REPORT DIGEST NORTHERN ILLINOIS UNIVERSITY FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2022 Release Date: February 16, 2023 FINDINGS THIS AUDIT: 2 CATEGORY: NEW -- REPEAT – TOTAL Category 1: 0 -- 1 -- 1 Category 2: 1 -- 0 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 1 -- 2 FINDINGS LAST AUDIT: 1 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. State of Illinois, Office of the Auditor General FRANK J. MAUTINO, AUDITOR GENERAL To obtain a copy of the Report contact: Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703 (217) 782-6046 or TTY (888) 261-2887 This Report Digest and Full Report are also available on the worldwide web at www.auditor.illinois.gov INTRODUCTION This digest covers the Northern Illinois University’s (University) Financial Audit as of and for the year ended June 30, 2022. The University’s Compliance Examination and Single Audit will be issued in separate reports at a later date. SYNOPSIS • (22-1) The University did not have adequate internal control over reporting its census data and did not have a reconciliation process to provide assurance census data submitted to its pension and other postemployment benefits plans was complete and accurate. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE INTERNAL CONTROLS OVER CENSUS DATA Northern Illinois University (University) did not have adequate internal control over reporting its census data and did not have a reconciliation process to provide assurance census data submitted to its pension and other postemployment benefits (OPEB) plans was complete and accurate. Census data is demographic data (date of birth, gender, years of service, etc.) of the active, inactive, or retired members of a pension or OPEB plan. The accumulation of inactive or retired members’ census data occurs before the current accumulation period of census data used in the plan’s actuarial valuation (which eventually flows into each employer’s financial statements), meaning the plan is solely responsible for establishing internal controls over these records and transmitting this data to the plan’s actuary. In contrast, responsibility for active members’ census data during the current accumulation period is split among the plan and each member’s current employer(s). Initially, employers must accurately transmit census data elements of their employees to the plan. Then, the plan must record and retain these records for active employees and then transmit this census data to the plan’s actuary. We noted the University’s employees are members of the State Universities Retirement System (SURS) for their pensions and the State Employees Group Insurance Program sponsored by the State of Illinois, Department of Central Management Services (CMS) for their OPEB. In addition, we noted these plans have characteristics of different types of pension and OPEB plans, including single employer plans and cost-sharing multiple-employer plans. Additionally, CMS’ actuary uses census data for employees of the State’s public universities provided by SURS, along with census data for the other participating members provided by the State’s four other pensions plans, to prepare their projection of the liabilities of CMS’ plan. Finally, SURS’ actuary and CMS’ actuary used census data transmitted by the University during Fiscal Year 2020 to project pension and OPEB- related balances and activity at the plans during Fiscal Year 2021, which is incorporated into the University’s Fiscal Year 2022 financial statements. During testing we noted the following: • The University had not performed an initial complete reconciliation of its census data recorded by SURS to its internal records to establish a base year of complete and accurate census data. • After establishing a base year, the University had not developed a process to annually obtain from SURS the incremental changes recorded by SURS in their census data records and reconcile these changes back to the University’s internal supporting records. • During our cut-off testing of data transmitted by the University to SURS, we noted 31 instances of an active employee becoming inactive and 1 instance of an active employee becoming retired were reported to SURS after the close of the fiscal year in which the event occurred. • During detail testing, we noted 1 of 30 (3%) members tested had their birth date reported to SURS incorrectly, which was off by 10 years. (Finding 1, Pages 5-6) We recommended the University continue to work with SURS to complete the base year reconciliation of Fiscal Year 2021 active members’ census data from its underlying records to a report of census data submitted to SURS’ actuary and CMS’ actuary. After completing an initial full reconciliation, the University may limit the annual reconciliations to focus on the incremental changes to the census data file from the prior actuarial valuation, provided no risks are identified that incomplete or inaccurate reporting of census data may have occurred during prior periods. Any errors identified during this process should be promptly corrected by either the University or SURS, with the impact of these errors communicated to both SURS’ actuary and CMS’ actuary. We also recommended the University ensure all events occurring within a census data accumulation year are timely and accurately reported to SURS so these events can be incorporated into the census data provided to SURS’ actuary and CMS’ actuary. University officials agreed with the finding. OTHER FINDING The remaining finding pertains to inadequate internal controls over the recognition of revenue and unearned revenue during the fiscal year ended June 30, 2022. We will review the University’s progress towards the implementation of our recommendations in our next financial audit. AUDITOR’S OPINION The auditors stated the financial statements of the University as of and for the year ended June 30, 2022 are fairly stated in all material respects. This financial audit was conducted by CliftonLarsonAllen, LLP JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:TLK