REPORT DIGEST

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AUDIT
For the Year Ended June 30, 2014

Release Date:  February 11, 2015

FINDINGS THIS AUDIT:  1

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 1 -- 1
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 0 -- 0
TOTAL:  0 -- 1 -- 1

FINDINGS LAST AUDIT: 1

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
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

SYNOPSIS

• (14-1) The University’s internal controls
over financial reporting are not sufficient to
prevent misstatements.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

IMPROVEMENTS NEEDED IN THE FINANCIAL REPORTING
PROCESS

The University’s internal controls over
financial reporting are not sufficient to
prevent misstatements.

During our review of the draft financial
statements provided by the University, several
errors were identified.  Some of the more
significant items were as follows:

• The University recorded a year-end interest
accrual entry for the Series 2010B Student
Housing Revenue Bonds, the Northern View
Capital Lease, and the New Residence Hall
Capital Lease twice.  This improperly
increased interest expense by $2,203,000 and
Build America Bond subsidy revenue by
$870,000.

• The University classified $6,910,000 of
escrow funds for the phase 11 performance
contract as construction in progress, rather
than as long-term restricted cash as required
by generally accepted accounting principles
(GAAP).

• During the fiscal year 2013 closing process,
the University expensed $4,231,000 of
construction in progress rather than including
it as part of capital assets in accordance
with GAAP. To correct the impact this had on
net position, during fiscal year 2014 the
amount was added to capital assets and
expenses were reduced by a matching amount.

• As part of its closing process, the
University removed all billed fall 2014
tuition and fee revenue from unearned revenue
and accounts receivable. This revenue was
unearned as of June 30, 2014 and as of that
date the University had no legal claim to
receive any payments.  However, $1,140,000 of
the billed charges had been prepaid by
students and should have remained on the
University’s Statement of Net Position.

• The University did not include the employer
portion of Medicare taxes in its accrual
calculation for compensated absences in
accordance with GAAP.  This understated the
balance of compensated absences by $259,000.
(Finding 1, pages 5-9)  This finding has been
repeated since 2011.

We recommended the University improve controls
over financial reporting to ensure accurate
presentation and disclosure of their annual
financial statements.

University officials concurred with the
finding and stated they are in the process of
documenting the policies and procedures for
the year-end close process.  They expect to
have this completed by April 30, 2015. (For
the previous University response, see Digest
Footnote #1.)

AUDITOR’S OPINION

Our auditors stated the financial statements
of Northern Illinois University as of June 30,
2014, and for the year then ended, are fairly
stated in all material respects.

WILLIAM G. HOLLAND
Auditor General

WGH:TLK

SPECIAL ASSISTANT AUDITORS

Our Special Assistant Auditors for this audit
were McGladrey LLP.

DIGEST FOOTNOTES

#1 – Financial Reporting Process

2013 - The University agrees.