FY11-NEIU-Fin-Full

              STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
FINANCIAL AUDIT
For the Year Ended June 30, 2011
Performed as Special Assistant Auditors for
the Auditor General, State of Illinois
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
FINANCIAL AUDIT
For the Year Ended June 30, 2011
TABLE OF CONTENTS
Page(s)
Agency Officials .......................................................................................................................... 1
Financial Statement Report
Summary ................................................................................................................................ 2
Independent Auditor’s Report .............................................................................................. 3-4
Management’s Discussion and Analysis ........................................................................... 5-16
Basic Financial Statements
Statement of Net Assets ............................................................................................ 17-18
Statement of Revenues, Expenses, and Changes in Net Assets ................................... 19
Statement of Cash Flows ................................................................................................ 20
Notes to Basic Financial Statements ......................................................................... 21-45
Supplementary Information
University Facilities Revenue Bond Funds
Insurance in Force (Unaudited) ................................................................................. 46
Rates and Charges (Unaudited) ................................................................................ 47
Summary of Reserves for Debt Service and Renewal and
Replacement (Unaudited) ................................................................................... 48
Independent Auditor’s Report on Internal Control over Financial Reporting
and on Compliance and other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing Standards ........ 49-50
Schedule of Findings
Current Findings ............................................................................................................... 51-55
Prior Findings Not Repeated ................................................................................................. 56
Related Report Published under Separate Cover
Northeastern Illinois University
Compliance Examination (in Accordance with the Single Audit Act and
OMB Circular A-133) for the Year Ended June 30, 2011
1
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
FINANCIAL AUDIT
For the Year Ended June 30, 2011
Agency Officials
President Dr. Sharon Hahs
Vice President for Finance and Administration Mr. Mark Wilcockson, CPA
Associate Vice President - Financial and Administrative
Affairs Mr. David Jonaitis
Director of Financial Affairs/Controller Ms. Peggy Ho
Director of Internal Audit Mr. Ronald Cierny, CPA
Executive Director - Office of University Budgets Ms. Helen Ang
Agency offices are located at:
5500 North St. Louis Avenue
Chicago, Illinois 60625
2
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
FINANCIAL AUDIT
For the Year Ended June 30, 2011
FINANCIAL STATEMENT REPORT
Summary
The audit of the accompanying 2011 basic financial statements of Northeastern Illinois
University was performed by CliftonLarsonAllen LLP.
Based on their audit, the auditors expressed an unqualified opinion on the University’s basic
financial statements.
The auditors reported that the supplementary information presented in this section has not been
subjected to the auditing procedures applied in the audit of the basic financial statements and
the auditors express no opinion on them.
Summary of Findings
The auditors identified a matter involving the University’s internal control over financial reporting
that they considered to be a significant deficiency. The significant deficiencies are described in
the accompanying Schedule of Findings on pages 51 to 55 of this report, as findings 11-1,
Failure to Identify and Refund Title IV Aid in a Timely Manner and 11-2, Generally Accepted
Accounting Principles (GAAP) Not Properly Applied to the State Universities Risk Management
Association (SURMA) Asset.
Exit Conference
The University waived having an exit conference in correspondence dated January 30, 2012,
from the University’s Vice President for Finance and Administration, Mark Wilcockson.
The responses to the recommendations were provided by Mark Wilcockson in correspondence
dated February 7, 2012.
CliftonLarsonAllen LLP
1301 West 22nd Street, Suite 1100
Oak Brook, IL 60523
630-573-8600 | fax 630-573-0798
www.cliftonlarsonallen.com
3
Independent Auditor’s Report
Honorable William G. Holland
Auditor General of the State of Illinois
and
Board of Trustees
Northeastern Illinois University
As Special Assistant Auditors for the Auditor General, we have audited the accompanying financial
statements of the business-type activities of the Northeastern Illinois University (University) and its
aggregate discretely presented component units, collectively a component unit of the State of
Illinois, as of and for the year ended June 30, 2011, which collectively comprise the University’s
basic financial statements as listed in the table of contents. These financial statements are the
responsibility of the University's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The prior year partial comparative information has been
derived from the University’s June 30, 2010 financial statements and, in our report dated
January 11, 2011, we expressed an unqualified opinion on the respective financial statements of
the business-type activities and the aggregate discretely presented component units. We did not
audit the financial statements of the aggregate discretely presented component units, as described
in Note 1 of the financial statements. Those financial statements were audited by another auditor
whose report thereon has been provided to us, and our opinion on the financial statements, insofar
as it relates to the amounts included for the aggregate discretely presented component units, is
based on the report of the other auditor.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit and the report of the other auditor provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditor, the financial statements
referred to above present fairly, in all material respects, the respective financial position of the
business-type activities and the aggregate discretely presented component units of the University,
as of June 30, 2011, and the respective changes in its financial position and its cash flows, where
applicable, for the year then ended in conformity with accounting principles generally accepted in
the United States of America.
In accordance with Government Auditing Standards, we have also issued a report dated
February 10, 2012 on our consideration of the University’s internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on the internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards and
4
should be considered in assessing the results of our audit.
The Management's Discussion and Analysis on pages 5 through 16 is not a required part of the
basic financial statements but is supplementary information required by accounting principles
generally accepted in the United States of America. We have applied certain limited procedures,
which consisted principally of inquiries of management regarding the methods of measurement
and presentation of the required supplementary information. However, we did not audit the
information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise the University's basic financial statements. The accompanying
supplementary information, as listed in the table of contents, is presented for purposes of additional
analysis and is not a required part of the basic financial statements. The supplementary
information, as listed in the table of contents, has not been subjected to the auditing procedures
applied by us in the audit of the basic financial statements, and accordingly, we express no opinion
on it.
a
Oak Brook, Illinois
February 10, 2012
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
5
This section of Northeastern Illinois University’s (University) annual report presents
management’s discussion and analysis of the University’s financial position and activities during
the fiscal year ended June 30, 2011 with comparative information for the year ended June 30,
2010. The discussion and analysis is designed to focus on current activities and currently
known facts. Please read it in conjunction with the University’s financial statements and related
footnote disclosures. This discussion and analysis is focused on the University, a discussion
and analysis of the University’s Component Units can be found in the separately issued financial
statements of the University’s Foundation.
USING THIS ANNUAL REPORT
The University’s annual report contains three financial statements: The Statement of Net
Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and the Statement
of Cash Flows. These financial statements are prepared in accordance with the Governmental
Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements - and
Management Discussion and Analysis - for State and Local Governments, and GASB
Statement No. 35, Basic Financial Statements - and Management Discussion and Analysis - for
Public Colleges and Universities, as amended by GASB Statements No. 37 and No. 38. These
statements establish standards for external financial reporting and provide a consolidated
perspective of the University’s assets, liabilities, net assets, revenues, expenses, and cash
flows.
The Statement of Net Assets presents the assets, liabilities, and net assets of the University
as of the end of the fiscal year using the accrual basis of accounting, whereby revenues and
assets are recognized when the service is provided, and expenses and liabilities are recognized
when a service is delivered to the University, regardless of when cash is exchanged. Net
assets, the difference between total assets and total liabilities, is one indicator of the overall
strength of the institution. Except for capital assets, all other assets and liabilities are measured
at a point in time using current values. Capital assets are recorded at historical cost less an
allowance for depreciation. For comparison purposes, comparative data are provided for the
prior year.
The Statement of Revenues, Expenses, and Changes in Net Assets presents the
University’s results of operations, as well as the non-operating revenues and expenses for the
fiscal year. Operating revenues are generated by providing goods and services to various
customers and constituencies of the University. Operating expenses are incurred when goods
and services are provided by vendors and employees for the overall operations of the
University. Non-operating revenues and expenses include resources provided by the State of
Illinois and other non-operating transactions. For comparison purposes, comparative data are
provided for the prior year.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
6
The Statement of Cash Flows presents the receipt and use of cash and cash equivalents in
the University’s operating, financing, and investing activities during the fiscal year and provides
a view of the University’s ability to meet financial obligations as they mature. For comparison
purposes, comparative data are provided for the prior year.
The Notes to Financial Statements are a crucial component of the report because they
include important background and financial information that may not be reflected on the face of
the statements. Details on the University’s accounting policies, long-term debt obligations, cash
holdings, capital assets, and other important areas are presented in the footnotes.
FINANCIAL HIGHLIGHTS
Highlights of the University’s financial position for the fiscal year ended June 30, 2011 are
presented below:
 The University has total assets of $185.0 million, including current assets of $67.6 million
and noncurrent assets of $117.4 million.
 The University has total liabilities of $55.1 million, including current liabilities of $12.1
million and noncurrent liabilities of $43.0 million.
 The University’s total net assets increased over the prior year by $18.2 million to $130.0
million, including an increase of $20.2 million in unrestricted net assets, offset by a
decrease in restricted net assets of $1.6 million.
 The total operating revenues of the University were $79.0 million, including $53.0 million
in student tuition and fees, net of scholarship allowances, and $17.8 million in grants and
contracts.
 The total operating expenses of the University were $153.5 million, including $70.7
million for instruction.
 The operating loss of $74.5 million was completely funded by non-operating revenues,
including State appropriations, gifts and donations, investment income, payments on
behalf of the University, Pell Grant revenue, and other non-operating revenues. As a
result, net income before other revenues, expenses, gains and losses totaled $18.4
million. This amount includes $4.9 million in depreciation expense.
