REPORT DIGEST NORTHEASTERN ILLINOIS UNIVERSITY COMPLIANCE EXAMINATION AND SINGLE AUDIT FOR THE YEAR ENDED JUNE 30, 2017 Release Date: March 29, 2018 FINDINGS THIS AUDIT: 18 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 8 -- 10 -- 18 Category 3: 0 -- 0 -- 0 TOTAL: 8 -- 10 -- 18 FINDINGS LAST AUDIT: 17 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 FRANK J. MAUTINO, 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 federal Single Audit and Compliance Examination of the Northeastern Illinois University (University) for the year ended June 30, 2017. A separate Financial Audit as of and for the year ending June 30, 2017, was previously released on March 13, 2018. In total, this report contains 18 findings, one of which was reported in the Financial Audit. SYNOPSIS • (17-05) The University inaccurately calculated the return of the Title IV funds for students who withdrew from the University. • (17-06) The University did not ensure time and effort reports were submitted or timely submitted by employees. • (17-12) The University failed to comply with the Fiscal Control and Internal Auditing Act and International Standards for the Professional Practice of Internal Auditing. • (17-14) The University did not comply with the University Guidelines on remittance of excess funds. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INACCURATE CALCULATION OF RETURN OF TITLE IV FUNDS The University inaccurately calculated the return of the Title IV funds for students who withdrew from the University. During testing of 40 students awarded with Title IV grants who withdrew from classes during the Academic Year 2016-2017, we noted the University erroneously included the cost of room and board in the institutional charges for five (13%) students residing in the student residence hall that is under a concession arrangement with an operator entity. Contracts for room and board are entered between the students and the operator entity of the residence hall. The erroneous inclusion of room and board in the calculation of institutional charges resulted in excessive return of Title IV funds totaling $8,831. (Finding 5, pages 26-27) We recommended the University strengthen its procedures to ensure accurate calculations of return of Title IV funds. University officials agreed with the finding and stated they will develop training, monitoring and controls to ensure accurate calculations of return of Title IV funds. TIME AND EFFORT REPORTS NOT SUBMITTED OR TIMELY SUBMITTED The University did not ensure time and effort reports were submitted or timely submitted by employees. During our review of payroll documents for 46 employees who received salaries from federally funded grants, we noted 25 (54%) employees did not submit their time and effort reports certifying their efforts expended on federally funded projects to the University’s Controller’s Office for review. Subsequently, 13 employees submitted their time and effort reports 13 to 103 days after the September 30, 2017 due date. (Finding 6, pages 28-30) We recommended the University improve its procedures on time and effort reporting process to ensure timely submission of the reports and compliance with University policy and Federal regulations. University officials agreed with the finding and stated they plan to evaluate the current manual time and effort reporting processes for possible automation. NONCOMPLIANCE WITH THE FISCAL CONTROL AND INTERNAL AUDITING ACT The University failed to comply with the Fiscal Control and Internal Auditing Act (FCIAA) and International Standards for the Professional Practice of Internal Auditing. During testing of the University’s internal auditing activities, we noted the following: • The University’s Internal Audit division did not perform the audits outlined in the University’s Fiscal Year 2016 and 2017 Internal Audit Plan. No audits were completed relating to internal accounting and administrative controls, including testing of: (1) the obligation, expenditure, receipt, and use of public funds of the State and of funds held in trust; (2) grants received or made by the University completed during the current fiscal year; and (3) reviews of the design of major new electronic data processing systems and major modifications of those systems. • The University submitted its FCIAA certification to the Office of the Auditor General six days after it was due. • The University’s Internal Audit division did not undergo a peer review since the last external quality assurance completed in Fiscal Year 2012. (Finding 12, pages 39-40) We recommended the University ensure completion of audits of major systems of internal accounting and administrative control at least once every two years and submit its FCIAA certification to the Office of the Auditor General timely. We also recommended the University promptly arrange an external assessment of its internal audit activity to comply with the Institute of Internal Auditors’ Standards. University officials agreed with the finding and stated they have developed and are in the process of completing a two-year annual plan covering the required areas of the FCIAA. NONCOMPLIANCE WITH THE UNIVERSITY GUIDELINES ON EXCESS FUNDS The University did not comply with the University Guidelines on remittance of excess funds. During our testing of the University’s compliance with the University Guidelines 1982 (As Amended 1997), we noted the University complied with the requirement to calculate excess fund on auxiliary enterprises and accounting entities but failed to remit amounts due to the Income Fund from Educational Contracts Fund amounting to $98,870. (Finding 14, page 44) We recommended the University ensure compliance with all the requirements of the University Guidelines. University officials agreed with the finding and stated they will assure compliance with the University Guidelines regarding calculations and transfers. OTHER FINDINGS 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 next engagement. AUDITOR’S OPINIONS The Financial Audit report was previously released. The auditors stated the financial statements of the University as of and for the year ended June 30, 2017 are fairly stated in all material respects. The auditors also conducted a Single Audit of the University as required by the Uniform Guidance. The auditors stated the University complied, in all material respects, with the types of compliance requirements that could have a direct and material effect on the University’s major federal programs for the year ended June 30, 2017. ACCOUNTANT’S OPINION The auditors conducted a Compliance Examination of the University for the year ended June 30, 2017, as required by the Illinois State Auditing Act. The auditors stated the University complied, in all material respects, with the requirements described in the report. This engagement was conducted by E.C. Ortiz & Co., LLP. JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:JGR