EASTERN ILLINOIS UNIVERSITY
FINANCIAL AUDIT AND COMPLIANCE EXAMINATION
For the Year Ended: June 30, 2010
Summary of Findings:
Total this audit: 5
Total last audit: 5
Repeated from last audit: 1
Release Date: April 28, 2011
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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• Eastern Illinois University (University) did not properly
classify costs associated with the construction of a building that was
substantially completed as a depreciable asset in accordance with generally
accepted accounting principles.
• The University did not timely submit reports as required
by the federal granting agency.
• The University did not ensure newly hired employees
completed ethics training within the required timeframe in accordance with the
State Officials and Employee Ethics Act.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
COMPLETED BUILDING NOT DEPRECIATED
Eastern Illinois University (University) did not properly
classify costs associated with the construction of a building that was substantially
completed as a depreciable asset in accordance with generally accepted
In January 2001, the University through the Capital
Development Board (CDB) entered into various construction contracts for the
renovation and expansion of the Doudna Fine Arts Building funded through direct
appropriation to CDB. The construction
project estimated cost was $56 million.
CDB turned over the building to the University upon substantial
completion in September 2008 at which time the University occupied and used the
building for its intended purpose. From
the time of substantial completion until June 30, 2010, the University
continued to account for the costs of the construction of the building in a
construction in progress account. As a
result, no depreciation was allocated to the asset and an adjustment to
depreciation expense and accumulated depreciation totaling $1.7 million was
necessary at year-end. In addition, a reclassification entry was made to
reclassify related construction costs from construction in progress to building
According to University personnel, the University reluctantly
agreed to substantial completion of the building. The University still had a significant work
and various safety issues that prevented full and complete use of the building
at the time when the building was turned over to the University. (Finding 1, pages 18-20)
We recommended the University review its policies and
procedures related to accounting for completed capital asset projects. Projects substantially complete and put into
service should be capitalized and depreciated in accordance with Generally
Accepted Accounting Principles.
University officials responded that in June, 2008 CDB gave
the University notice of substantial completion. However, numerous issues still existed with
the building and the University refused to provide final acceptance of the
building. Since the University no longer
had the option of going back to rental facilities, it agreed to sign the notice
of substantial completion but with the understanding that additional work had
to be done before the University would accept the building. Based upon conversations with the
University’s engineer and architect, the University made a professional
decision that the building was not done and should not be depreciated.
In an auditors’ comment, we noted that the University has
some ongoing construction items which are needed to completely finish the
Doudna Fine Arts Center. The University,
however, occupied and began using the building in September 2008. Accounting rules use the concept and criteria
of “substantial completion” to delineate the time depreciation should
begin. It’s important to note that the
accounting standard for beginning depreciation is “substantial completion” and
not “absolute completion”. By any
reasonable standard, once the University decided to occupy and use the
building, the building was effectively substantially complete and depreciation
should have begun.
NONCOMPLIANCE WITH FEDERAL REPORTING REQUIREMENT
Eastern Illinois University (University) did not timely
submit reports as required by federal granting agencies.
During our testing, we noted the following:
• The University was a recipient of a grant from the
Department of Commerce. The Federal
Financial Report SF-425 for the semi-annual period ended March 31, 2010 was not
submitted. Upon notification from the
auditors, the University submitted the SF-425 132 days after the report was
• The University received a grant from the National Science
Foundation (NSF). In fiscal year 2010,
the annual progress report was submitted 21 days late.
• The University also received a grant from the Department
of Energy (DOE). For the quarters ended
September 30, 2009 and December 31, 2009, the University submitted a quarterly
Financial Status Report SF-269A instead of the revised form SF-425 as required
by the grant.
According to University personnel, the delays in filing the
reports were due to miscommunications.
(Finding 2, pages 21-23)
We recommended management monitor submission of required
reports to awarding entities to ensure compliance with the reporting
requirement of the grant.
University officials agreed with our recommendation and
stated they have established a system that will help them track all reports
that are due.
NONCOMPLIANCE WITH ETHICS TRAINING
Eastern Illinois University (University) did not ensure
newly hired employees completed the ethics training within the required
timeframe in accordance with the State Officials and Employees Ethics Act.
During our testing, we noted 4 of 25 (16%) new hires tested
did not complete the required ethics training within 30 days after commencement
of employment with the University. The ethics training of the referenced
employees were completed 15 to 129 days after they were due.
According to University personnel, the change in the
requirement for completion of the Ethics training from 6 months to 30 days took
a while for the entire campus to grow accustomed to resulting in the delay in
the completion of the ethics training.
(Finding 4, page 26)
We recommended the University’s Ethics Officer reinforce the
effort to monitor new hires completion of ethics training to ensure compliance
with the Act.
University officials agreed with our recommendation and
stated they are investigating the establishment of a policy that will require
new employees to report to the employment office on the first day of employment
and require them to take the ethics test at that time.
The remaining findings are reportedly being given attention
by the University. We will review the
University’s progress towards the implementation of our recommendations in our
Our auditors stated the financial statements of Eastern
Illinois University as of and for the year ended June 30, 2010 are fairly
stated in all material respects.
WILLIAM G. HOLLAND
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this engagement were E.C.
Ortiz & Co. LLP.