FINANCIAL ANALYSIS
Following are condensed financial statements. Certain significant items are discussed in further
detail following each respective statement.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
7
Statement of Net Assets
Condensed Statement of Net Assets
As of June 30, 2011 and 2010
(dollars in thousands)
Increase Percent
2011 2010 (Decrease) Change
ASSETS
Current assets $ 67,631 $ 50,054 $ 17,577 35.1
Non-current assets:
Restricted cash and cash equivalent 7,635 4,304 3,331 77.4
Restricted investment 1,347 994 353 35.5
Receivables, net 2,406 2,567 (161) (6.3)
Unamortized bond issue costs 718 657 61 9.3
Capital assets, net 105,329 103,454 1,875 1.8
Total assets 185,066 162,030 23,036 14.2
LIABILITIES
Current liabilities 12,134 12,027 107 0.9
Non-current liabilities:
Liability for compensated absences 7,310 7,798 (488) (6.3)
Revenue bonds payable 17,350 17,520 (170) (1.0)
Certificates of participation 18,286 12,856 5,430 42.2
Total liabilities 55,080 50,201 4,879 9.7
NET ASSETS
Invested in capital assets, net 82,619 83,044 (425) (0.5)
Restricted 5,751 7,320 (1,569) (21.4)
Unrestricted 41,616 21,465 20,151 93.9
TOTAL NET ASSETS $ 129,986 $ 111,829 $ 18,157 16.2
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
8
The following chart shows net assets by classification and restriction:
Comparative of Net Assets ‐ Fiscal Years 2011 and 2010
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
Invested in Capital
Assets, net
Restricted Unrestricted
(dollars in thousands)
2011
2010
Current Assets - The majority of the Current Assets of the University consists of cash and cash
equivalents of $42.6 million, and net receivables of $24.2 million, including $3.1 million in grants
receivables, $3.2 million in tuition and fees receivables, and $17.8 million in other receivables.
Total current assets increased by $17.6 million from the prior year. This is primarily the result of
the $12.3 million increase in cash and cash equivalents and the $5.3 million increase in
receivables. The increase in cash and cash equivalents can be attributable to two factors. Net
student tuition and fees cash receipts increased by $2.9 million mainly due to a 6% increase in
undergraduate student tuition rates. Grants and contracts (including Pell grants) cash receipts
increased by $7.8 million, which reflects timely collection of federal grant funds and the increase
in the number of Pell eligible students. The increase in receivables was the result of the $7.8
million increase in other receivables offset by a decrease in grants receivables of $2.4 million.
The increase in other receivables was due to the delay in reimbursement payments owed to the
University at June 30, 2011, by the State Comptroller for payroll expenses. The decrease in
grants receivables was mainly due to regular monthly scheduled draws from the Department of
Education which resulted in lower receivables in fiscal year 2011 compared to fiscal year 2010.
Noncurrent Assets - As of June 30, 2011, the University had total noncurrent assets of $117.4
million compared with $112.0 million at June 30, 2010. This net increase of $5.4 million was
primarily due to the $3.3 million increase in restricted cash and cash equivalents and $1.9
million increase in capital assets. The increase in restricted cash and cash equivalents reflects
the unspent proceeds from the 2010 Certificates of Participation issued in September 2010 to
fund the energy conservation project. The increase in capital assets is primarily due to the
construction of the energy construction project. The University’s net investment in capital
assets is as follows:
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
9
Capital Assets, Net
As of June 30, 2011 and 2010
(dollars in thousands)
Increase Percent
2011 2010 (Decrease) Change
Capital assets:
Land and land improvements $ 8,008 $ 8,008 $ - -
Site improvements 6,408 6,408 - -
Building 134,099 130,931 3,168 2.4
Equipment and historical treasures 14,032 14,047 (15) (0.1)
Library books 22,571 21,899 672 3.1
Construction in progress 3,679 1,056 2,623 248.4
Total 188,797 182,349 6,448 3.5
Less accumulated depreciation 83,469 78,895 4,574 5.8
NET CAPITAL ASSETS $ 105,328 $ 103,454 $ 1,874 1.8
The following chart is the breakdown of the University’s capital assets, net of depreciation, by
category:
Net Capital Assets - Fiscal Years 2011 and 2010
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
Land and
Land
Improvements
Site
Improvements
Building
and Building
Improvements
Equipment
and Historical
Treasures
Library
Books
Consruction
in Progress
(dollars in thousands)
2011
2010
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
10
Current Liabilities - Current liabilities consist primarily of accounts payable and accrued
liabilities of $7.5 million, deferred revenues for summer tuition and grants of $2.7 million, and the
current portion of the liability for compensated absences of $1.0 million. Total current liabilities
as of June 30, 2011 were $12.1 million.
Noncurrent Liabilities - Noncurrent liabilities consist of long-term debt and other obligations for
which the principal is due more than one year from the statement of net assets date. Long-term
debt totaled $42.9 million at June 30, 2011 as compared to $38.2 million at June 30, 2010.
Long-term debt increased in September 2010 when the University issued $6.0 million in
Certificates of Participation to finance the acquisition of energy conserving improvements. The
University’s current revenue bonds payable consists of University Facilities Revenue Bonds
Series 1973, and University Facilities System Revenue Bonds Series 2004.
Fiscal year 2011 principal repayments for the two revenue bonds and the two Certificates of
Participation are as follows:
Principal Paid
in Fiscal Year
Debt Type 2011
Revenue Bonds Series 1973 $ 165,000
Revenue Bonds Series 2004* -
Certificates of Participation 2006 610,000
Certificates of Participation 2010** -
Total Principal Paid $ 775,000
* No principal repayment until year 2014
** No principal repayment until year 2012
Total Net Assets - Net assets are divided into three major categories. The first category,
invested in capital assets, net of related debts, reports the University’s net equity in property and
equipment. The second category, restricted net assets, reports net assets that are owned by
the University, but the use or purpose of the funds is restricted by an external source or entity.
The third category is unrestricted net assets, which are available to be used for any lawful
purpose of the University. The total net assets increased by $18.2 million over the prior year.
This is a result of a $20.2 million increase in unrestricted net assets, and a $1.5 million decrease
in restricted net assets. The increase in unrestricted net assets was due to the growth in
operating revenues outpaced the growth in operating expenses, resulting in the build-up of
unrestricted fund balance.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
11
The following is a breakdown of the $5.7 million restricted net assets:
Restricted Net Assets
As of June 30, 2011 and 2010
(dollars in thousands)
2011 2010
Grants and contracts $ 659 $ 494
Student loans 2,487 2,562
Debt service 1,951 3,452
Other 654 812
TOTAL RESTRICTED NET ASSETS $ 5,751 $ 7,320
Total Net Assets - June 30, 2011
Unrestricted
32.0%
Restricted
4.4%
Invested in Capital
Assets
63.6%
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
12
Statement of Revenues, Expenses, and Changes in Net Assets
Condensed Statement of Revenues, Expenses, and Changes in Net Assets
For the Years Ended June 30, 2011 and 2010
(dollars in thousands)
Increase Percent
2011 2010 (Decrease) Change
OPERATING REVENUES
Net tuition and fees $ 53,053 $ 50,742 $ 2,311 4 .6
Grants and contracts 17,763 16,694 1,069 6 .4
Auxiliary enterprises 3,913 3,734 179 4.8
Other 4 ,317 3,893 424 10.9
Total operating revenues 79,046 75,063 3,983 5 .3
OPERATING EXPENSES
Instruction 70,745 65,484 5,261 8 .0
Public service 13,439 13,634 (195) (1.4)
Academic support 9 ,603 10,111 (508) (5.0)
Student services and programs 11,608 12,319 (711) (5.8)
Institutional support 13,440 13,651 (211) (1.5)
Operations and maintenance of plant 14,014 14,366 (352) (2.5)
Depreciation expense 4 ,944 5,029 (85) (1.7)
Auxiliary 4 ,053 3,943 110 2 .8
Other 11,654 10,227 1,427 14.0
Total operating expenses 153,500 148,764 4,736 3 .2
Operating loss (74,454) (73,701) (753) 1.0
NON-OPERATING REVENUES (EXPENSES)
State appropriations 40,711 43,732 (3,021) (6.9)
Payments on behalf of the University 33,391 30,096 3,295 10.9
Pell Grant 19,972 15,744 4,228 26.9
Other non-operating revenues 2 34 184 5 0 27.2
Other non-operating expenses (1,499) (1,379) (120) 8 .7
Total non-operating revenues 92,809 88,377 4,432 5 .0
NET INCOME 18,355 14,676 3,679 25.1
Gain/(loss) on disposal of capital assets (14) (22) 8 (36.4)
Adjustments to capital additions provided
by State of Illinois (184) (85) (99) 116.5
CHANGES IN NET ASSETS 18,157 14,569 3,588 24.6
NET ASSETS, BEGINNING OF YEAR 111,829 97,260 14,569 15.0
NET ASSETS, END OF YEAR $ 129,986 $ 111,829 $ 18,157 16.2
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
13
Total Revenue by Source - June 30, 2011
Net tuition and fees
30.9%
Grants and contracts
10.3%
Auxilliary activities
2.3%
On behalf payments
19.4%
State appropriations
23.7%
Other Revenues - net
of interest on
indebtedness
13.4%
Operating Expenses - June 30, 2011
Instruction
46.1%
Public Service
8.8%
Academic Support
6.3%
Student Services and
Programs
7.6%
Institutional Support
8.8%
Operations and
maintenance of Plant
9.1%
Depreciation Expense
3.2%
Auxiliary
2.6%
Other
7.5%
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
14
Operating Revenues - Total operating revenues increased by $4.0 million. This is the result of
the increase in tuition and fees of $2.3 million and the increase in federal grant awards of $1.5
million.
