REPORT DIGEST WESTERN ILLINOIS UNIVERSITY FINANCIAL AUDIT For the Year Ended June 30, 2014 Release Date: January 15, 2015 FINDINGS THIS AUDIT: 2 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 1 -- 1 -- 2 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 1 -- 2 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 INTRODUCTION This digest covers the Western Illinois University Financial Audit as of and for the year ended June 30, 2014. Western Illinois University’s Compliance Examination and Federal Single Audit covering the year ended June 30, 2014 will be issued in a separate report at a later date. SYNOPSIS (14-1) The University had inadequate controls over its journal entries to ensure that journal entry transactions were properly prepared, supported and approved. (14-2) The University improperly capitalized interest on completed capital projects and overstated capitalized interest by $800,000 in the financial statements. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROLS OVER JOURNAL ENTRIES The University had not established adequate controls over its journal entries. During our review of 25 batches of journal entries, we noted the following: • One of 25 (4%) batches of journal entries totaling $816,062 was approved but not supported. • No independent review and/or approval was noted for 2 of 25 (8%) batches of journal entries, totaling $13,078,569. • One journal entry was needed to correct a $1,383,438 prior error for an unreviewed prior journal entry. • Seven of 25 (28%) batches of journal entries tested, totaling $656,649, were not reviewed by the University at all. In total, over 2,700 manual batches of journal entries totaling about $29.2 million were not reviewed because they fell under the University’s $100,000 review threshold. (Finding 1, pages 44-46). We recommended the University establish formal policies and procedures to ensure that all journal entries are adequately supported and properly reviewed by an independent person prior to posting to the general ledger. University officials agreed with the finding and responded they would review its existing policy and procedures and consider policy revisions that will strengthen controls. INACCURATE RECORDING OF TRANSACTIONS The University did not properly record certain transactions in the general ledger. The University erroneously capitalized interest on completed capital projects, resulting in an $800,000 overstatement of the financial statements. (Finding 2, pages 47-48) We recommended the University review its recording and accounting for interest capitalization and ensure staff receive appropriate training. University officials agreed with the finding and stated they will review and adjust existing procedures to ensure capitalized interest is accurately recorded. AUDITOR’S OPINION Our auditors stated the financial statements of Western 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:LW SPECIAL ASSISTANT AUDITORS E.C. Ortiz & Co., LLP were our Special Assistant Auditors.