REPORT DIGEST NORTHEASTERN ILLINOIS UNIVERSITY FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2017 Release Date: March 13, 2018 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 1 -- 0 -- 0 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 0 -- 0 FINDINGS LAST AUDIT: 3 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 Northeastern Illinois University’s (University) Financial Audit as of and for the year ended June 30, 2017. The University’s Compliance Examination (including the Single Audit) covering the year ended June 30, 2017 will be issued at a later date. SYNOPSIS • (17-01) The University did not have adequate controls over financial close and reporting. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROLS OVER FINANCIAL CLOSE AND REPORTING The University did not have adequate controls over financial close and reporting to allow management or employees in the normal course of performing their assigned functions to prevent or detect financial statement misstatements timely. We noted the following: • The University misclassified its student receivables and related allowance for doubtful accounts totaling $11,241,739 and $9,602,549, respectively, as noncurrent assets instead of current assets on the University’s financial statements. • The University erroneously categorized a portion of its student receivables aged over 365 days in the 91 to 180 days category resulting in an understatement of bad debts and allowance for doubtful accounts of $753,828. • The University misclassified the allocated health, dental, and life insurance expenses of operation and maintenance plant program to the institutional support program totaling $2,616,441. • The University classified its revenues from student and staff services and public service activities as revenues of auxiliary enterprises instead of other operating revenues totaling $324,863 on the University’s financial statements. • The University did not remove the University’s share of Excess Liquid Capital totaling $165,518 from the University’s Federal Perkins Loan Revolving Fund after the return of federal share to the Department of Education. As such, the restricted net position for student loans and unrestricted net assets were overstated and understated, respectively. • The University did not consistently ensure noncapital assets are reported as restricted when constraints upon the use of the associated net positions, externally imposed by creditors, change the availability of the assets. As such, an adjustment to reclassify noncapital assets totaling $1,404,363 from unrestricted to restricted classification was necessary. • The University misclassified the net position of funds restricted for repair and replacement of the auxiliary system totaling $412,480, as unrestricted. (Finding 1, pages 62-64) We recommended the University review its current process for the preparation and review of the annual financial statements to ensure financial information is complete, accurate, and prepared in accordance with GAAP. University officials agreed with the recommendation. AUDITOR’S OPINION The auditors stated the financial statements of Northeastern Illinois University as of and for the year ended June 30, 2017 are fairly stated in all material respects. This financial audit was conducted by E.C. Ortiz & Co., 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:JGR