Operating Expenses - Instruction accounted for the largest portion of operating expenses at
$70.7 million. Operation and maintenance is the next largest at $14.0 million. These two
sources, plus institutional support at $13.4 million, public service at $13.4 million, student
services and programs at $11.6 million, and academic support at $9.6 million, account for
approximately 87% of the operating expenses of the University. Operating expenses increased
by $4.7 million. This increase is a net result of four items: Employee salaries increased by 1.4
million due to the salary increases for negotiated and non-negotiated employees; payments on
behalf of the University for health insurance and retirement benefits increased by $3.3 million,
which reflects the rise in employee health insurance and retirement benefits costs financed by
the State; scholarships and fellowships increased by $1.3 million; supplies and services costs
decreased by $1.3 million.
Non-operating Revenues (Expenses) - This consists of State appropriations, on behalf
payments, Pell Grant revenue, investment income, and other non-operating revenues, less
interest on indebtedness. Total non-operating revenues increased by $4.4 million. This is the
net result of the increase of $3.3 million in payments on behalf of the University, the increase of
$4.2 million in Pell Grant and the decrease of $4.2 million in American Recovery and
Reinvestment Act (ARRA) Federal Funding.
Statement of Cash Flows
Condensed Statement of Cash Flows
For the Years Ended June 30, 2011 and 2010
(dollars in thousands)
2011 2010
Cash received from operations $ 79,872 $ 73,920
Cash expended for operations (116,429) (114,726)
Net cash used in operating activities (36,557) (40,806)
Net cash provided by noncapital financing activities 54,460 53,012
Net cash used in capital financing activities (2,114) (7,477)
Net cash provided by (used in) investing activities (189) 1,390
Net increase in cash 15,600 6,119
Cash, beginning of year 34,648 28,529
CASH, END OF YEAR $ 50,248 $ 3 4,648
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
15
The primary cash receipts from operating activities consist of tuition and fees of $52.2 million,
and grants and contracts of $18.5 million. Cash outlays included payments to employees of
$78.0 million, payments for fringe benefits of $4.2 million, and payments to suppliers of $23.4
million.
The State appropriation of $33.0 million is the primary source of noncapital financing activities.
Accounting standards require the University to reflect this source of revenue as non-operating
even though the University’s budget depends on this funding to support operations.
The main capital financing activities included purchases of capital assets and construction costs
of $5.9 million, debt service payment of $2.3 million, and proceeds from capital debt of $6.0
million.
Investing activities reflect purchases, sales, and interest income earned on investments.
The total net cash increased by $15.6 million from fiscal year 2010. The increase is the result of
the $17.9 million increase in cash from operating activities and noncapital financing activities
offset by the $2.1 million decrease in cash from capital financing activities
SIGNIFICANT FINANCIAL EVENTS IMPACTING FUTURE PERIODS
In September 2008, the Northeastern Illinois University Board of Trustees endorsed the
University’s strategic planning priorities that include six major goals and underlying action steps
to accomplish each of those goals. Those goals are ensuring student success, enhancing
academic excellence and innovation, providing urban leadership in Chicago and the region,
investing in exemplary faculty and staff, enhancing University operations and facilities, and
strengthening the financial position of the University.
The University also identified key performance indicators and uses those indicators to measure
our successes in addressing our strategic goals. Through these indicators, we identify areas in
which additional resources, financial and staffing, should be allocated to make progress in
attaining our goals.
The University will continue to use the above described planning process in future periods as
the means to allocate available financial resources to the highest institution goals and priorities.
However, the fiscal climate in Illinois and the nation will have a significant financial impact on the
level of resources available to the University, and to our students, and will impact the
University’s ability to address our goals and likely students’ ability to access higher education.
The fiscal climate in Illinois can best be described as uncertain. Since fiscal year 2002, the
high-water mark for state support for University appropriations have declined from $45.4 million
to $40.2 million for fiscal year 2012. This is a total decrease of $5.2 million, or 11.4%, or an
annual decrease of 1.2%. Given Illinois’ fiscal challenges, it is unlikely that this trend will
change in the near future. In response to this trend, the University, and most higher education
institutions in the nation, has increased tuition to compensate for both declining State support
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2011
16
and to address the need for resources to meet increasing costs, implement new and innovative
academic programs, and provide needed student support services.
Another casualty of decreasing government support for education, at both the State and
national levels, is less financial aid grant funding to allow student with few financial resources to
attend college. This trend also is likely to continue in future periods. In response, many
colleges and universities, including Northeastern, are allocating a portion of operating funds for
institutional need-based student aid programs. In addition, future cuts in federal spending likely
will decrease available grant funding that has been used at Northeastern for student support
services (e.g., veterans and transfer students) and certain facility renovations (e.g., science lab
renovations).
Given these trends, significant financial events impacting future periods will likely be as follows.
State and federal support for Northeastern and our students likely will continue to diminish,
resulting in increasing costs to students, a shift in University resources to financial assistance
programs for students with financial need, increasing deferred maintenance of facilities, and
financial challenges in implementing new academic programs to address student and
occupational demands.
In response to these challenges, the University will continue to identify and implement cost
savings measures such as our current energy conservation project and the new voice-over-IP
phone system. We will continue to be good stewards of the resources that we have and use
those resources for the highest priorities within our strategic plan, focusing on student retention
and success. We will look for new and creative ways to bring additional resources to the
University. We will continue to be accountable by self-assessing our progress in meeting our
goals using key performance indicators and we will share those results, both good and areas for
improvement, with our stakeholders. We will advocate for appropriate governmental
appropriations and grants to support the operations of the University and to assure access to
higher education for students with financial need. And finally, we will not let future financial
events diminish the quality of the education we offer to our students as we prepare our
graduates to be our future leaders.
CONTACTING NEIU’S FINANCIAL MANAGEMENT
This financial report is designed to provide interested parties with a general overview of
Northeastern Illinois University’s finances and to show the University’s stewardship and
accountability for the money it receives. If you have questions about this report or need
additional financial information, contact Mark Wilcockson, Vice President for Finance and
Administration, or Peggy Ho, Director of Financial Affairs/Controller, at 5500 N. St. Louis
Avenue, Chicago, IL 60625.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
STATEMENT OF NET ASSETS
2010
Component Component
University Units University Units
ASSETS
Current assets:
Cash and cash equivalents $ 4 2,612,199 $ 108,967 $ 30,343,413 $ 466,698
Short-term investments - 1,667,812 - 982,870
Receivables
Grants 3,089,505 - 5,504,301 -
Student loans (net of allowance for doubtful
accounts of $350,241 in 2011 and $354,595
in 2010) 51,761 - 92,932 -
Tuition and fees (net of allowance for doubtful
accounts of $424,901 in 2011 and $449,063
in 2010) 3,226,639 - 3,310,539 -
Other receivables (net of allowance for doubtful
accounts of $701,611 in 2011 and $691,757
in 2010) 17,808,831 - 9,963,069 -
Inventories 18,170 - 11,959 -
Deferred charges 785,729 - 794,883 -
Other assets 3 8,596 75,721 3 2,827 296
Total current assets 67,631,430 1,852,500 50,053,923 1,449,864
Noncurrent assets:
Restricted cash and cash equivalents 7,635,272 - 4,304,270 -
Restricted investments 1,346,959 4,451,184 993,705 3,526,934
Receivables:
Student loans (net of allowance for doubtful
accounts of $434,800 in 2011 and $464,856
in 2010) 1,972,606 - 2,118,491 -
Tuition and fees (net of allowance for doubtful
accounts of $2,224,201 in 2011 and $1,374,456
in 2010) 433,512 - 448,283 -
Unamortized bond issue costs 718,102 - 657,184 -
Capital assets:
Land and land improvements 8,007,817 - 8,007,817 -
Site improvements (net of accumulated
depreciation of $4,225,996 in 2011 and
$3,959,322 in 2010) 2,181,939 - 2,448,613 -
Buildings and building improvements (net of
accumulated depreciation of $47,690,222
in 2011 and $44,727,711 in 2010) 8 6,408,690 - 86,203,094 -
Equipment (net of accumulated depreciation
of $11,998,671 in 2011 and $11,487,519
in 2010) 1,950,661 - 2,476,449 -
Historical treasures and works of art 83,330 - 83,330 -
Library books (net of accumulated depreciation
of $19,554,105 in 2011 and $18,720,244
in 2010) 3,017,145 - 3,178,920 -
Construction in progress 3,678,792 - 1,056,000 -
Other assets - 18,286 - 18,286
Total noncurrent assets 1 17,434,825 4,469,470 111,976,156 3,545,220
TOTAL ASSETS 1 85,066,255 6,321,970 162,030,079 4,995,084
June 30,
(Comparative Totals Only)
2011
See accompanying notes to basic financial statements.
17
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
STATEMENT OF NET ASSETS
2010
Component Component
University Units University Units
June 30,
(Comparative Totals Only)
2011
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 7,532,184 4,102 6,373,838 5,025
Deferred revenues 2,664,518 337,321 3,713,627 377,595
Liability for compensated absences 998,037 - 1,043,111 -
Revenue bonds payable 170,000 - 165,000 -
Certificates of participation, net 630,284 - 605,284 -
Funds held in custody for others 139,460 - 126,113 -
Total current liabilities 1 2,134,483 341,423 12,026,973 3 82,620
Noncurrent liabilities:
Liability for compensated absences 7,309,987 - 7,797,780 -
Revenue bonds payable 1 7,350,000 - 17,520,000 -
Certificates of participation, net 1 8,285,585 - 12,855,869 -
Total noncurrent liabilities 4 2,945,572 - 38,173,649 -
TOTAL LIABILITIES 5 5,080,055 341,423 50,200,622 382,620
NET ASSETS
Invested in capital assets, net of related debts 8 2,618,639 - 83,044,097 -
Restricted for:
Nonexpendable:
Scholarships and charitable trust - 4,491,184 - 3,526,934
Expendable:
Grants and contracts 659,487 - 493,986 -
Student loans 2,486,987 - 2,562,045 -
Debt service 1,951,010 - 3,452,260 -
Other 653,588 1,038,568 811,878 844,837
Unrestricted 4 1,616,489 450,795 21,465,191 240,693
TOTAL NET ASSETS $ 129,986,200 $ 5,980,547 $ 111,829,457 $ 4,612,464
See accompanying notes to basic financial statements.
18
(Comparative Totals Only)
2010
Component Component
University Units University Units
OPERATING REVENUES
Student tuition and fees (net of scholarship
allowances of $15,671,679 in 2011 and
$12,371,206 in 2010) $ 5 3,052,879 $ - $ 50,741,927 $ -
Federal grants and contracts 1 3,561,635 - 12,002,930 -
State and local grants 2 ,706,114 - 3,124,281 -
Nongovernmental grants and contracts 1 ,495,146 - 1,566,650 -
Auxiliary enterprises 3 ,912,966 - 3,734,399 -
Other operating revenues 4,317,416 1,747,130 3,893,200 1,213,795
Total operating revenues 7 9,046,156 1 ,747,130 75,063,387 1 ,213,795
OPERATING EXPENSES
Instruction 7 0,745,029 - 65,483,818 -
Research 7 64,946 - 894,756 -
Public service 1 3,439,552 - 13,634,224 -
Academic support 9 ,603,298 - 10,111,431 -
Student services and programs 1 1,608,228 - 12,318,597 -
Institutional support 1 3,440,062 - 13,651,118 -
Operation and maintenance of plant 1 4,014,069 - 14,366,452 -
Scholarships and fellowships 9 ,124,810 - 7,845,618 -
Auxiliary enterprises 4 ,052,508 - 3,943,137 -
Depreciation expense 4 ,944,041 - 5,029,378 -
Other operating expenses 1 ,763,866 609,920 1,485,620 693,487
Total operating expenses 1 53,500,409 6 09,920 148,764,149 6 93,487
Operating income (loss) ( 74,454,253) 1 ,137,210 (73,700,762) 5 20,308
NONOPERATING REVENUES (EXPENSES)
State appropriations - general revenue fund 4 0,711,218 - 39,578,482 -
ARRA Fund - - 4,154,162 -
Payments on behalf of the University 3 3,390,867 - 30,095,726 -
Pell Grant 1 9,972,301 - 15,743,639 -
Gifts and donations - - - -
Investment income 1 64,381 - 113,838 -
Interest on indebtedness ( 1,499,699) - (1,378,661) -
Other nonoperating revenues 7 0,000 - 70,000 -
Net nonoperating revenues 9 2,809,068 - 88,377,186 -
Income before other revenues,
expenses, gains and losses 18,354,815 1 ,137,210 14,676,424 5 20,308
Additions to permanent endowments - 230,873 - 460,965
Gain (loss) on disposal of capital assets ( 13,799) - (21,529) -
Adjustments to capital additions provided
by State of Illinois ( 184,273) - (85,301) -
INCREASE IN NET ASSETS 1 8,156,743 1 ,368,083 14,569,594 9 81,273
NET ASSETS - BEGINNING OF YEAR 1 11,829,457 4,612,464 97,259,863 3,631,191
NET ASSETS - END OF YEAR $ 1 29,986,200 $ 5 ,980,547 $ 111,829,457 $ 4 ,612,464
2011
For the Year Ended June 30,
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
NORTHEASTERN ILLINOIS UNIVERSITY
STATE OF ILLINOIS
See accompanying notes to basic financial statements.
19
Component Component
University Units University Units
CASH FLOWS FROM OPERATING ACTIVITIES
Tuition and fees $ 5 2,188,554 $ - $ 49,268,829 $ -
Grants and contracts 1 8,538,206 - 16,756,189 -
Payments to employees (78,022,595) - ( 76,705,983) -
Payments for fringe benefits (4,160,370) - ( 4,099,422) -
Payment to suppliers (23,927,454) (397,972) ( 25,593,693) (562,132)
Payments for scholarships and fellowships (9,447,859) - ( 8,103,504) -
Loans issued to students (870,282) - ( 224,130) -
Collections of loans from students 9 79,145 - 309,369 -
Auxiliary enterprises 3 ,877,289 - 3,643,398 -
Other receipts 4 ,288,757 670,835 3,942,711 721,133
Net cash provided by (used in) operating activities (36,556,609) 272,863 ( 40,806,236) 159,001
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State appropriations 3 3,048,137 - 37,575,455 -
Federal Pell Grant 2 1,328,286 - 15,299,474 -
Agency transactions 1 3,347 - 66,883 -
Other noncapital financing activities 7 0,000 190,873 70,000 460,965
Net cash provided by noncapital financing activity 5 4,459,770 190,873 53,011,812 460,965
CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES
Purchases of capital assets and construction (5,889,158) - ( 2,716,928) -
Proceeds from COP 6 ,060,000 - - -
Principal paid on capital debt and leases (775,000) - ( 3,300,000) -
Interest paid on capital debt and leases (1,510,342) - ( 1,459,842) -
Net cash used in capital financing activities (2,114,500) - ( 7,476,770) -
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of investments - 102,636 1,275,770 40,500
Interest on investments 1 64,381 - 113,838 -
Purchases of investments (353,254) (924,103) - (1,098,479)
Net cash provided by (used in) investing activities (188,873) (821,467) 1,389,608 (1,057,979)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1 5,599,788 (357,731) 6,118,414 (438,013)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3 4,647,683 466,698 28,529,269 904,711
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5 0,247,471 $ 108,967 $ 34,647,683 $ 466,698
Reconciliation of operating income (loss) to net cash provided by
(used in) operating activities:
Operating income (loss) $ (74,454,253) $ 1,137,210 $ ( 73,700,762) $ 520,308
Adjustments to reconcile operating income (loss) to net cash
provided by (used in) operating activities:
Payment on-behalf of the University 3 3,390,867 - 30,095,726 -
Unrealized loss (gain) on changes in market value of investments - (837,393) - (385,763)
Realized loss (gain) on sale of investments - (22,914) - 15,725
Depreciation expense 4 ,944,041 - 5,029,378 -
Changes in asset and liabilities:
Receivables - net 1 ,161,859 - ( 681,566) 6,882
Deferred charges and other assets (52,818) (3,117) ( 190,904) 5,168
Inventories (6,211) - 749 -
Accounts payable and accrued liabilities 2 75,524 (923) ( 718,647) (3,319)
Accrued salaries and wages (233,642) - 52,824 -
Liability for compensated absences (532,867) - ( 550,338) -
Deferred revenues (1,049,109) - ( 142,696) -
Net cash provided by (used in) operating activities $ (36,556,609) $ 272,863 $ ( 40,806,236) $ 159,001
Noncash operating and capital financing activities:
On-behalf payments for fringe benefits $ 3 3,390,867 $ - $ 30,095,726 $ -
Adjustments to capital assets from capital appropriations (184,273) - ( 85,301) -
Net noncash activities $ 3 3,206,594 $ - $ 30,010,425 $ -
See accompanying notes to basic financial statements.
STATE OF ILLINOIS
2011 2010
For the Year Ended June 30,
STATEMENT OF CASH FLOWS
NORTHEASTERN ILLINOIS UNIVERSITY
20
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
21
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by Northeastern Illinois University (the “University”
or “NEIU”) are presented below to assist the reader in evaluating the financial statements and
accompanying notes.
Reporting Entity
Northeastern Illinois University, an agency of the State of Illinois, with a primary focus on
postsecondary institution, research and public service, is located in Chicago, Illinois. The
governing body of the University is the Board of Trustees of Northeastern Illinois University,
created in January 1996 as a result of legislation to reorganize governance of state public
universities. Northeastern Illinois University is the oversight unit, which includes all applicable
funds, departments and entities for which the University is considered financially accountable
and over which the University exercises oversight responsibility. Oversight responsibility is
defined to include, but is not limited to, the following considerations: financial interdependency,
designation of management, ability to significantly influence operations, accountability for fiscal
matters, the scope of an organization's public service, and/or special financing relationships. As
required by generally accepted accounting principles, these financial statements present the
financial position and financial activities of the University and its component units; Northeastern
Illinois University Foundation (the Foundation) and The Northeastern Illinois Alumni Association
(the Association).
The Foundation is a University Related Organization as defined under University Guidelines
adopted by the State of Illinois Legislative Audit Commission in 1982 and amended September
1997. The Foundation was formed for the purpose of providing fund raising and other
assistance to the University in order to attract private gifts to support the University's
instructional, research, and public service activities. In this capacity, the Foundation solicits,
receives, holds, and administers gifts for the benefit of the University. An audit of the
Foundation’s financial statements, for the fiscal year ended June 30, 2011, was conducted by
an independent certified public accountant. Complete financial statements for the Foundation
may be obtained by writing to the NEIU Foundation, Vice President for Institutional
Advancement, Northeastern Illinois University, 5500 North St. Louis Ave., Chicago, Illinois
60625.
The Northeastern Illinois Alumni Association also is a University Related Organization as
defined under University Guidelines adopted by the State of Illinois Legislative Audit
Commission in 1982 and amended September 1997. The Alumni Association was formed for
the purpose of reconnecting with and engaging Northeastern Illinois University alumni with the
University to engender more volunteerism, advocacy and support. Specifically it was founded
“to aid in the development of Northeastern Illinois University as an institution of higher
education, making a maximum contribution to excellence in higher education by securing for
said University the contribution of knowledge, skill, support and loyalty of the thousands of her
former students who call her Alma Mater.” In this capacity, the Association hosts social and
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
22
advocacy events, solicits memberships in the association to further alumni activities, and offers
opportunities for volunteerism on projects all of which benefit Northeastern Illinois University.
The Association was re-established on October 15, 2008 through the Illinois Office of the
Secretary of State. An audit of the Alumni Association’s financial statements, for the fiscal year
ended June 30, 2011, was conducted by an independent certified public accountant. Complete
financial statements for the Alumni Association may be obtained by writing to the NEIU Alumni
Association, Vice President for Institutional Advancement, Northeastern Illinois University, 5500
North St. Louis Ave., Chicago, Illinois 60625.
The University is a component unit of the State of Illinois for financial reporting purposes. The
financial balances and activities included in these financial statements are, therefore, also
included in the State of Illinois’ comprehensive annual financial report.
Basis of Accounting
The financial statements of the University are prepared in accordance with accounting principles
generally accepted in the United States of America as prescribed by the Governmental
Accounting Standards Board (GASB) using the economic resources measurement focus and
the accrual basis of accounting. Under the accrual basis of accounting, revenues are
recognized when earned and expenses are recorded when incurred. All significant intra-agency
transactions have been eliminated.
The University follows all applicable Financial Accounting Standards Board (FASB) statements
issued prior to December 1, 1989, to the extent that those standards do not conflict with or
contradict guidance of the GASB. The University has elected not to apply FASB
pronouncements issued after November 30, 1989.
The financial statements are prepared in accordance with GASB No. 35, Basic Financial
Statements - and Management’s Discussion and Analysis - for Public Colleges and Universities
and follow the special purpose governments engaged only in “business-type” activities
requirements, which requires the following components of the University’s financial statements:
Management’s Discussion and Analysis
This provides an objective analysis of the University’s financial activities based on facts,
decisions and conditions.
Basic financial statements including a Statement of Net Assets; Statement of
Revenues, Expenses, and Changes in Net Assets; and Statement of Cash Flows
 The Statement of Net Assets details current assets/liabilities and noncurrent
assets/liabilities. In general, current assets are those that are available to satisfy
current liabilities. Current liabilities are those that will be paid within one year of the
date of the Statement of Net Assets. Other assets and liabilities due beyond one year
are noncurrent. Net Assets are divided into three major categories: 1) Invested in
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
23
capital assets, net of related debt, 2) Restricted net assets, and 3) Unrestricted net
assets.
 The Statement of Revenues, Expenses, and Changes in Net Assets provides operating
and nonoperating revenues and expenses, and displays the net income or loss from
operations and total changes in net assets.
 The Statement of Cash Flows details the change in the cash and cash equivalents
balance for the fiscal year and is prepared using the direct method. Cash and cash
equivalents include bank accounts and investments with original maturities of 90 days
or less at the time of purchase, primarily U.S. Treasury bills and money market funds.
This Statement provides information related to cash receipts and cash payments during
the year. The statement also helps users evaluate the University’s ability to meet
financial obligations as they mature.
Notes to Basic Financial Statements
This provides additional analysis of the University’s Basic Financial Statements.
Operating and Nonoperating Revenues
Operating revenues of the University consist of student tuition and fees, grants and contracts,
student union sales and services, parking revenues, and other operating revenues.
Transactions relating to capital or financing activities, noncapital financing activities, investing
activities, State appropriations, Pell grant, and State on-behalf payments for retirement and
health care costs are components of nonoperating income. Restricted and unrestricted
resources are used at the discretion of the University, within the proper guidelines. The
University first applies restricted net assets when an expense or outlay is incurred for purposes
for which both restricted and unrestricted net assets are available.
Auxiliary Enterprises
The auxiliary enterprises are primarily composed of the student union, child care, and parking
operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses. Actual results could differ from those estimates.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
24
Cash and Cash Equivalents
Cash and cash equivalents include bank accounts and investments with original maturities of
90 days or less at the time of purchase, primarily U.S. Treasury bills and money market funds.
Investments and Marketable Securities
The University accounts for its investments and marketable securities at fair value in
accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain
Investments and for External Investment Pools.
For the joint investing activity of the University, interest and dividends on investments are
allocated to the funds which participated in the investment purchase according to the fund’s
appropriate share of the total investment.
Restricted Assets
Restricted assets consist of cash and investments that are externally restricted by outside
sources classified as noncurrent in the Statement of Net Assets.
Inventories
Inventories are carried at the lower of cost (determined by the first-in and first-out or average
cost method depending on the nature of the inventory item) or market.
Unamortized Bond Issue Costs
Amortization of unamortized bond issue costs is calculated on a straight-line basis over the term
of the related debts.
Certificates of Participation
Certificates of participation are stated at face value net of unamortized original issue discount.
Capital Assets
Capital assets reported in the Statement of Net Assets are recorded at actual cost at the time of
acquisition or fair value at the date of donation. The University follows the capitalization policy
established by the Comptroller of the State of Illinois as follows:
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
25
* Library books consist of a large number of items with modest values reported on a composite
basis.
Depreciation is computed using the straight-line method over the estimated useful lives of the
assets. There is no depreciation recorded for assets that are capitalized during the first year.
Revenue Recognition
Appropriations made from the State of Illinois General Revenue and Capital Development Funds
for the benefit of the University are recognized as nonoperating revenues to the extent
expended, limited to available appropriations.
Tuition and fees, except for the Summer Session, are recognized as revenues as they are
assessed. Tuition and fees are reduced by scholarship discounts and allowances of
$15,671,679 for fiscal year 2011. The Summer Session tuition and fees are allocated between
fiscal years based on when the revenue is earned. The portion of Summer Session tuition and
fees applicable to the following fiscal year is deferred. The value of tuition and fee exemptions
awarded to graduate assistants, staff members and others is calculated at the applicable tuition
rates. These exemptions amounted to $3,736,268 in fiscal year 2011.
Restricted funds which are received or receivable from external sources are recognized as
revenues to the extent of related expenses or satisfaction of eligibility requirements on the
accrual basis. This is based on the terms of the agreement. Advances are classified as
deferred revenues.
Certain revenue sources that the University relies on to provide funding for operations including
State appropriations, Pell grant, on-behalf payments, gifts, and investment income are defined
by GASB Statement No. 35 as nonoperating. In addition, transactions related to capital and
financing activities are components of non-operating revenues.
Classification
Capitalized
Threshold
Estimated Useful
Life (in years)
Land $ 100,000 Indefinite
Land improvements 25,000 Indefinite
Site improvements 25,000 5-50
Buildings 100,000 50
Building improvements 25,000 10-45
Equipment 5,000 3-25
Non-depreciable historical treasures/works of art 5,000 Indefinite
Software/license fees 50,000 5
Library books 5,000 7
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
26
In accordance with GASB Statement No. 24, Accounting and Financial Reporting for Certain
Grants and Other Financial Assistance, the University reported on-behalf payments totaling
$33,390,867 representing $19,662,714 and $13,728,153, respectively, for health care and
retirement costs. These on-behalf payments are reflected in Payments Made on Behalf of the
University as nonoperating revenues and offsetting amount allocated to each functional category
under the Operating Expenses.
New Accounting Standards
In February 2009, GASB issued Statement No. 54, Fund Balance Reporting and Governmental
Fund Type Definitions. This Statement establishes fund balance classifications that comprise a
hierarchy based primarily on the extent to which a government is bound to observe constraints
imposed upon the use of the resources reported in governmental funds. This Statement also
provides for additional classification as restricted, committed, assigned, and unassigned based
on the relative strength of the constraints that control how specific amounts can be spent. The
requirements of this Statement are effective for financial statements for periods beginning after
June 15, 2010. The University has determined that the Statement has no effect on its financial
statements.
In June 2010, GASB issued Statement No. 59, Financial Instruments Omnibus. GASB No. 59
provides updates and improvements to existing standards regarding financial reporting and
disclosure requirements of certain financial instruments and external investment pools for which
significant issues have been identified in practice. The requirements of this Statement are
effective for financial statements for periods beginning after June 15, 2010. The University has
determined that this Statement has no effect on its financial statements.
2. CASH AND INVESTMENTS
The University uses the “pooled cash” method of accounting for substantially all of its operating
cash and investments. The following table is a reconciliation of deposits and investments held
by the University and University’s Component Units as shown on the Statement of Net Assets
as of June 30, 2011:
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
27
Deposits
The University utilizes several different bank accounts for the various activities of the University.
The book balance of such accounts is $50,129,287 at June 30, 2011, while the bank balance
was $51,739,430. The difference between the above amounts primarily represents checks that
have been issued but have not yet cleared the bank as of June 30, 2011.
Custodial credit risk for deposits exists when, in the event of the failure of a depository financial
institution, the University’s deposits may not be recovered. The University’s policy for reducing
its exposure to the risk is to require deposits in excess of the federally insured amount to be
collateralized at 110%. As of June 30, 2011, the University’s deposits were covered by the
Federal Deposit Insurance Corporation (FDIC) and by collateral held by the financial institution
in the University’s name.
