REPORT DIGEST

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AUDIT

For the Year Ended:

June 30, 2008

Release Date:

April 23, 2009

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

www.auditor.illinois.gov

INTRODUCTION

This digest covers our financial audit of the Northern Illinois University for the year ended June 30, 2008. A compliance examination covering the year ended June 30, 2008 will be issued at a later date.

SYNOPSIS

¨ 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, 2008 (in Thousands)

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS	FY 2008	FY 2007
OPERATING REVENUES Student tuition and fees, net.................................................. Auxiliary enterprises............................................................. Grants, contracts, and gifts.................................................... Sales and services of educational departments........................ Other................................................................................... Total Operating Revenues.............................................. OPERATING EXPENSES Instruction............................................................................ Research.............................................................................. Public service....................................................................... Academic support................................................................ Student services................................................................... Operation and maintenance of plant...................................... Depreciation......................................................................... Institutional support.............................................................. Staff benefits........................................................................ Student aid........................................................................... Auxiliary enterprises............................................................. Total Operating Expenses.............................................. Operating loss...................................................................... NONOPERATING AND OTHER REVENUES (EXPENSES) State appropriations.............................................................. Investment income................................................................. Interest expense...................................................................... 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...................................................	$116,800 97,946 53,150 20,759 3,274 $291,929 $125,392 17,263 27,864 31,966 12,828 25,628 19,208 35,075 66,331 15,057 77,777 $454,389 ($162,460) $170,024 2,993 (8,756) 349 $164,610 $ 2,150 213,655 $215,805	$110,265 93,746 51,890 19,048 3,210 $278,159 $119,477 16,054 25,101 28,606 12,692 22,247 23,224 30,674 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
SELECTED ACCOUNT BALANCES	FY 2008	FY 2007
Cash and cash equivalents...................................................... Investments and marketable securities..................................... Capital assets, net................................................................... All other assets....................................................................... Accounts payable and accrued liabilities.................................. Revenue bonds, notes, contracts and leases payable................ All other liabilities...................................................................	$11,017 93,046 317,515 35,165 33,255 157,836 $49,847	$16,197 86,145 313,449 34,568 31,242 156,225 $49,237
UNIVERSITY PRESIDENT
During Audit Period: Dr. John G. Peters Currently: Dr. John G. Peters

University did not provide complete and accurate financial statements

$715,000 paid to suppliers was misclassified as payments of capital debt

Future revenue pledged to debt service was not disclosed

University management stated information needed from the State was not received timely

University agreed with auditors

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

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 statement of cash flows. These adjustments resulted in changes to the net cash used in operating activities and the net cash used in capital and related financing activities. Details of the adjustments follow:

An increase in the amount reported as payment to suppliers of $715,000 and a corresponding decrease in principal payments on capital debt, and

A $715,000 decrease in the amount reported as changes in accounts payable and accrued liabilities on the reconciliation section of the statement.

The University also had to make modifications to the Notes to the Basic Financial statements to include information required under Governmental Accounting Standards Board (GASB) Statement No. 48 related to future revenues pledged to debt service as noted by the Illinois Office of the Comptroller.

University management stated the GASB No. 48 presentation format was received by NIU from the State on October 31. The date was subsequent to submission deadlines, and revisions to existing footnotes to agree to the State presentation format were beyond the University’s control. The Cash flow error was a presentation error that did not affect cash. (Finding 1, page 6 of the Report Required under Government Auditing Standards) This finding was first reported in 2006.

University officials accepted our recommendation to 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. (For the previous University response, see Digest Footnote #1.)

AUDITORS’ OPINION

Our auditors stated the financial statements of Northern Illinois University as of June 30, 2008, 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.

DIGEST FOOTNOTE

#1: FINANCIAL STATEMENT PREPARATION – Previous University Response

The University agrees that adjustments to the Statement of Cash Flows and misclassifications in the Statement of Revenues, Expenses, and Changes in Net Assets did occur and will completely review the financial statement process to ensure that these adjustments/misclassifications do not occur in the future. While adjustments did occur, they did not impact the overall amount of cash reported as cash used in operating activities. The misclassifications of expenses did not materially misrepresent the financial activity and had no impact on the financial position of the University.

INTRODUCTION

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

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

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

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS