A REPORT TO THE ARIZONA LEGISLATURE Financial Audit Division Report on Internal Control and Compliance Arizona State University Year Ended June 30, 2012 Debra K. Davenport Auditor General The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the operations of state and local government entities. To this end, she provides financial audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state agencies, and the programs they administer. Copies of the Auditor General’s reports are free. You may request them by contacting us at: Office of the Auditor General 2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333 Additionally, many of our reports can be found in electronic format at: www.azauditor.gov Arizona State University Report on Internal Control and Compliance Year Ended June 30, 2012 Table of Contents Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report Issued Separately 2012 Financial Report Page 1 Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Members of the Arizona State Legislature The Arizona Board of Regents We have audited the financial statements of the business-type activities and aggregate discretely presented component units of Arizona State University as of and for the year ended June 30, 2012, which collectively comprise the University’s financial statements, and have issued our report thereon dated October 12, 2012. Our report was modified to include a reference to our reliance on other auditors. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Other auditors audited the financial statements of the aggregate discretely presented component units consisting of the Arizona State University Foundation; the Arizona Capital Facilities Finance Corporation; the Arizona State University Alumni Association; the Arizona State University Research Park, Inc.; the Collegiate Golf Foundation; the Downtown Phoenix Student Housing, LLC; the Mesa Student Housing, LLC; the Sun Angel Endowment; the Sun Angel Foundation; and the University Public Schools, Inc. as described in our report on the University’s financial statements. The financial statements of the aggregate discretely presented component units, except for those of the University Public Schools, Inc., were not audited by the other auditors in accordance with Government Auditing Standards. This report includes our consideration of the results of the other auditors’ testing of internal control over financial reporting that are reported on separately by those other auditors. However, this report, insofar as it relates to the results of the other auditors, is based solely on the report of the other auditors. Internal Control over Financial Reporting The University’s management is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the University’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the University’s basic financial statements will not be prevented, or detected and corrected, on a timely basis. 2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051 Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We and the other auditors did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the University’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests and those of the other auditors disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the members of the Arizona State Legislature, the Arizona Board of Regents, university management, and others within the University and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited. Debbie Davenport Auditor General October 12, 2012 2 Arizona State University Report on Internal Control and Compliance For the Year Ended June 30, 2012 State of Arizona Office of the Auditor General