FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
IMPROPER ACCOUNTING OF $1.8 MILLION OF LICENSE FEE RECEIPTS
The University entered into an agreement which should have been recorded and
accounted for as operating revenue to the University's Auxiliary Enterprise activity, but
instead was improperly classified as a "donation" and deposited into and
reported as part of the Northern Illinois University Foundation records.
The University entered into a ten-year Exclusive Rights agreement with a bottler
which provides for a license fee of $4 million over the contract period. The University
has received $1.8 million to date from the bottler and deposited the monies as a
"donation" with its Foundation. Although being generated from the operation of
the University's auxiliary enterprises, the revenue has never been recorded in its general
ledger and records. Thus, the University and Foundation have understated/overstated their
books of records, respectively. (Finding 3, pages 26-29)
We recommended the University correct the accounting treatment of this Agreement as a
University transaction (not the Foundation's) and follow the requirements of the
"University Guidelines" adopted by the Legislative Audit Commission. We also
recommended the University review the stipulations of future contracts to determine proper
accounting and reporting of the transactions to ensure they are in accordance with
established University Guidelines.
University officials agreed to report the license fee revenues in the University
general ledger as recommended and stated preservation of the agreement for the benefit of
the students is their primary concern. Their response also stated that given the enormous
opportunity to obtain additional funding to support University students, especially in
terms of increasing the number of scholarships available, the University decided to pursue
an exclusive beverage contract. University officials further stated they considered this
agreement a very unique opportunity that it had never had before, nor probably will ever
have again. In particular, current procurement law (30 ILCS 500/20-50) prohibits public
universities from soliciting and negotiating such agreements in the future. Therefore,
this situation will not recur unless the law is changed.
LACK OF CONTROLS OVER PROCESSING REPAYMENTS AND REFUNDS DUE ON GRANTS AND LOANS
The University has inadequate controls over the processing of Title IV refunds and
repayments. Specifically, the University did not always accurately determine the amount of
refund/repayment owed the federal government when a student who had obtained a federal
grant/loan (or both) withdrew from the University prior to a specified date. There is also
a lack of control between University departments in the date recorded as the student's
withdrawal date. (Finding 1, pages 21-23)
We recommended the University establish proper controls in the processing of Title IV
refunds/repayments to include: (1) prenumbered withdrawal forms, (2) assurance that all
student withdrawals having financial aid are accounted for, (3) verification that all
refunds/repayments are processed, and (4) the amount computed should be checked for
accuracy by a second person.
University officials concurred with the recommendation and indicated written procedures
have been updated, responsibilities assigned, and discussed with staff. All errors noted
in the finding have been corrected. In the future, all withdrawal dates will be entered
into the Student Information System by the Registration and Records Department and used as
the basis for calculating refunds/repayments.
OTHER FINDINGS
The remaining findings and recommendations were less significant and reportedly are
being given attention by University management. We will review progress toward
implementation of our recommendations during our next audit.
University responses were provided by Ms. Kathe Shinham, Associate Vice President,
Division of Finance and Facilities.
AUDITORS’ OPINION
Our auditors stated the financial statements of Northern Illinois University as
of June 30, 2001, and for the year then ended, are fairly presented in all material
respects.
____________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:SES:pp
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this audit were The Bronner Group.