Investments
The University’s established investment policy follows the State of Illinois Public Funds
Investment Act and the covenants provided from the University’s bond issuance activities,
which authorize the University to purchase certain obligations of the U. S. Treasury, federal
agencies and instrumentalities; certificates of deposit and time deposits covered by federal
depository insurance; commercial paper of U.S. corporations with assets exceeding
$500,000,000, if such paper is rated at the highest classification established by at least two
standard rating services; money market funds; and the Illinois Funds.
The University has pooled its investments, except for certain funds that are required by bond
resolution to be in separate accounts. Investments are stated at fair value. Net income from
investments of pooled funds is allocated and credited to the original sources of the funds or is
remitted to the University’s Income Fund. The following table presents the fair value of
investments held by the University and the University’s Component Units at June 30, 2011:
University Foundation
Carrying amounts of deposits $ 50,129,287 $ 108,967
Carrying amounts of investments 1,465,142 6,118,996
$ 51,594,429 $ 6,227,963
Cash and cash equivalents $ 42,612,198 $ 108,967
Restricted cash and cash equivalents 7,635,272 -
Short-term investments - 1,667,812
Long-term investments 1,346,959 4,451,184
$ 51,594,429 $ 6,227,963
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
28
Investment Type University Foundation
Illinois funds $ 118,183 $ -
U.S. Treasury notes 1,102,471 -
Certificate of deposit 244,488 -
Mutual funds - 6,118,996
Total $ 1,465,142 $ 6,118,996
Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair value of
an investment. Generally, the longer the maturity of an investment, the greater the susceptibility
of its fair value to changes in market interest rates. The University’s policy for reducing its
exposure to the risk is to structure the University’s portfolio so that securities mature to meet the
University’s cash requirements for ongoing operations. Also, the investment returns are
evaluated and tracked monthly against appropriate performance benchmarks and reported
quarterly to the Vice President for Finance and Administration/Board Treasurer. As of June 30,
2011, the University had the following investments subject to Interest Rate Risk:
Maturity Weighted
Investment Type Fair Value
Less than
1 Year 1 - 5 Years
Average
Maturity (Years)
Illinois funds $ 118,183 $ 118,183 $ - 0.11
U.S. Treasury notes 1,102,471 - 1,102,471 3.71
Certificate of deposit 244,488 - 244,488 2.00
Total $ 1,465,142 $ 118,183 $ 1,346,959
Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. The University’s policy for managing its exposure to the risk is to limit investments
to those allowable by the Illinois Public Funds Investment Act. As of June 30, 2011, the
University had quality ratings as shown in the table below:
Investment Type Total
Standard &
Poor’s Moody’s Fitch
Certificate of deposit 244,488 AA- Aa2 -
Illinois Fund 118,183 AAA - -
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
29
Concentration of Credit Risk is the risk of loss attributed to the magnitude of a government’s
investment in a single issuer. The University’s policy for mitigating the risk is to diversify the
investment portfolio so that the failure of any one issue will not place an undue financial burden
on the University. As of June 30, 2011, the University does not have any investments
representing 5% or more of total assets in any single issuer other than the U.S. Government, its
agencies or sponsored corporations.
Custodial Credit Risk for investments is the risk that, in the event of a failure of the counterparty,
the University will not be able to recover the value of the investments that are in the possession
of an outside party. The University minimizes its custodial credit risk by establishing limitations
on the types of investments held with qualifying institutions. As of June 30, 2011, University’s
investment in the U.S. Treasury was registered with securities in the University’s name.
Investments in external investment pools and in money market funds are not exposed to
custodial credit risk because their existence is not evidenced by securities that exist in physical
or book entry form. The University therefore, has no custodial credit risk in its investment
portfolio.
3. CAPITAL ASSETS
Details of the University’s investment in capital assets at June 30, 2011 are as follows:
July 1, 2010 Additions Transfers Reduction June 30, 2011
Cost:
Land and land improvements $ 8,007,817 $ - $ - $ - $ 8,007,817
Site improvements 6,407,935 - - - 6,407,935
Building and building
improvements 130,930,805 2,551,374 811,901 195,168 134,098,912
Equipment 13,963,968 368,417 - 383,053 13,949,332
Non-depreciable historical
treasures and works of art 83,330 - - - 83,330
Library books 21,899,164 672,977 - 891 22,571,250
Construction in progress 1,056,000 3,434,693 (811,901) - 3,678,792
Total 182,349,019 7,027,461 - 579,112 188,797,368
Less accumulated depreciation:
Site improvements 3,959,322 266,674 - - 4,225,996
Building and building
improvements 44,727,711 2,962,511 - - 47,690,222
Equipment 11,487,519 880,104 - 368,952 11,998,671
Library books 18,720,244 834,752 - 891 19,554,105
Total 78,894,796 4,944,041 - 369,843 83,468,994
Capital assets - net $ 103,454,223 $ 2,083,420 $ - $ 209,269 $ 105,328,374
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
30
Additions to building improvements include expenditures totaling $10,895 incurred by the Illinois
Capital Development Board for construction projects on behalf of the University. Reductions to
building improvements include $195,168 of adjustments to prior year retainage estimates
provided by the Illinois Capital Development Board
4. LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt and other liabilities consist of the following as of June 30, 2011:
Investment Type July 1, 2010 Additions Reductions June 30, 2011
Compensated absences $ 8,840,891 $ 451,404 $ 984,271 $ 8,308,024
Revenue Bonds Series 1973 715,000 - 165,000 550,000
Revenue Bonds Series 2004 16,970,000 - - 16,970,000
Certificates of Participation (COP):
Series 2006 13,535,000 - 610,000 12,925,000
Certificates of Participation COP):
Series 2010 - 6,060,000 - 6,060,000
COP Discount (73,847) - (4,716) (69,131)
Subtotal 39,987,044 $ 6,511,404 $ 1,754,555 44,743,893
Less current portion 1,813,395 1,798,321
Total noncurrent liabilities $ 38,173,649 $ 42,945,572
5. UNIVERSITY FACILITIES SYSTEM REVENUE BONDS
Revenue Bonds Payable and Interest Subsidy
At June 30, 2011, bonds payable consist of University Facilities Revenue Bond Series 1973,
and University Facilities System Revenue Bond Series 2004.
Series 1973
The University Facilities Revenue Bonds Series of 1973 were sold during 1974 in the
amount of $3,075,000, ($550,000 of which are outstanding at June 30, 2011) and were
used to finance the construction of the University’s Student Union Building. The bonds and
related interest are not general obligations of the University since they are payable from and
secured by a first lien on and the pledge of net revenues to be derived from certain student
fees and operations of the University’s Student Union, pledged fees and tuition, and funds
held in the Bond Reserve Account. The restricted fund balances are legally restricted under
the University Facilities Revenue Bonds indenture.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
31
The bonds mature in increasing principal amounts ranging from $170,000 due on July 1,
2011 to $195,000 due on July 1, 2013. Interest is payable semi-annually, on January 1 and
July 1, at rate of 6.2%, with an average effective rate of approximately 6.2%. Future
aggregate annual payments applicable to revenue bonds at June 30, 2011 are:
Fiscal Year Principal Interest
2012 $ 170,000 $ 28,830
2013 185,000 17,825
2014 195,000 6,045
Total $ 550,000 $ 52,700
The Board of Trustees has the right, after providing proper notice to bondholders, to call the
bonds for redemption prior to their maturity, in whole or in part, on July 1, 2011, or on any
interest payment date thereafter, at the principal amount redeemed, together with the
unpaid interest accrued thereon, plus a premium applied to the principal amounts redeemed
at par.
The U.S. Department of Housing and Urban Development has made a grant under which it
has guaranteed to pay an annual debt service subsidy on the bonds subject to its audit and
approval. During the year ended June 30, 2011, $70,000 of such subsidy was included in
other nonoperating revenues.
Series 2004
The University Facilities System Revenue Bond Series 2004, dated April 1, 2004, were sold
in April 2004, in the amount of $16,970,000, all of which were outstanding at June 30, 2011.
The proceeds from the sale of the bonds were used to finance the construction of a multi-level
parking structure on the University’s campus, fund a deposit to the Bond Reserve
Account, provide capitalized interest on the bonds through January 1, 2005, and pay certain
expenses incurred in connection with the issuance of the bonds. The bonds are obligations
of the Board payable only in accordance with the term of the indenture and are not
obligations of the State of Illinois. The 2004 Bonds were issued as Parity Bonds to the 1973
Bonds and 1997 Bonds, and are secured by a pledge of lien on the Net Revenues of the
System, the pledged fees and tuition, and the funds held in the Bond Reserve Account.
The Bonds mature in increasing principal amounts ranging from $215,000 due on July 1,
2014 to $1,255,000 due on July 1, 2035. Interest is payable semi-annually, on January 1
and July 1, at rates between 3.45% and 4.50%, with an average effective rate of
approximately 4.166%. Future aggregate annual payments applicable to the Series 2004
Bonds at June 30, 2011 are:
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
32
Fiscal Year Principal Interest
2012 $ - $ 726,790
2013 - 726,790
2014 - 726,790
2015 215,000 723,081
2016 220,000 715,412
2017-2021 2,385,000 3,375,884
2022-2026 3,755,000 2,709,593
2027-2031 4,635,000 1,810,518
2032-2036 5,760,000 667,710
Total $ 16,970,000 $ 12,182,568
The Series 2004 Bonds are subject to redemption on or after January 1, 2014, at the option
of the Board, from monies available therefore, in whole or in part at any time and, if in part,
in the maturities designated by the Board and within a single maturity in integral multiples of
$5,000 in such manner as the Bond Registrar may deem fair and appropriate, at a
redemption price of par (100%), plus accrued interest to the date fixed for redemption.
