REPORT DIGEST

NORTHEASTERN
ILLINOIS UNIVERSITY

FINANCIAL AND
COMPLIANCE AUDIT
(In Accordance with the
Single Audit Act and
OMB Circular A-133)
For the Year Ended:
June 30, 1998

Summary of Findings:

Release Date:
May 20, 1999

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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217) 782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

• The University did not adequately plan the selection and implementation of its new academic and administrative computer system for which it paid $804,170.

• The University's efforts to define and correct impending computer problems due to the impact of the year 2000 are not fully adequate.

• The University maintained bank deposits $600,000 in excess of FDIC insurance coverage and pledged collateral.
  
  
  
  
  

{Financial Information is summarized on the reverse page.}

Uninsured deposits of over $600,000

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE PLANNING IN SELECTION AND IMPLEMENTATION OF NEW COMPUTER SYSTEM

The University did not adequately plan the selection and implementation of its new academic and administrative computer system. Although the project was originally targeted to be completed by November 1996, it was still incomplete at the conclusion of our audit fieldwork.

The University purchased a software package that did not meet its needs and required extensive modifications. Also, the University's software package was not adequately tested before implementation. The University paid the vendor $804,170 for the new academic and administrative computer system, but the vendor could not deliver the finance and purchasing modules in the negotiated time frame. When the new system did not perform as expected, the University was without a working financial package. As a result, the University was still relying on an old system that is not Year 2000 compliant. (Finding 98-2, page 17)

We recommended that the University develop a planning framework that ensures all required components of computer system development projects are adequately addressed.

The University agreed with our recommendation and stated it is currently implementing two new systems that will be in production by July 1, 1999.

YEAR 2000 PLANNING AND IMPLEMENTATION DEFICIENCIES

The University's efforts to define and correct impending computer problems due to the impact of the Year 2000 were not fully adequate. Y2K compliance continues to be a prominent issue for the University, and a significant amount of effort must be expended to identify and correct problems.

The Year 2000 can cause problems with computer-based systems due to the manner that computers process calendar dates. This problem can cause significant business problems if not identified and corrected.

Since the University uses computer systems to process information to meet its mandates and objectives, addressing the technical issues surrounding the upcoming millennium was important. The University's building management system was not Y2K compliant, and steps had not been identified, nor resources allocated, to ensure that campus structures and facilities will function into the next millennium. Correspondingly, the University had not yet developed a plan to address the extent of the millennium's impact, determine appropriate actions, test for the reliability, and implement solutions for embedded systems. The University was still assessing the Y2K compliance of all desktop computers, networking equipment and file servers. In addition, the University had not determined the extent of Y2K compliance with regard to data shared with external entities. Furthermore, contingency plans had not been developed to address any systems failures due to Y2K non-compliance.

If the University does not give high priority to this issue, systems relied upon to meet mandates and objectives could have serious problems. The University needed to have a plan in place where the scope of the impact has been inventoried, and corrective process defined and scheduled or implemented. (Finding 98-3, pages 18-19)

The University agreed with this finding and accepted our recommendation to assess this problem, develop a plan, and devote the necessary resources to implement corrective action.

UNCOLLATERALIZED DEPOSIT ACCOUNTS

The University maintained deposits of $612,331 in excess of the Federal Deposit Insurance Coverage (FDIC) and pledged collateral. The University's deposits (bank balances) at a single financial institution totaled $3,212,331 at June 30, 1998. FDIC plus pledged collateral coverage totaled $2,600,000, which left uninsured deposits in excess of $600,000. The State Officers and Employees Money Disposition Act (30 ILCS 230/2c) requires State agencies to obtain appropriate collateral whenever funds deposited exceed the $100,000 federal deposit insurance coverage. The University indicated this was due to the income fund being held locally and the manner in which the income is recorded. Failure to obtain collateral puts State funds at risk in the event that the financial institution should incur financial difficulties. (Finding 98-4, page 20)

We recommended the University obtain sufficient collateral to meet the statutory requirements. The University stated it has now obtained an increase in pledged collateral.

OTHER FINDINGS

The remaining findings and recommendations are being given appropriate attention by the University. We will review progress toward implementation of our recommendations in our next audit.

Responses to the findings were provided by Helen C. Ang, Acting Chief Fiscal Affairs Officer.

AUDITORS' OPINION

Our auditors stated the University's financial statements at June 30, 1998 are fairly presented except for the effects of such adjustments, if any, as might have been determined to be necessary had they been able to examine evidence regarding year 2000 disclosures.

_____________________________________
WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Nykiel, Carlin, Lemna & Co. were our special assistant auditors for this audit.