NOTE:

The results of our compliance testing in accordance with the Single Audit Act and OMB Circular A-133 for the FY 09 reporting period has been reissued in a separate report.

Please disregard the information previously reported on pages 12, 14, 15, 23, 24, 25, 46, 47, 48, 49, 50, and 51in the State of Illinois, Northeastern Illinois University Compliance Examination (In Accordance with the Single Audit Act and OMB Circular A-133) for the year ended June 30, 2009.

For updated information please refer to the separately issued report entitled State of Illinois, Northeastern Illinois University, Single Audit (In Accordance with the Single Audit Act and OMB Circular A-133) for the year ended June 30, 2009.

The previously issued report did not include the federal Higher Education Institutional Aid program as a major program. This federal program was subsequently tested and reported as a major program. The Auditor’s Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular
A-133 dated April 15, 2011 replaces the previously issued report dated December 15, 2009.

REPORT DIGEST NORTHEASTERN ILLINOIS UNIVERSITY FINANCIAL AUDIT AND COMPLIANCE EXAMINATION (In accordance with the Single Audit Act and OMB Circular A-133) For the Year Ended: June 30, 2009 Summary of Findings: Total this audit 9 Total last audit 7 Repeated from last audit 4 Release Date: January 14, 2010 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 http://www.state.il.us/auditor

SYNOPSIS ¨ The University did not have adequate controls in place for identifying and reporting the University’s liability for accrued compensated absences. ¨ The University did not identify errors in the draft financial statements provided to auditors. ¨ The University did not perform reconciliations of its student receivables on a timely basis. ¨ The University’s grant expenditures were not reimbursed timely through cash draw downs of grant funds. ¨ The University did not have adequate procedures over verification of eligibility requirements for TRIO Cluster – Upward Bound Math and Science program. ¨ The University did not have adequate controls over its property and equipment. ¨ The University did not comply with certain required contracting procedures. {Financial Information is summarized on the reverse page.}

NORTHEASTERN ILLINOIS UNIVERSITY

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Year Ended June 30, 2009

Statement of Revenues, Expenses, and Changes in Net Assets	FY 2009	FY 2008*
OPERATING REVENUES Student tuition and fees (net of scholarship allowances of $7,039,868 in 2008 and $7,039,868 in 2007) .......................................................................... Federal grants and contracts ............................................................. State and local grants ........................................................................ Nongovernmental grants and contracts.............................................. Auxiliary enterprises......................................................................... Other operating revenues................................................................... Total operating revenues........................................................... OPERATING EXPENSES Instruction ........................................................................................ Research ........................................................................................... Public service..................................................................................... Academic support ............................................................................. Student services and programs.......................................................... Institutional support......................................................................... Operation and maintenance of plant................................................. Scholarships and fellowships............................................................ Auxiliary enterprises......................................................................... Depreciation expense........................................................................ Other operating expenses.................................................................. Total operating expenses........................................................... Operating income (loss)......................................................... NONOPERATING REVENUES (EXPENSES) State appropriations – general revenue fund ..................................... Payments on behalf of the University ............................................... Federal Pell grant............................................................................... Gifts and donations ........................................................................... Investment income (loss)................................................................... Interest on indebtedness .................................................................... Other nonoperating revenues ............................................................ Net nonoperating revenues............................................. Income (loss) before other revenues, expenses, gains and losses Gain (loss) on disposal of capital assets ........................................... Capital additions provided by State of Illinois ................................. Increase in Net Assets NET ASSETS Net assets – beginning of year ......................................................... Net assets – end of year ..................................................................	$42,672,062 12,607,691 3,061,082 1,489,238 3,434,342 3,290,560 66,554,975 61,354,540 1,005,011 14,502,092 9,015,138 11,022,575 10,191,864 12,552,318 5,348,939 3,752,658 5,336,575 1,915,830 135,997,540 (69,442,565) 44,043,061 22,909,660 10,300,329 71,745 (209,171) (1,533,100) 80,234 75,662,758 6,220,193 8,938 1,617,304 7,846,435 89,413,428 $97,259,863	$40,447,226 14,962,034 3,469,916 1,613,907 3,333,719 2,995,344 66,822,146 57,031,681 953,381 17,738,913 8,926,086 10,298,189 10,393,188 12,190,804 4,592,734 4,171,490 5,228,066 3,841,645 135,366,177 (68,544,031) 40,745,238 21,448,970 9,065,767 148,330 608,814 (1,571,749) 283,531 70,728,901 2,184,870 (32,780) 2,328,793 4,480,883 84,932,545 $89,413,428
SUPPLEMENTARY INFORMATION (UNAUDITED)	FY 2009	FY 2008
Employment Statistics Administration........................................................................................... Faculty....................................................................................................... Civil Service............................................................................................... Students..................................................................................................... Total Employees.............................................................................. Selected Activity Measures Average annual full-time equivalent students.................................................... Full-time equivalent cost per student – Undergraduate.................................... Full-time equivalent cost per student – Graduate.............................................	280 406 466 341 1,493 8,069 $8,640 $12,008	267 437 487 369 1,560 8,172 $8,121 $11,591
UNIVERSITY PRESIDENT
During Audit Period: Dr. Sharon Hahs Current: Dr. Sharon Hahs

* - Certain reclassifications have been made to the 2008 amounts to conform to the 2009 presentation.

Inadequate procedures Salary rates for some employees were not accurate Vacation leave accruals for bi-weekly employees were not calculated properly Some employees were not included in the Report provided by the University Salary rates were inaccurate and resulted in a $674,082 overstatement Some employees who were not eligible for sick leave accrual were included in the report resulting in an overstatement of $24,619 Some employees had their vacation leave accrual calculated incorrectly Auditors proposed a net adjusting entry of $636,392 to the financial statements which was not made University agrees with the auditors Unapplied payments were presented as accounts payable instead of being offset against student receivables $194,726 adjustment made to the financial statements for errors relating to Summer Tuition Waivers $247,987 error relating to the state and local grant revenue that was not corrected in the financial statements $25,873 of fiscal year 2008 expenses were recorded in fiscal year 2009 University agrees with the auditors Tuition and fees revenue and the related receivables were understated by $738,291 University agrees with the auditors Draw downs were not made prior to the closeout period $83,440 was left to draw after the funding period end date $91,468 was left to draw after the funding period end date University agrees with the auditors Eligibility verification was not properly documented University agrees with the auditors Some items could not be found totaling $8,662 University agrees with the auditors Certain contracts were not filed with the State Comptroller Some contracts did not have the required signatures University agrees with the auditors

