REPORT DIGEST

NORTHERN ILLINOIS UNIVERSITY

FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the Federal Single Audit Act and OMB Circular A-133)
For the Year Ended:
June 30, 1997

Summary of Findings:

Release Date:
April 23, 1998

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

SYNOPSIS

• The University did not reconcile amounts recorded as "due from award sponsors" on the general ledger to supporting detail records. Supporting information had not been compiled, which would have facilitated the reconciliation process. When a reconciliation was finally completed, the receivable amount was increased by $572,000.

• We noted instances where control procedures were weak at the Material Distribution Center. We found "dummy orders" could be created to cover inventory variances.

{Expenditures and Activity Measures are summarized on the next page.}

FY 1997

FY 1996

EXPENDITURES, MANDATORY TRANSFERS, AND OTHER
Instruction
Research
Public service
Academic support
Student services
Institutional support
Operation of plant
Staff benefits
Scholarships and fellowships
Auxiliary enterprises
Other transfers and additions
Total

$ 118,286
60,441
21,680
13,394
51,210
3,447
$ 268,458


$ 88,432
9,520
8,792
21,065
9,794
17,124
16,640
26,819
18,381
52,175
1,203
$ 269,945

$ 112,585
58,073
23,087
14,854
49,515
2,043
$ 260,157


$ 86,475
10,620
9,274
20,595
9,914
16,542
15,634
24,087
15,338
51,823
1,251
$ 261,553

FY 1997

FY 1996

$16,458
$58,570
$444,720
$26,087
$84,976

$(6,648)
$2,896
$5,577
$343,664

$8,619
$17,855
$430,730
$24,473
$46,480

$(11,033)
$1,244
$5,626
$371,332

1,547
1,035
156
43

356
553
462
4,152

13,256
2,829
$3,582

1,514
1,076
155
42

378
620
472
4,257

13,539
2,949
$3,357

Subsidiary accounting records were not reconciled to General Ledger

Weak Inventory Control Procedures

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

ENSURING SUBSIDIARY RECORDS SUPPORT GENERAL LEDGER BALANCES

The University did not reconcile amounts recorded as "due from award sponsors" on the general ledger to supporting detail. Supporting information had not been compiled, which would have facilitated the reconciliation process. As a result of reconciling, the University adjusted the balance by $572,000, increasing both the receivable and miscellaneous income. Additionally, certain financial transactions were not recorded in the general ledger on a timely basis. Although the University properly reflected all material fiscal year 1997 transactions in its financial statements, the University increased the risk of inaccurate financial reporting when transactions were not reflected in the underlying accounting records on a timely basis. (Finding 2, page 16)

We recommended the University assign a staff member responsibility to reconcile the amounts recorded in the "due from award sponsors" account on the general ledger to the underlying detail on a regular basis throughout the year. We also recommended an additional staff member be assigned to review the records.

The University responded that it would correct its accounting procedures.

INVENTORY PROCEDURES

We noted instances where control procedures were weak at the Material Distribution Center. We found "dummy orders" could be created to cover inventory variances.

The total amount of inventory that turned over at this site amounted to $1,278,664 during the year ended June 30, 1997 and the amount held at this location at year end had a value of $869,914. (Finding 3, page 17)

We recommended that the ability to issue dummy orders be removed from the materials distribution control inventory system. Further, an inventory variance exception report should be generated on a monthly basis.

The University responded that the use of a dummy work order is the most efficient method of adjusting the inventory given its current system. The University further responded that when it replaces the inventory system, the University will explore other methods of adjusting inventory records that may offer a greater degree of internal control. Effective immediately, however, the University responded that it will create a monthly exception report itemizing all adjustments required which will be approved by the Director of Physical Plant or a designee.

OTHER FINDING

The remaining finding is less significant and is being addressed by the University. We will review the University's progress toward the implementation of our recommendations in our next compliance audit.

M. Kathe Shinham, Vice President, provided the University's responses.

AUDITORS' OPINION

Our auditors state the June 30, 1997 financial statements of Northern Illinois University are fairly presented.

____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:JTD:pp

SPECIAL ASSISTANT AUDITORS

Coopers & Lybrand L.L.P. were our special assistant auditors for this audit.