REPORT DIGEST

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the Federal Single Audit Act of 1984 and OMB Circular A-133)
For the Year Ended:
June 30, 1996

Summary of Findings:

Release Date:
May 15, 1997

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

SYNOPSIS

• In violation of the University Guidelines, the University has combined its four separate accounting entities within its revenue bond fund enterprises into one entity for reporting purposes.

{Expenditures and Activity Measures are summarized on the next page.}

FY 1996

FY 1995

$ 112,585
58,073
23,087
14,854
49,515
2,043
$ 260,157

$ 86,475
10,620
9,274
20,595
9,914
16,542
15,634
24,087
15,338
51,823
1,251
$ 261,553

$ 107,154
55,491
23,748
13,637
48,433
1,319
$ 249,782

$ 85,274
11,228
8,347
19,651
9,409
15,197
14,017
21,561
15,145
50,965
1,127
$ 251.921

FY 1996

FY 1995*

$8,619
$17,855
$430,730
$24,473
$46,480

$(11,033)
$1,244
$5,626
$371,332

$10,009
$23,769
$405,848
$22,687
$46,852

$(8,950)
$1,886
$5,573
$346,534

FY 1996

FY 1995

1,514
1,076
155
42

378
620
472
4,257

13,539
2,949
$3,357

1,522
1,088
170
45

367
631
467
4,290

14,633
3,000
$ 3,077

University Guidelines Requirements

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

SEPARATE ACCOUNTING ENTITIES COMBINED IN REVENUE BOND FUND

In violation of the University Guidelines, the University has combined its four separate accounting entities within its revenue bond fund enterprises into one entity for reporting purposes.

University Guidelines 1982, Section V. A.2., requires that universities "must maintain accounting entities into which all revenue bond enterprises and activities must be classified. Only activities or enterprises which are substantially similar and rationally related may be grouped into the same accounting entity." Prior to June 30, 1992, the University has maintained the following accounting entities within the revenue bond funds: Residence Halls, Holmes Student Center, Recreational Facilities and Campus Parking. As of June 30, 1992, and for the year then ended, the University elected to combine all four entities for financial reporting purposes, which violates University Guidelines, Sections III. A. and C. Those sections require separate financial statements be prepared for each accounting entity. Such statements are to be used for all University Guidelines calculations.

Upon combination of the entities, the calculation resulted in a margin of compliance of $9,336,846 for the year ending June 30, 1996. It could not be determined whether or not each of four entities individually complied because they were combined. This combination of entities directly violates Section IV.D.2., which states that "Excess funds of one entity may not be offset against another entity having less than the maximum permitted working capital allowance of capital reserves."

The University has intentionally combined the separate accounting entities in an effort to present the activity consistent with its interpretation of the University Guidelines and to minimize its accounting burden. The University believes all of the entities to be components of one accounting entity, the Revenue Bond Fund, and should be presented as such. (Finding 1, page 6, Volume I)

We recommended the University comply with the provisions of the University Guidelines and prepare separate financial statements and excess fund calculations for each accounting entity.

The University responded that it has prepared financial statements and excess fund calculations in accordance with the accounting entities approved by the Board of Regents. The University further noted that a single entity was created for all revenue bond activities in recognition of the fact that economic resources of each revenue bond facilities are effectively pledged to all of the facilities in the Auxiliary Facilities System.

OTHER FINDINGS

There were no other findings. We will review the University's progress toward the implementation of our recommendation in our next compliance audit.

Mr. Douglas J. Moore, Controller, provided the University's response.

AUDITORS' OPINION

Our auditors state the June 30, 1996 financial statements of Northern Illinois University are fairly presented.

____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:JTD:pp

SPECIAL ASSISTANT AUDITORS

Coopers & Lybrand L.L.P. were our special assistant auditors for this audit.