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NEED TO IMPROVE CONTROLS FOR REPORTING ACCRUED COMPENSATED ABSENCES The University did not have adequate controls in place for identifying and reporting the University’s liability for accrued compensated absences. The University began maintaining its records of employees’ vested vacation and sick time in its new Human Resources (HR) Banner information system. At the end of the fiscal year, the HR department queried the system in order to extract data, which is then used to adjust the accrued compensated absences liability on the University’s financial statements. The liability for accrued compensated absences reported on the University’s financial statements amounted to $9,391,229 at June 30, 2009. Based on our review of the Leave Liability Report (Report), we noted the following errors: · The salary rates used in the calculation of accrued compensated absences for 45 employees included the across-the-board increase effective July 1, 2009 resulting in an overstatement of $8,086 in the accrued compensated absences liability. · Vacation leave accruals for bi-weekly employees were not calculated based on the actual hours in pay status in accordance with the University policy resulting in an overstatement of $15,275 in the accrued compensated absences liability. · Four (4) employees with compensable vacation leave balances were not included in the Report resulting in an understatement of $9,482 in the accrued compensated absences liability. Based on our detailed testing of vacation and sick leave balances for 30 employees, we noted the following errors: · Comparison of the salary rates used for June 30, 2008 and 2009 calculations of the accrued compensated absences showed that salary rates used for the prior year accruals were incorrect. The effect on the previously issued 2008 financial statements would be an overstatement of the liability in the amount of $674,082. · Sick leave balances for 6 employees who were not eligible for accrual were included in the Report resulting in an overstatement of $24,619 in the liability. · Vacation usages for 7 employees for various months during the year were either incorrectly posted or not recorded in the system resulting in a net overstatement of $332 in the liability. · Vacation leave accruals for 3 employees during the year were either incorrectly calculated or not recorded in the system resulting in a net understatement of $1,140 in the liability. A net adjusting entry of $636,392 was proposed to correct the current year understated compensated sick and vacation expenses associated with the exceptions noted. The University did not adjust the financial statements as the amount was determined not to materially affect the financial statements. The adjustment has been included on the auditor’s schedule of proposed adjustments. (Finding 1, Pages 16-18) We recommended that the University implement adequate internal controls to ensure that financial information is complete and accurate. Specifically, the HR department should verify the information extracted from the system prior to submitting the Report to the auditors for review. University officials concurred with the finding. FINANCIAL STATEMENT ERRORS The University did not identify errors in the draft financial statements provided to the auditors. We noted the following in our audit of the financial statements originally submitted by the University to the Office of the State Comptroller: · The unapplied payments at yearend consisting of student tuition and fees, financial aid, and tuition waivers totaling $722,529 were presented as accounts payable in the Statement of Net Assets instead of being offset against student receivables. The University subsequently made the necessary adjustments in the financial statements. · The fiscal year 2010 portion of the Summer tuition waivers totaling $194,726 was presented as part of the student receivables in the Statement of Net Assets instead of deferred charges. The University subsequently made the necessary adjustments in the financial statements. · The state and local grant revenue include erroneous accrual for 2 local grants. This resulted in a $247,987 overstatement in the grants receivable and state and local grant revenue. This amount was not adjusted since it was determined to be immaterial in relation to the financial statements. During our detailed testing of vouchers as part of the compliance examination, we also noted the following: · A voucher amounting to $25,873 for the purchase of books received by the University during fiscal year 2008 was recorded as a fiscal year 2009 expense. · Four (4) vouchers incurred and paid subsequent to fiscal year 2009 totaling $77,958 initially accrued as fiscal year 2009 expenses were reversed against a prepaid expense account instead of the related payable account. The University subsequently made the adjustment in the financial statements. (Finding 2, Pages 19-20) We recommended that the University review its current process for the preparation and review of the annual financial statements to ensure that financial information in complete and accurate in accordance with generally accepted accounting principles. University officials concurred with the finding. STUDENT RECEIVABLES NOT RECONCILED TIMELY The University did not perform reconciliations of its student receivables on a timely basis. The Student module of the University’s Banner information system went live in March 2008, beginning with Summer 2008 enrollment. Interface of the transactions from the Student module to the Finance module in Banner to generate accounting entries started in June 2008. The University’s Bursar’s Office did not perform timely reconciliations to ensure that all transactions from the Student module were fed into the Finance module. During our walkthrough review of the University’s tuition and fees revenue process performed in May 2009, we noted that a report generated from Banner showed that tuition and fees revenue from Spring 2009 enrollment of approximately $738,291 was not fed from the Student module to the Finance module. This resulted in an understatement of the tuition and fees revenue and the related receivables. The University subsequently corrected this error in Banner. (Finding 3, Pages 21-22) We recommended that the University perform timely reconciliations of student receivables to ensure that financial information is complete and accurate. University officials concurred with the finding. GRANT EXPENDITURES NOT REIMBURSED TIMELY The University’s grant expenditures were not reimbursed timely through cash draw downs of grant funds. During our review of the University’s cash management activities, we noted that expenditures from grant funds were not reimbursed through cash draw downs from the U.S. Department of Education (ED) in a timely manner. The funding periods for these major grant programs have ended, however, the University did not perform the draw down of the remaining funds during the closeout period. No extension had been requested by the University. Details are as follows: · Upward Bound had a funding period end date of August 31, 2007 and a balance left to draw of $83,440. · Upward Bound Math and Science had a funding period end date of August 31, 2008 and a balance left to draw of $91,468. · McNair Post Baccalaureate Achievement had a funding period end date of September 30, 2007 and a balance left to draw