Operation of the Project
The resolutions by which the University Facilities Revenue Bonds were authorized provides that
bond proceeds and gross revenues from the Student Union and parking facilities operations,
including student fees, are to be deposited to the University accounts and used only in the
manner and order as follows:
Revenue Fund Account
Gross revenues received from the operations of the University’s Student Union and parking
facilities, student fees, interest income and any interest subsidy received from the U.S.
Department of Housing and Urban Development may be used to make required deposits to
accounts shown below or may be used for any lawful purpose as the Board of Trustees
directs after all yearly required deposits have been met.
Operation and Maintenance Account
The operation and maintenance account receives monthly from the revenue fund account
such amounts as are necessary to pay for the operation and maintenance of the
University’s Student Union and parking facilities.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
33
Bond Accounts
The bond accounts receive monthly one-sixth of the interest and one-twelfth of the
principal next coming due on the bonds, to be used solely for the purpose of paying
bond principal and interest.
Bond Reserve Accounts
The bond reserve accounts are to be used solely to pay bond principal and interest when
there would otherwise be a default. At June 30, 2011, the maximum funding requirements
have been met.
Renewal and Replacement Reserve Account
Commencing on July 1, 1975, the renewal and replacement reserve account is to receive
semi-annually not less than $25,000 until $500,000 has been accumulated in the account.
These deposits are to be used solely for the purpose of paying the cost of extraordinary
repairs, upkeep and replacements in, on, or about the facilities used by the University’s
Student Union operation, including the furnishings and equipment therein, except that the
funds in the account may be used to the extent necessary to prevent or remedy a default in
payment of bond interest or principal.
During 2011, $50,000 was credited to the renewal and replacement reserve account. At
June 30, 2011, the fund balance in this account was $108,361.
Non-Instructional Facilities (Development) Reserve Account
On or before the close of each fiscal year, the Treasurer will, from the funds remaining in
the revenue fund, credit to the non-instructional facilities reserve account such funds, or
such portion thereof as is available for transfer, as have been approved by the Board for
expenditure or planned for expenditure for new space or construction in, or in addition to, a
facility constituting a part of the system, and contiguous real estate thereto, consistent with
the purpose and mission of that facility. Monies or investments to the credit of such
accounts are not pledged as security for the payment of the bonds or parity bonds. At
June 30, 2011, the fund balance in this account was $0.
Equipment Reserve Account
On or before the close of each fiscal year, the Treasurer will, from the funds remaining in
the revenue fund, credit to the equipment reserve account such funds as have been
approved by the Board for expenditures in connection with the acquisition of movable
equipment to be installed in the facilities constituting the system. Monies or investments to
the credit of the equipment reserve account are not pledged as security for the payment of
the bonds or parity bonds. At June 30, 2011, the fund balance in this account was
$134,885.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
34
The following are the financial statements for the University Facilities Revenue Bond Funds:
University Facilities Revenue Bond Funds
Statement of Net Assets
June 30, 2011
ASSETS
Current Assets
Cash and cash equivalents $ 2,544,027
Receivables:
Tuition and fees - net 128,566
Parking fines - net 184,401
Other receivables - net 143,622
Inventories 1,559
Other assets 18,823
Total current assets 3,020,998
Noncurrent Assets
Restricted cash and cash equivalents 1,218,401
Investments 1,346,959
Receivables
Tuition and fees - net 17,273
Unamortized bond issue costs 432,937
Capital assets:
Site improvements - net 1,571,473
Buildings - net 16,361,359
Equipment - net 77,980
Construction in progress 288,177
Total noncurrent assets 21,314,559
Total assets 24,335,557
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 902,534
Deferred revenues 146,484
Liability for compensated absences 95,214
Revenue bonds payable 170,000
Total current liabilities 1,314,232
Noncurrent Liabilities
Liability for compensated absences 6,365
Revenue bonds payable 17,350,000
Total noncurrent liabilities 17,356,365
Total liabilities 18,670,597
NET ASSETS
Invested in capital assets - net of related debt 1,230,750
Restricted for:
Expendable:
Capital projects 421,239
Debt service 1,461,532
Unrestricted 2,551,439
TOTAL NET ASSETS $ 5,664,960
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
35
University Facilities Revenue Bond Funds
Statement of Revenues, Expenses and Changes in Net Assets
For the Year Ended June 30, 2011
OPERATING REVENUES
Student fees $ 1,556,608
Vending services 144,154
Rental and use fees 34,673
Bookstore commission 361,394
Parking revenue 2,576,962
Other operating revenues 77,730
Total operating revenues 4,751,521
OPERATING EXPENSES
Personal services 1,350,820
Contractual services 739,720
Commodities and supplies 108,362
Vending cost of sales 7,445
Telecommunications 5,584
Depreciation 722,420
Other operating expenses 707,868
Total operating expenses 3,642,219
Operating income 1,109,302
NONOPERATING REVENUES (EXPENSES)
Investment income 39,364
Interest on indebtedness (760,890)
Federal grants - HUD 70,000
Net nonoperating expenses (651,526)
Income (loss) before gains and losses 457,776
GAIN ON DISPOSAL OF CAPITAL ASSETS 300
Total increase in net assets 458,076
NET ASSETS
Net assets - beginning of year 5,206,884
Net assets - end of year $ 5,664,960
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
36
University Facilities Revenue Bond Funds
Statement of Cash Flows
For the Year Ended June 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Student fees $ 1,539,844
Payment for salaries and benefits (1,356,377)
Payment for suppliers (1,151,776)
Vending services 143,870
Rental and use fees 35,488
Bookstore commission 370,356
Parking revenue 2,508,382
Other revenues 77,730
Other payments (130,245)
Net cash provided by operating activities 2,037,272
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITY
Federal grants - HUD 70,000
CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES
Proceeds from sale of capital assets 300
Purchases of capital assets and construction (280,077)
Principal paid on capital debt (165,000)
Interest paid on capital debt (760,890)
Net cash used in capital financing activities (1,205,667)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments (353,254)
Interest on investments 39,364
Net cash used in investing activities (313,890)
Net increase in cash and cash equivalents 587,715
Cash and cash equivalents - beginning of the year 3,174,713
Cash and cash equivalents - end of year $ 3,762,428
Reconciliation of operating income to net cash provided by
operating activities:
Operating income $ 1,109,302
Adjustments to reconcile operating income to net cash provided by
operating activities:
Depreciation expense 722,420
Changes in assets and liabilities:
Receivables - net (25,048)
Inventories 1,493
Unamortized bond issue cost 18,823
Accounts payable and accrued liabilities 274,822
Accrued liability for compensated absences (8,233)
Deferred revenues (56,307)
Net cash provided by operating activities $ 2,037,272
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
37
Pledged Revenues and Debt Service Requirements
The University has pledged specific revenues, net of specified operating expenses, to repay the
principal and interest of revenue bonds. The following is a schedule of the pledged revenues
and related debt:
PLEDGED REVENUES
Bond Issues Purpose
Source of Revenue
Pledged
Future
Revenues
Pledged
Term of
Commitment
Debt Service to
Pledged
Revenues
(Current Year)
Facilities
Revenue Bonds
Series 1973
Construction of the
University's Student
Union Building
Net revenues of the
University Facilities
System*, student
tuition and fees $ 602,700 2013 100.00%
Facilities
Revenue Bonds
Series 2004
Construction of a
multi-level parking
structure
Net revenues of the
University Facilities
System*, student
tuition and fees 29,152,568 2035 100.00%
Total future revenues pledged $ 29,755,268
* The University Facilities System consists of the Student Union, all parking facilities, the University’s
vending facilities, the University bookstore, and any equipment or improvements pertaining thereto.
6. CERTIFICATES OF PARTICIPATION
Series 2006
On March 1, 2006, the University issued Certificates of Participation Series 2006, in the amount
of $15,060,000 with an original issue discount of $94,315, to finance the acquisition,
development and implementation of an enterprise resource planning system. The Board is
obligated to make installment payments on an annual basis either from funds derived from State
appropriations or from legally available non-appropriated funds. The Board’s obligation to pay
installment payments is subject to termination 60 days after the Board certifies to the Trustee
that: 1) the General Assembly of the State has made a determination not to appropriate
requested funds necessary to make the installment payments from State-appropriated funds,
and 2) the Board has determined that there are not sufficient legally available non-appropriated
funds to pay the installment payments. The Certificates are subject to mandatory redemption,
in whole, at the redemption prices set forth below, plus accrued interest to the date fixed for
redemption, on the following dates, if the Board notifies the Trustee not less than 60 days prior
thereto that it is exercising its option to terminate the purchase contract:
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
38
Redemption Date Redemption Price
October 1, 2010 110%
On or after October 1, 2015 100%
The certificates mature in increasing principal amounts ranging from $635,000 due on
October 1, 2011 to $1,155,000 due on October 1, 2025 at rates between 3.750% and 4.75%.
