REPORT DIGEST WESTERN ILLINOIS UNIVERSITY FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2016 Release Date: February 2, 2017 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 0 -- 0 -- 0 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 0 -- 1 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 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 the Western Illinois University Financial Audit as of and for the year ended June 30, 2016. Western Illinois University’s Compliance Examination and Federal Single Audit covering the year ended June 30, 2016 will be issued in a separate report at a later date. SYNOPSIS • (16-1) The University did not evaluate changes in circumstances affecting capital assets to determine whether impairment occurred and did not properly account for and report capital asset impairments in the financial statements. FINDING, CONCLUSION, AND RECOMMENDATION IMPROPER ACCOUNTING FOR CAPITAL ASSET IMPAIRMENTS The University did not evaluate changes in circumstances affecting capital assets to determine whether impairment occurred and did not properly account for and report capital asset impairments in the financial statements. We noted: • Buildings planned for demolition were still depreciated and maintained on the books, rather than evaluated for impairment and adjusted to reflect the decline in value when management chose to change the expected use. • Deconstruction and demolition costs were capitalized instead of expensed as incurred. • Notes to the financial statements did not disclose idle capital assets or impairment losses. As a result, prior year net position balances were overstated by $7,620,658 and current year expenses were understated by $752,057. The financial statements and footnotes were corrected subsequent to audit testing. (Finding 1, pages 53-55) We recommended the University establish procedures to ensure that transactions are carefully reviewed for proper accounting and disclosure and any necessary guidance should be obtained to ensure conformity with Generally Accepted Accounting Principles (GAAP). University officials agreed with the finding and stated they will modify its capital asset procedures to ensure proper capitalization and as necessary, obtain guidance to ensure conformity with GAAP. AUDITOR’S OPINION Our auditors stated the financial statements of Western Illinois University as of June 30, 2016 and for the year then ended, are fairly stated in all material respects. FRANK J. MAUTINO Auditor General FJM:lkw SPECIAL ASSISTANT AUDITOR Our Special Assistant Auditors for this audit were Adelfia LLC.