REPORT DIGEST

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AND COMPLIANCE AUDIT

(In accordance with the Federal Single Audit Act and OMB Circular A-133)

For the Year Ended:
June 30, 2001

Summary of Findings:

Total this audit 4
Total last audit 4
Repeated from last audit 0

Release Date:
March 15, 2002

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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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

 

 

 

 

 

 

 

 

 

SYNOPSIS

 

  • The University did not record revenue, totaling $1.8 million, earned from a 10-year exclusive rights license granted a bottler. Instead, the monies were deposited with the University's Foundation as a "donation" to be used for promotional opportunities and to improve goodwill in the University community.
  • The University did not have adequate controls over the processing of refunds and repayments applicable to both undergraduate and graduate federal grant and loan programs.

 

 

 

 

 

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

NORTHERN ILLINOIS UNIVERSITY
FINANCIAL AND COMPLIANCE AUDIT
For The Year Ended June 30, 2001 (in Thousands)

FINANCIAL OPERATIONS (CURRENT FUNDS)

FY 2001

FY 2000

REVENUES
Appropriations
Student tuition and fees
Grants, contracts, and gifts
Sales and services of educational departments
Auxiliary enterprises
Other
TOTAL

EXPENDITURES, MANDATORY TRANSFERS, AND OTHER
Instruction
Research
Public service
Academic support
Student services
Operation of plant
Institutional support
Staff benefits
Scholarships and fellowships
Auxiliary enterprises
Other transfers and deductions (net)
Total


$148,641
77,523
30,868
9,385
68,510
5,131
$340,058


$107,557
11,355
13,401
26,918
11,597
18,215
23,319
40,729
22,458
69,711
2,901
$348,161


$137,952
70,882
30,264
11,917
61,923
5,922
$318,860


$101,570
10,982
12,829
24,973
10,684
15,861
20,947
33,845
21,749
63,826
268
$317,534

ACCOUNT BALANCES (ALL FUNDS)

FY 2001

FY 2000

Cash and cash equivalents
Investments and marketable securities
Investment in plant
Accrued compensated absences
Revenue bonds payable
Leases payable
Fund balances (deficit):
Unrestricted
Restricted
U.S. government advances refundable
Net investment in plant

$14,951
$57,458
$542,575
$26,900
$115,475
$20,996

$(19,894)
$1,586
$6,078
$395,276

$12,031
$65,751
$508,087
$25,187
$118,192
$21,162

$(10,563)
$1,886
$5,870
$357,182

SUPPLEMENTARY INFORMATION (In whole numbers)

FY 2001

FY 2000

Employment Statistics
Appropriated funds:
Faculty/administrative
Civil service
Student employees
Miscellaneous contracts
Nonappropriated funds:
Faculty/administrative
Civil services
Student employees
Miscellaneous contracts
Total Employees

Selected Activity Measures
Fall semester enrollment - Undergraduate
Fall semester enrollment - Graduate
Fall semester enrollment - Professional
Total full-time equivalent semester cost per student



1,629
976
167
44

379
573
461
65
4,294

15,428
2,741
361
$4,033



1,596
990
147
30

369
601
430
-
4,163

15,261
2,761
330
$3,831

UNIVERSITY PRESIDENT
During Audit Period: Dr. John G. Peters
Currently: Dr. John G. Peters
 

 

 

 

Exclusive license revenues are not being recorded in University's records

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inaccurate processing of refunds/repayments

 

 

 

 

 

 

 

 

 

 

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.