of $69,136. We also noted other non-major programs whose funding periods have ended for which expenditures were not reimbursed from ED as follows: · Special Education – Personnel Preparation to Improve Services and Results for Children with Disabilities had a funding period end date of May 31, 2007 and a balance left to draw of $512. · Overseas Programs – Group Projects Abroad had a funding period end date of March 31, 2009 and a balance left to draw of $29,024. · Higher Education Institutional Aid had a funding period end date of September 30, 2007 and a balance left to draw of $75,799. · Funds for Improvement of Postsecondary Education (FIPSE) had a funding period end date of September 30, 2007 and a balance left to draw of $58,580. · Early Reading First had a funding period end date of August 31, 2008 and a balance left to draw of $103,003. Failure to request reimbursement of grant expenditures within the allowable time period results in noncompliance with Federal requirements and could result in the University not being able to recover costs from the Department of Education. (Finding 4, Pages 26-27) We recommended that the University comply with the Federal regulations and ensure timely reimbursement of expenditures from grant funds. Further, a cutoff in reviewing expenditures should be performed by Program personnel to ensure that all expenditures are recorded before completion of the grant. University officials concurred with the finding. INADEQUATE PROCEDURES OVER VERIFICATION OF ELIGIBILITY REQUIREMENTS The University did not have adequate procedures over verification of eligibility requirements for TRIO Cluster – Upward Bound math and Science program. In our eligibility testing of 15 TRIO Cluster – Upward Bound Math and Science participants, we noted the following: · The University did not completely document its determination of the student’s need for services provided by the program for 12 participants prior to the award. · There was no evidence of review and approval of the eligibility determinations made by the University for 10 participants. · The University did not completely document its determination of the student’s grade level for a participant prior to the award. · The University did not completely document its determination of the student’s citizenship or residency status for a participant prior to the award. (Finding 6, Pages 29-30) We recommended that the University verify the eligibility requirements for grant applicants and maintain supporting documentation and evidence of review and approval to ensure compliance with Federal regulations. University officials concurred with the recommendation. INADEQUATE CONTROLS OVER UNIVERSITY PROPERTY AND EQUIPMENT The University did not have adequate controls over its property and equipment. During the audit we performed various tests on the property records. Some of the items that we noted are summarized in the following paragraphs. In our physical identification for 79 items in the property records a total of 3 items, with a total value of $8,662, were not found. Further, 9 items were not tagged, 6 items were not marked as property of the University and 10 items were not updated in the property control records. During our tracing of to the Property Listing of items physically identified, we noted that 3 items were not included in the Property listing. In our detailed testing of 30 equipment vouchers, we noted that equipment purchases from 2 vouchers tested, with a total value of $8,307, were not included in the property listing. Further, one voucher that included freight and installation charges of $16,024 was expensed instead of being added to the cost of the equipment. During our review of 25 surplus equipment items as of fiscal year-end, we noted that 2 items with a total value of $1,187 were transferred to the surplus cage but were not supported with the Property Change Notice form. Additionally, 3 items listed as surplus property were not found. Also, 7 items with a total value of $11,340 transferred to the Department of Central Management Services (DCMS) warehouse were still recorded as surplus in the Property Listing. (Finding 7, Pages 31-36) (This finding was first reported in 2004) We recommended the University adhere to its procedures to ensure that the property and equipment records are accurately maintained and updated. Periodic physical inventories should be conducted to ensure existence of equipment, and property records should be updated with the results of the inventory. Also, the University should improve its controls over off-campus use of property and equipment by reviewing the forms submitted by the employees for completeness and accuracy. Further, the University should ensure submission of a complete Inventory of Equipment with DCMS. University officials concurred with the finding. (For previous University response, see Digest Footnote #1.) FAILURE TO COMPLY WITH REQUIRED CONTRACTING PROCEDURES The University did not comply with certain required contracting procedures. Some of the problems noted during our tests of contractual service expenditures follow: · Nine of 32 contracts tested (28%) were valued at more than $10,000 and were not filed with the Office of the State Comptroller. · A contract (3%) for professional services amounting to $350,000 was not approved and executed prior to performance of services. This contract was executed 83 days after the start of services. A late filing affidavit was not filed together with the contract. · Five contracts (16%) totaling $2,453,894 did not have the three signatures required for contracts of $250,000 or more. (Finding 8, Pages 37-39) (This finding was first reported in 2005.) We recommended the University adhere to its procedures to ensure all contracts over the threshold amounts be reduced to writing and filed with the Office of the State Comptroller in accordance with State statutes and regulations. Also, an Affidavit for Late Filing should be completed for any contract liability not filed within thirty (30) days of execution. Further, contract requirements and signatures should be observed in all instances. University officials concurred with the finding. (For previous University response, see Digest Footnote #2.) OTHER FINDINGS The remaining findings are reportedly being given attention by the University. We will review the University’s progress toward the implementation of our recommendations in our next audit. AUDITORS' OPINION Our auditors stated the University’s financial statements at June 30, 2009 and for the year then ended are fairly presented in all material respects. ___________________________________ WILLIAM G. HOLLAND, Auditor General WGH:TLK:pp SPECIAL ASSISTANT AUDITORS Our special assistant auditors were E.C. Ortiz & Co., LLP. DIGEST FOOTNOTE #1  INADEQUATE CONTROLS OVER UNIVERSITY PROPERTY AND EQUIPMENT – (Previous University Response) 2008: “The University concurs with the finding and recommendation and will continue to improve adherence to our property control policies and procedures.” #2 NONCOMPLIANCE WITH REQUIRED CONTRACTING PROCEDURES – (Previous University Response) 2008: “The University concurs with the finding and recommendation and will increase efforts to ensure compliance with University and state contracting procedures, including compliance with Comptroller filing requirements, procedures for Late Filing Affidavits and signature and competitive solicitation procedures.”