination as to whether the meals should be reported on their taxable income. Correction: The BCN Payroll Department manager has reviewed the tax laws and has determined that because this is a requirement of their job duties, it is not a taxable benefit. The employees PDQs will be updated to formally include this duty in their job description. The updated PDQs will be submitted for the June Placement Committee meeting. RECONCILIATION Students and employees can purchase credits for food and other items either in person at the RLHFS Department offices, at kiosks available on campus, and at other select locations. The credits for food are redeemable at all of Chartwells food service locations. These purchases are managed on an internal computer application that allows the data to be loaded onto students or employees university identification cards. There are other types of credit for which no payment is received which can also be loaded onto the cards. This includes credits for the unused portion of students meal plans, the complimentary meal plans discussed in the prior section of this report, and credits issued for various types of awards. We noted that an independent review of these types of credits is not being performed. Although the payment of money is not involved in these transactions; the lack of an independent review provides the opportunity for error or misuse by employees with the ability to load the credits onto the identification cards. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 17 of 25

We recommend a RLHFS Department employee, who does not have update access to the internal computer system, be responsible for generating a monthly report of the credits that were issued for these purposes. We recommend the employee review the report to determine that the issuance of the credits was properly approved. We recommend the report be signed and dated and maintained for three years. Correction: In order to conduct such a review an employee needs to have access to the BlackBoard system but not have cashier access within the BlackBoard system. Such an employee will be identified and a process put in place for this review by June 30, 2010. Prevention and Monitoring: The identified employee will review the report to determine that the issuance of the food credit was properly approved. The report will be signed and maintained for three years. MAINTENANCE ACCRUAL As previously mentioned in this report, Chartwells is required to accrue two percent of net sales for maintenance and repair of food services equipment. A monthly report is provided to the RLHFS Department that provides the amount that was accrued for each location and any expenditures from the account. We noted documentation is not provided with the report that supports the accrual amounts. Copies of the repair and maintenance invoices are also not provided. We recommend the department retrieve the monthly sales data from the internal computer application and ensure the accrual amounts provided by Chartwells are accurate. Since the catering function is not maintained in this system, we recommend the department request the necessary documentation needed to verify the catering accrual amount. We also recommend Chartwells be requested to provide copies of invoices so expenditures can be properly reviewed. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 18 of 25

Correction: The RLHFS Support Operations manager will be consulted to help obtain the appropriate internal computer application reports by June 30, 2010 to enable comparison with retail sales data received from Chartwells. Campus Audit will be consulted to help obtain the appropriate documentation by June 30, 2010 to enable comparison with the catering sales data received from Chartwells. Chartwells now provides copies of invoices and a spreadsheet that tracks repairs for each piece of equipment. Prevention and Monitoring: Sales data received from Chartwells will be compared with information obtained from available internal computer applications and other documentation by the Accounting Assistant II in the Housing Office. MEAL PLAN RATE ADJUSTMENTS The food services contract states meal plan rates can be adjusted on an annual basis according to changes in a specific Consumer Price Index (CPI). According to the contract, the timeframe for evaluating changes to the CPI is September to September. For the 2008-2009 fiscal year, we noted the CPI statistics from July 2007 to July 2008 were used to calculate the adjustment. adjustments. We recommend the department comply with the contract in determining meal plan rate Correction: The date meal plan rates are due for Board of Regents consideration has changed over the years. In order to be consistent and allow for any future changes in due dates, we will use the August to August CPI. The revised food service contract will be amended prior to December 31, 2010. APPLICATION SECURITY During a review of the internal computer system, security groups were noted that do not have access to any screens or functions. We also noted test accounts that are active. We were informed these issues are due to the recent installation of a new version of the application. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 19 of 25

We recommend the department review the security groups and test accounts and eliminate those that are not needed. Correction: The test users have all been deactivated because they are no longer being used. A number of security groups were removed when the upgrade was completed. Two user groups have no access to screens or functions, but are necessary for certain user to access the web based reporting feature. OTHER The following item was noted during this review; however, it is not the responsibility of the RLHFS Department. CATERING Of 43 catering transactions tested, Chartwells was not used for four events that cost $50 or more, as required. We also noted one transaction in which a purchase order was completed after the fact, that is, after an invoice for catering services was received by a campus department. We recommend university departments be reminded of catering and purchasing policies. Correction: Immediately prior to each academic year university departments will be reminded of catering and purchasing policies via email. Prevention and Monitoring: Immediately prior to each academic year Food Services will send out an email to reminded university departments of the universities catering and purchasing policies. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 20 of 25

STATEMENT OF REVENUES AND EXPENDITURES The statement of revenues and expenditures provided below is based on the activity of the 13 auxiliary enterprise accounts that have been assigned to the food services program. The revenue and expenditure information was obtained from the financial accounting system. It was noted that the food service accounts had a balance of over $3.5 million at the end of the 2008-2009 fiscal year and increased $896,460 during this time. Of the auxiliary sales revenue generated by the food services program during the year, $6,014,267 came from meal plan sales. It is understood that a reserve is necessary to pay debt and operating expenses, however, the level of the reserve balance has not been evaluated. We recommend that the overall balance in the food service accounts be reviewed by university administration for reasonableness. Correction: As a result of this audit, we have reviewed the current balance and have made adjustments in the account which has reduced the balance. During the Board of Regents meeting in March, the Regents approved reducing the rates for the fall 2010 semester. This will help reduce the balance to an appropriate amount. A somewhat large balance needs to remain in the account at the end of each fiscal year to cover the bond payment that is due in July. Prevention and Monitoring: Rates will be reviewed and adjusted annually by the Associate Director for Housing Operations and Dining Services as necessary to maintain a reasonable overall balance. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 21 of 25

Auxiliary Enterprise Funds Balance, July 1, 2008 $ 2,617,902 Transfer In 1,512,161 Revenues Sales, Auxiliary 7,289,065 Total 7,289,065 Transfer Out 2,022,375 Expenditures Salaries 168,027 Travel 1,269 Operations 5,639,676 Equipment 73,419 Total 5,882,391 Balance June 30, 2009 $ 3,514,362 (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 22 of 25

The Internal Audit Department appreciates the cooperation and assistance received from UNR and Chartwells personnel during this review. Reno, Nevada February 23, 2010 Mary S. Stoltz Senior Internal Auditor Eric Wilber Internal Auditor Grant Dintiman Information Technology Auditor Scott Anderson Internal Audit Manager Sandra K. Cardinal Assistant Vice Chancellor for Internal Audit and Risk Management (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 23 of 25

Business and Finance Reno, Nevada 89557-1124 (775) 784-6662 Fax: (775) 327-2306 Memorandum To: From: Sandi Cardinal, Assistant Vice Chancellor for Internal Audit and Risk Management, NSHE Tom Judy Date: April 27, 2010 Subject: Audit of UNR Network Security The purpose of this memorandum is to transmit responses from UNR Residential Life, Housing and Food Services to the Audit of UNR Food Services covering the period July 1, 2008 through June 30, 2009. I have reviewed and concur with all responses. Attachments c: Milton Glick, President Ron Zurek, Vice President Administration and Finance (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 24 of 25

April 27, 2010 Memorandum To: From: Subject: Tom Judy Jerry Marczynski, Associate Vice President for Student Life Services Student Life Services Food Services Audit Response Attached is the Audit Response to the UNR Food Services audit. I have reviewed and I am in agreement with the Food Services responses. If you have any questions or concerns, please contact me. (AUDIT COMMITTEE 06/03/10) Ref. A-5, Page 25 of 25