REPORT DIGEST
NORTHEASTERN ILLINOIS UNIVERSITY
Financial, Compliance, and Single Audit
For the Year Ended: June 30, 2011
Release Date: March 8, 2012
Summary of Findings:
Total this audit: 9
Total last audit: 8
Repeated from last audit: 3
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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(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
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SYNOPSIS
• The University did not properly identify all students who
withdrew from the University and did not determine or return the unearned
portion of Title IV aid provided to all students who withdrew from the
University resulting in inaccuracies in the amounts reported in their financial
statements and noncompliance with federal regulations.
• The University did not have adequate controls in place
over the awarding of student financial aid.
• The University did not reconcile its cash balance for the
Federal Direct Loan Program on a monthly basis.
• The University reported inaccurate information on its
Fiscal Operations Report and Application to Participate (FISAP)
filed September 30, 2011.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
FAILURE TO IDENTIFY AND REFUND TITLE IV AID IN A TIMELY
MANNER
The University did not properly identify all students who
withdrew from the University. The
University also did not determine or return the unearned portion of Title IV
aid provided to all students who withdrew from the University resulting in
inaccuracies in the amounts reported in their financial statements and
noncompliance with Federal Regulations.
In our testing of unofficial withdrawal determination, we
tested a sample of 40 students receiving Title IV aid and who failed to receive
a passing grade in any of their classes.
We noted that seven students lacked documentation that they completed
the period and, therefore, should have been considered to have unofficially
withdrawn from the University.
In response to the results of this testing, University
personnel performed unofficial withdrawal determination procedures on the
remaining students receiving Title IV aid and who failed to receive a passing
grade in any of their classes. These
procedures resulted in the identification of 248 students that received Title
IV aid and should have been considered to have unofficially withdrawn from the
University.
The Federal Government requires that an institution must
have a procedure for determining whether a Title IV aid recipient who began
attendance during a period completed the period or should be treated as a
withdrawal. If a student who began
attendance and has not officially withdrawn fails to earn a passing grade in at
least one course offered over an entire period, the institution must assume, for
Title IV purposes, that the student has unofficially withdrawn, unless the
institution can document that the student completed the period.
Furthermore, Federal Regulations require that when a
recipient of Title IV grant or loan assistance withdraws from an institution
during a payment period or period of enrollment in which the recipient began
attendance, the institution must determine the amount of Title IV grant or loan
assistance that the student earned as of the student’s withdrawal date and
refund the unearned portion to the Federal Government.
The withdrawal date for a student who ceases attendance
without providing notice at an institution that is not required to take
attendance is the mid-point of the payment period (34 CFR
668.22(c)). Consequently, 50% of Title
IV grant or loan assistance provided to the student is considered unearned and
should be refunded.
In the case of a student who did not begin attendance during
the period of enrollment, or if the institution is unable to document the student’s
attendance at any class during the period, all Title IV grant or loan
assistance provided to the student is considered unearned and should be
refunded (34 CFR 668.21(a)).
Based on our testing of the University’s calculation of the
refundable Title IV grant and loan assistance for the 248 students identified
above, we noted that the University lacked documentation of attendance in any
class for 144 of these students.
Ultimately, in response to our testing and inquiries, the
University identified $529,154 in unearned Title IV aid which should have been
refunded to the Federal Government and for which the University has recourse
against the students for payment.
Since the liability to the Federal Government had not been
identified timely, the University’s financial statements understated current
liabilities for refundable grant revenues by $529,154 and also understated
student receivables, net of an allowance for doubtful accounts, by $264,577. A
proposed adjustment was not recorded by the University.
(Finding 1, Pages 14-16)
We recommended that the University implement procedures to
ensure that refunds are processed timely and accurately in order to facilitate
accurate financial reporting and to be in compliance with federal regulations.
University officials agreed with the finding.
NEED TO IMPROVE CONTROLS OVER AWARDING OF STUDENT FINANCIAL
AID
The University did not have adequate controls in place over
the awarding of student financial aid.
During our testing of 83 students, we noted errors with nine
of the students as follows:
• For four students tested, an incorrect number of credit
hours were used to calculate these students’ budgeted cost of attendance.
• For one student tested, we noted three months were used to
calculate the summer budgeted cost of attendance instead of the approved two
months.
• For four students tested, we noted that an incorrect
tuition rate was used to calculate the students’ cost of attendance. (Finding
3, Pages 19-20)
We recommended that the University improve its procedures
over the awarding of student financial aid to ensure that students are awarded
accurately.
University officials agreed with the finding.
DIRECT LOAN CASH SUMMARY RECONCILIATION
The University did not reconcile its cash balance for the
Federal Direct Loan Program on a monthly basis.
We requested monthly reconciliations of the University’s
Direct Loan records to the ending cash balance on the School Account Statements
(SAS) provided by the Common Origination and Disbursement (COD) System. Although the University was able to provide
evidence that it had separately analyzed components of the SAS, the University
could not provide us with a reconciliation of the cash balance.
The Department of Education’s “Direct Loan School Guide”,
Chapter 6, Reconciliation, requires that the University reconcile the ending
cash balance on the SAS with its internal records on a monthly basis, ensuring
that any discrepancies are resolved, and documents any reason for a positive or
negative balance. (Finding 6, Pages
25-26)
We recommended that the University review its procedures to
ensure that the ending cash balance per the Direct Loan Cash Summary is being
reconciled on a monthly basis.
University officials agreed with the finding.
INACCURATE FISCAL OPERATIONS REPORT AND APPLICATION TO
PARTICIPATE (FISAP) REPORTING
The University reported inaccurate information on its Fiscal
Operations Report and Application to Participate (FISAP)
filed September 30, 2011. An amended FISAP was filed on January 3, 2012.
During or testing of the FISAP we noted the following inaccuracies:
• Total undergraduate tuition and fees for the award year
ended June 30, 2011 was reported as $54,541,033 but should have been reported
as $56,126,761.
• Total graduate tuition and fees for the award year ended
June 30, 2011 was reported as $11,709,873 but should have been reported as
$10,448,405.
• Total Federal Pell grant expenditures for the 2010-2011
award year was reported as $23,951,933 but should have been reported as
$19,274,053. (Finding 7, Pages 27-28)
We recommended that the University review its procedures to
ensure that the FISAP is being prepared accurately.
University officials agreed with the finding.
OTHER FINDINGS
The remaining findings are reportedly being given attention
by the University. We will review the University’s progress toward
implementation of our recommendations in our next audit.
AUDITORS’ OPINION
Our auditors state the University financial statements as of
June 30, 2011 and for the year then ended, are fairly presented in all material
respects.
WILLIAM G. HOLLAND
Auditor General
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SPECIAL ASSISTANT AUDITORS
CliftonLarsonAllen were our special assistant auditors.