REPORT DIGEST SOUTHERN ILLINOIS UNIVERSITY FINANCIAL AUDIT For the Year Ended: June 30, 2013 Release Date: January 23, 2014 Summary of Findings: Total this audit: 1 Total last audit: 3 Repeated from last audit: 0 State of Illinois, Office of the Auditor General WILLIAM G. HOLLAND, 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 Southern Illinois University’s financial audit report consists of three sets of financial statements as follows - the financial statements of Southern Illinois University (the “University”); the financial statements of the Housing and Auxiliary Facilities System (HAFS), a segment financial report of the University issued for bondholders; and the Medical Facilities System (MFS), a segment financial report of the University issued for bondholders. This report contains only Government Auditing Standards findings pertaining to the Financial Statement Audit of the University, HAFS and MFS for the year ended June 30, 2013. Those findings are reported in a report under separate cover titled “Reports Required Under Government Auditing Standards”. SYNOPSIS • The University’s process to review receivables was not adequate for financial reporting purposes. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS MISSTATEMENT OF ACCOUNTS RECEIVABLE Southern Illinois University (the University) did not establish an adequate process to review receivables to ensure all amounts recorded are in conformity with accounting principles generally accepted in the United States of America. The Carbondale campus implemented the use of a fixed fringe benefit rate negotiated with the federal Department of Health and Human Services in 2009 to facilitate the administration of grants. The fringe benefit clearing account accumulated a negative balance when actual expenses exceeded the amounts reimbursed. Those excess expenses were subsequently accounted for as a receivable. Since amounts allocated in excess of those rates may not be reimbursable until future years, this negative balance should not have been recognized as revenue earned in the current period. The University’s method of accounting for unrecovered fringe benefit expense resulted in the Carbondale campus overstating receivables by $6.0 million and $3.4 million and understating operating expenses by $2.6 million and $1.5 million in fiscal years ended June 30, 2013 and 2012, respectively. The University’s system of internal controls failed to identify this improper revenue recognition. University management agreed to adjust the University’s financial statements for fiscal year 2013. (Finding 1, pages 5-6) University officials agreed with our recommendation that the University evaluate the adequacy of receivables to ensure revenue and expenses are properly recognized in accordance with generally accepted accounting standards. AUDITORS’ OPINION Our auditors stated the June 30, 2013 financial statements of the University, HAFS and MFS are fairly stated in all material respects. WILLIAM G. HOLLAND Auditor General WGH:JAF SPECIAL ASSISTANT AUDITORS Our special assistant auditors for this audit were CliftonLarsonAllen LLP.