REPORT DIGEST NORTHEASTERN ILLINOIS UNIVERSITY SINGLE AUDIT, AND COMPLIANCE EXAMINATION FOR THE YEAR ENDED JUNE 30, 2016 Release Date: March 29, 2017 FINDINGS THIS AUDIT: 17 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 7 -- 10 -- 17 Category 3: 0 -- 0 -- 0 TOTAL: 7 -- 10 -- 17 FINDINGS LAST AUDIT: 14 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 our federal Single Audit and Compliance Examination of the Northeastern Illinois University (University) for the year ended June 30, 2016. A separate Financial Audit as of and for the year ending June 30, 2016, was previously released on February 2, 2017. In total, this report contains 17 findings, three of which were reported in the Financial Audit. SYNOPSIS • (16-04) The University did not have adequate controls in place over the awarding of student financial aid. • (16-05) The University did not timely return the unearned portion of student financial aid from students who withdrew from the University. • (16-11) The University did not have adequate controls over its property and equipment. • (16-12) The University did not comply with the requirements of the Fiscal Control and Internal Auditing Act. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS WEAKNESSES IN AWARDING OF STUDENT FINANCIAL AID The University did not have adequate controls in place over the awarding of student financial aid. We tested a sample of 40 students who received student financial aid and noted the following: • One student was paid $877 in excess of the award amount for Federal Work-Study (FWS) program. The unmet need of this student allows only for an adjustment in award of $138 and over award threshold of $300. Thus, the University should have reimbursed the Department of Education for the excess expense and drawdown of $439. In addition, an adjustment to increase budget for this student was not properly recorded and the document supporting this adjustment was not scanned into the University’s Financial Aid system until noted by the auditors. • For 7 students, the approval of the Financial Aid Director or Associate Director to adjust the cost of attendance to allow special conditions as stated in the University policies and procedures were not documented. In addition, the required Budget Adjustment Worksheet and documents supporting manual budget adjustments for these 7 students were not scanned into the University’s Financial Aid system. We also noted it is the practice of the University to allow verbal approval in making manual budget adjustments. (Finding 4, pages 25-27). This finding has been repeated since 2010. We recommended the University improve its procedures over the awarding of student financial aid to ensure awards are made accurately and approval of manual budget adjustments are adequately documented. University officials agreed with the finding and stated they have already completed an initial review of steps needed. (For the previous University response, see Digest Footnote #1.) UNTIMELY RETURN OF UNEARNED STUDENT FINANCIAL AID The University did not timely return the unearned portion of the Title IV aid provided to all students who withdrew from the University. During our review of 40 students awarded with Title IV grants who withdrew from classes during the Academic Year 2015-2016, we noted the University failed to return funds totaling $2,300 for two (5%) students within 45 days from the withdrawal date (3 to 5 days late). (Finding 5, pages 28-29). This finding has been repeated since 2010. We recommended the University strengthen its controls over processing of returns of Title IV funds to ensure these are made timely in compliance with federal regulations. University officials agreed with the finding and stated they have already completed an initial review of steps needed. (For the previous University response, see Digest Footnote #2.) INADEQUATE CONTROLS OVER UNIVERSITY PROPERTY AND EQUIPMENT The University did not have adequate controls over its property and equipment. In our physical identification of 20 items in the property records, we noted the following: • Five (25%) equipment items with a total value of $9,268 were not found. The University did not file a missing asset investigation notice for these items. • Seventy three laboratory instruments totaling $39,968 were sent by the University to a third party recycling unit in 2011 without the approval of Central Management Services (CMS). The 73 laboratory instruments are no longer with the University but are still included in the property records pending approval of deletion from CMS. During our tracing of 20 items physically identified to the property records as of June 30, 2016, we noted the following: • Four (20%) equipment items with a total value of $5,065 were not included in the property listing of the University. • A CPU (5%) with a value of $3,690 was identified as obsolete. (Finding 11, pages 39-41). This finding has been repeated since 2014. We recommended the University adhere to its procedures to ensure property and equipment records are accurately maintained and updated with proper approval. University officials agreed with the finding and stated they will develop necessary controls. (For the previous University response, see Digest Footnote #3.) NONCOMPLIANCE WITH THE FISCAL CONTROL AND INTERNAL AUDITING ACT The University did not fully comply with the Fiscal Control and Internal Auditing Act (FCIAA). During testing, auditors noted the University performed only two internal audit reviews during Fiscal Year 2016 as outlined in the University’s Fiscal Years 2016 and 2017 Internal Audit Plan. The internal auditor conducted the annual FCIAA reviews and the annual GAAP audit required by the Financial Reporting Standards Board Act. However, there were no audits performed relating to the major systems of internal accounting and administrative control as required. (Finding 12, page 42). We recommended the University ensure compliance with the requirements of the FCIAA in planning and performing the University’s internal control. University officials agreed with the finding and stated they will develop necessary steps to assure audits are completed. OTHER FINDINGS The remaining findings are reportedly being given attention by the University. We will review the University’s progress towards the implementation of our recommendations in our next engagement. AUDITOR’S OPINIONS The Financial Audit report was previously released. The auditors stated the financial statements of the University as of and for the year ended June 30, 2016 are fairly stated in all material respects. The auditors also conducted a Single Audit of the University as required by the Uniform Guidance. The auditors stated the University complied, in all material respects, with the types of compliance requirements that could have a direct and material effect on the University’s major federal programs for the year ended June 30, 2016. ACCOUNTANT’S OPINION The auditors conducted a Compliance Examination of the University for the year ended June 30, 2016, as required by the Illinois State Auditing Act. The auditors stated the University complied, in all material respects, with the requirements described in the report. This engagement was conducted by E.C. Ortiz & Co., LLP. BRUCE L. BULLARD Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:JGR DIGEST FOOTNOTES #1 – AWARDING OF STUDENT FINANCIAL AID 2015: The University concurs with this finding and recommendation. #2 – RETURN OF UNEARNED STUDENT FINANCIAL AID 2015: The University concurs with this finding and recommendation. #3 – PROPERTY AND EQUIPMENT CONTROLS 2015: The University concurs with this recommendation.