REPORT DIGEST

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AUDIT

For the Year Ended:

June 30, 2007

Summary of Findings:

Total this year

- Financial Audit 2

Total last year

- Financial Audit 2

Repeated from last year

- Financial Audit 1

Release Date:

March 25, 2008

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

INTRODUCTION

This report contains only findings pertaining to the Financial Statement Audit. This audit contains two audit findings. These two findings pertain to significant deficiencies in internal control over financial reporting.

Findings related to the State Compliance and federal Single Audit will be issued at a later date

SYNOPSIS

(Financial Statement Finding)

¨ The University did not provide the auditors with complete and accurate financial statements presented in accordance with generally accepted accounting principles.

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

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AUDIT

For The Year Ended June 30, 2007 (in Thousands)

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS	FY 2006	FY 2006
OPERATING REVENUES Student tuition and fees, net.................................................. Grants, contracts, and gifts.................................................... Sales and services of educational departments........................ Auxiliary enterprises............................................................. Other................................................................................... Total Operating Revenues.............................................. OPERATING EXPENSES Instruction............................................................................ Research.............................................................................. Public service....................................................................... Academic support................................................................ Student services................................................................... Operation and maintenance of plant...................................... Institutional support.............................................................. Depreciation.......................................................................... Staff benefits........................................................................ Student aid........................................................................... Auxiliary enterprises............................................................. Total Operating Expenses.............................................. Operating loss...................................................................... NONOPERATING AND OTHER REVENUES (EXPENSES) State appropriations.............................................................. Investment income................................................................. Interest expense..................................................................... Gifts...................................................................................... Net increase (decrease) in fair value of investments Total Nonoperating and Other Revenues........................... INCREASE IN NET ASSETS............................................. Net Assets, beginning of the year.............................................. Net Assets, end of the year......................................................	$110,265 51,890 19,048 93,746 3,210 $278,159 $119,477 16,054 25,101 28,606 12,692 22,247 30,674 23,224 57,672 13,601 74,961 $424,309 ($146,150) $161,180 4,373 (8,707) 276 $157,122 $10,972 202,683 $213,655	$100,632 55,075 22,344 87,643 2,205 $267,899 $114,033 15,941 27,210 28,923 12,600 24,509 30,718 27,134 52,619 10,821 68,102 $412,610 ($144,711) $157,514 3,014 (8,190) 5,549 (350) $157,537 $12,826 189,857 $202,683
SELECTED ACCOUNT BALANCES	FY 2006	FY 2006
Cash and cash equivalents...................................................... Investments and marketable securities..................................... Capital assets, net................................................................... Accrued compensated absences............................................. Noncurrent revenue bonds payable.........................................	$16,197 $86,145 $313,449 $23,470 $103,651	$12,073 $74,010 $298,150 $23,644 $107,885
UNIVERSITY PRESIDENT
During Audit Period: Dr. John G. Peters Currently: Dr. John G. Peters

Failure to provide complete and accurate financial statements

$3.7 million cash payment was classified incorrectly

$5.3 million incorrectly netted against collections

$1.2 million classification error

Edit checks

University agrees with auditors

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO IMPROVE CONTROLS OVER FINANCIAL STATEMENT PREPARATION

The University did not provide the auditors with complete and accurate financial statements presented in accordance with generally accepted accounting principles.

Adjustments were made to the cash provided by and used in operating activities on the statement of cash flows. These adjustments did not impact the overall amount reported as cash used in operating activities, but they did result in the following adjustments:

An increase in the amount reported as payment to employees of $3,737,000 and a corresponding decrease in payments to suppliers, and
A $5,294,000 increase in the amount reported as loans to students and employees with a corresponding decrease in the amount collected on those loans.

In the Statement of Revenues, Expenses and Changes in Net Assets, we also noted that interest expense was overstated by $991,000, student aid was overstated by $559,000, and sales and service of educational activities was overstated by $264,000. These overstatements were offset by an understatement of operations and maintenance expense of $1,286,000. These amounts were not corrected.

According to University personnel, the workpapers that create the statement of cash flows include edit checks for all totals, but do not include the possibility of offsetting errors within any given section of the statement. (Finding 1, page 6)

We recommended the University review its current process for preparation and review of the annual financial statements and allocate the resources necessary to ensure a thorough review of the financial statements by personnel possessing the appropriate skills and knowledge.

University officials agreed with our recommendation and stated that it would completely review the financial statement process to ensure that these adjustments do not occur in the future.

OTHER FINDING

The other finding concerned the University’s fraud prevention and detection program. We will review progress toward implementation of all recommendations during the next audit.

AUDITORS’ OPINION

Our auditors stated the financial statements of Northern Illinois University as of June 30, 2007, and for the year then ended, are fairly presented in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JAF:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were Clifton Gunderson, LLP.

INTRODUCTION

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

Operating loss......................................................................

INCREASE IN NET ASSETS.............................................

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS