REPORT DIGEST

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AUDIT
FOR THE ONE YEAR ENDED: JUNE 30, 2012

Release Date:   February 6, 2013

Summary of Findings:
Total this audit: 1
Total last audit:  1
Repeated from last audit: 1

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 Northern
Illinois University for the year ended June 30, 2012.  A
compliance examination covering the year ended June 30,
2012 will be issued at a later date.

SYNOPSIS

• The University needs to improve internal controls over
financial reporting.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO IMPROVE FINANCIAL REPORTING

Northern Illinois University needs to improve internal
control over financial reporting.

During our review of the draft financial statements and
notes several errors and omissions were identified and
subsequently corrected. Some of the more significant
items noted follow:

• “Net assets invested in capital assets, net of related
debt” and “unrestricted net assets” required a
reclassification of $9,897,000 for 2012 and a similar
reclassification of $11,584,000 for 2011 related to the
inclusion of accreted interest on capital appreciation
bonds as part of the principal amount used in
calculating the related debt portion of “Net assets
invested in capital assets, net of related debt.” After
this item was brought to the attention of the
University, reclassifications were made to correct the
balances of the affected accounts.

• The University did not disclose its exposures to
concentrations of credit risk.  The University had
concentrations of credit risk related to investments in
securities issued by the Federal Home Loan Bank of about
$33,507,000, investments in securities issued by the
Federal National Mortgage Association of about
$41,140,000 and investments in securities issued by the
Federal Home Loan Mortgage Corporation of about
$46,629,000.  The investments in securities from each of
these issuers exceeded 5% of the University’s total
investments.  Once this was brought to the attention of
the University, they corrected the disclosure.

• The University did not disclose a subsequent event.
The University signed an irrevocable letter of intent
with the Foundation.  Under this letter of intent, the
University leased land to the Foundation for the
construction of a facility.  The University committed to
lease the facility, upon completion, from the Foundation
for a period of 90 months.  Once this was brought to the
attention of the University, they added a disclosure for
this event.

According to University management, the missing
disclosures were due to an oversight by management when
the draft financial statements were prepared. (Finding
#1, pages 5-6 in the Report Required Under Government
Auditing Standards)
This finding was first reported in 2011.

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

University officials accepted our recommendation.

AUDITORS’ OPINION

Our auditors stated the financial statements of Northern
Illinois University as of June 30, 2012, and for the
year then ended, are fairly stated in all material
respects.

WILLIAM G. HOLLAND
Auditor General

WGH:TLK:rt

SPECIAL ASSISTANT AUDITORS

McGladrey LLP were our special assistant auditors for
this engagement.