Future aggregate annual payments applicable to the certificates of participation at June 30,
2011 are:
Fiscal Year Principal Interest
2012 $ 635,000 $ 550,288
2013 660,000 525,594
2014 685,000 499,106
2015 715,000 471,106
2016 740,000 442,006
2017-2021 4,215,000 1,704,841
2022-2026 5,275,000 644,712
Total $ 12,925,000 $ 4,837,653
Series 2010
On September 1, 2010, the University issued Certificates of Participation Series 2010, in the
amount of $6,060,000 to finance the acquisition of energy conserving improvements at the
University. The American Recovery and Reinvestment Act of 2009 permits the Board to issue
taxable obligations referred to as “Build America Bonds” to finance capital expenditures for
which it could issue tax-exempt obligations, and to elect to receive payments from the federal
government equal to 35% of the corresponding interest payable on such taxable obligations.
The Board is obligated to make installment payments on an annual basis either from funds
derived from State appropriations or from legally available non-appropriated funds. The Board’s
obligation to pay installment payments is subject to termination 60 days after the Board certifies
to the Trustee that: 1) the General Assembly of the State has made a determination not to
appropriate requested funds necessary to make the installment payments from State-appropriated
funds, and 2) the Board has determined that there are not sufficient legally
available non-appropriated funds to pay the installment payments. The Certificates maturing on
and after October 1, 2021 are subject to redemption on any date on or after October 1, 2010 at
the price of 100% of the principal amount thereof, plus accrued interest to the date fixed for
redemption, in whole or in part, and if in part, by lot. Such redemption shall be at the option of
the Board, upon at least 35 days prior written notice from the Board to the Trustee.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
39
The certificates mature in increasing principal amounts ranging from $155,000 due on
October 1, 2012 to $645,000 due on October 1, 2028 at rates between 2.000% and 6.000%.
Future aggregate annual payments applicable to the certificates of participation at June 30,
2011 are:
Fiscal Year Principal Interest
2012 $ - $ 303,406
2013 155,000 301,856
2014 170,000 298,287
2015 185,000 293,725
2016 205,000 287,850
2017-2021 1,380,000 1,287,969
2022-2026 2,175,000 844,888
2027-2029 1,790,000 164,997
Total $ 6,060,000 $ 3,782,978
7. NORTHEASTERN ILLINOIS UNIVERSITY COMPONENT UNITS AGREEMENT
On July 1, 2005, the University entered into an agreement with Northeastern Illinois University
Foundation. The Foundation is a separate non-profit organization incorporated in the State of
Illinois and a University Related Organization under University Guidelines, 1982 (amended 1997).
Under the terms of the contract, the Foundation aids and assists the University in developing
broader educational opportunities for students, alumni, and citizens of the State of Illinois by
encouraging gifts of money; property; works of art; and historical and other material having
educational, artistic and historical value. In turn, the University will furnish certain services
necessary to the operation of the Foundation. The contract may be cancelled upon 90 days
written notice by either party.
During fiscal year 2011, certain funds and in-kind services of the University with an estimated
value of $112,558 were provided to the Foundation without charge. In turn, during fiscal year
2011, the Foundation gave the University $300,701 in funds considered unrestricted for
purposes of the University Guidelines computation. In addition, the Foundation gave the
University non-qualifying restricted and unrestricted funds of approximately $93,230 in fiscal
year 2011 for scholarships and awards.
The Association had an agreement with the University. Under the terms of the agreement, the
Alumni Association coordinates the University’s alumni activities. In turn, the University will
furnish certain services necessary to the operation of the Alumni Association.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
40
During fiscal year 2011, certain funds and in-kind services of the University with an estimated
value of $96,031 were provided to the Alumni Association without charge. In turn, during fiscal
year 2011, the Alumni Association gave the University $7,399 in funds considered unrestricted
for purposes of the University Guidelines computation.
Below are the condensed financial statements by organization:
Condensed Statement of Net Assets
Foundation
Alumni
Association Total
ASSETS
Current assets $ 1,820,192 $ 32,308 $ 1,852,500
Noncurrent assets 4,469,470 - 4,469,470
Total assets 6,289,662 32,308 6,321,970
LIABILITIES
Current liabilities 341,423 - 341,423
Total liabilities 341,423 - 341,423
NET ASSETS
Restricted for:
Nonexpendable 4,491,184 - 4,491,184
Expendable 1,038,568 - 1,038,568
Unrestricted 418,487 32,308 450,795
TOTAL NET ASSETS $ 5,948,239 $ 32,308 $ 5,980,547
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
41
Condensed Statement of Revenues, Expenditures and Changes in Net Assets
Foundation
Alumni
Association Total
Operating revenues $ 1,626,136 $ 120,994 $ 1,747,130
Operating expenses 506,489 103,431 609,920
Net operating income 1,119,647 17,563 1,137,210
Additions to permanent endowments 230,873 - 230,873
INCREASE IN NET ASSETS 1,350,520 17,563 1,368,083
NET ASSETS, BEGINNING OF YEAR 4,597,719 14,745 4,612,464
NET ASSETS, END OF YEAR $ 5,948,239 $ 32,308 $ 5,980,547
Condensed Statement of Cash Flows
Foundation
Alumni
Association Total
Net cash provided by operating activities $ 272,863 $ - $ 272,863
Net cash provided by noncapital financing activities 190,873 - 190,873
Net cash used in investing activities (821,467) - (821,467)
NET DECREASE IN CASH AND CASH EQUIVALENTS (357,731) - (357,731)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 466,698 - 466,698
CASH AND CASH EQUIVALENTS, END OF YEAR $ 108,967 $ - $ 108,967
Reconciliation of operating income to net cash provided
by operating activities:
Operating income $ 1,119,647 $ 17,563 $ 1,137,210
Adjustments to reconcile operating income to net cash
provided by operating activities:
Change in market value of investments held (837,393) - (837,393)
Realized loss (gain) on sale of investments (22,914) - (22,914)
Effects of changes in assets and liabilities:
Receivables - - -
Prepaid expenses (3,117) - (3,117)
Accounts payable and accrued liabilities (923) - (923)
Cash held as custodial funds 17,563 - 17,563
Due from NEIU Foundation - (17,563) (17,563)
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 272,863 $ - $ 272,863
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
42
8. PENSION, COMPENSATED ABSENCES AND POST-EMPLOYMENT BENEFITS
State Universities Retirement System
Plan Description
The University contributes to the State Universities Retirement System of Illinois (SURS), a
cost-sharing, multiple-employer defined benefit pension plan with a special funding situation
whereby the State of Illinois makes substantially all actuarially determined required
contributions on behalf of the participating employers. SURS was established on July 21,
1941, to provide retirement annuities and other benefits for staff members and employees of
the state universities, certain affiliated organizations, and certain other state educational and
scientific agencies and for survivors, dependents, and other beneficiaries of such
employees. SURS is considered a component unit of the State of Illinois' financial reporting
entity and is included in the State's financial reports as a pension trust fund. SURS is
governed by Section 5/15, Chapter 40, of the Illinois Compiled Statutes. SURS issues a
publicly available financial report that includes financial statements and required
supplementary information. That report may be obtained by accessing the website at
www.SURS.org, or calling 1-800-275-7877.
Funding Policy
Plan members are required to contribute 8.0% of their annual covered salary and
substantially all employer contributions are made by the State of Illinois on behalf of the
individual employers at an actuarially determined rate. The current rate is 24.21% of annual
covered payroll. The contribution requirements of plan members and employers are
established and may be amended by the Illinois General Assembly. The University’s
contributions to SURS for the years ended June 30, 2011, 2010, and 2009 were
$14,376,041, $12,886,424 and $8,331,736, respectively, equal to the required contributions
for each year.
Medicare
University employees hired prior to April 1, 1986 are exempt from contributions required under
the Federal Insurance Contribution Act. Employees hired after March 31, 1986 are required to
contribute 1.45% of their gross salary for Medicare. The University is required to match this
contribution.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
43
Tax-Sheltered Retirement Plans
Employees may also elect to participate in certain tax-sheltered retirement plans. These
voluntary plans permit employees to designate a part of their earnings into tax-sheltered
investments and thus defer federal and state income taxes on their contributions and the
accumulated earnings under the plans. Participation and the level of employee contributions
are voluntary. The employer is not required to make contributions to these plans.
Compensated Absences
It is the policy of the University to accrue vacation pay as earned. As of June 30, 2011, the
accrued liability for this benefit was $4,928,670 and is reported as liability for compensated
absences.
As a result of Illinois Public Act 83-976, the University is required to compensate certain
employees for sick leave benefits earned after January 1, 1984. Sick leave earned by these
employees after this date will accumulate without limit and are payable upon termination of
employment for one-half of the unused amount. As of January 1, 1998 per 30 ILCS 105/14a,
sick leave benefits earned after that date are no longer compensable upon termination of
employment. All prior earned benefits will still be paid. As of June 30, 2011, the accrued
liability of this benefit was $3,379,354 and is included in the liability for compensated absences.
Post-employment Benefits
The State provides health, dental, vision, and life insurance benefits for retirees and their
dependents in a program administered by the Department of Healthcare and Family Services
along with the Department of Central Management Services. Substantially all State employees
become eligible for post-employment benefits if they eventually become annuitants of one of the
State sponsored pension plans. Health, dental, and vision benefits include basic benefits for
annuitants and dependents under the State's self-insurance plan and insurance contracts
currently in force. Annuitants may be required to contribute towards health, dental, and vision
benefits with the amount based on factors such as date of retirement, years of credited service
with the State, whether the annuitant is covered by Medicare, and whether the annuitant has
chosen a managed health care plan. Annuitants who retired prior to January 1, 1998, and who
are vested in the State Employee’s Retirement System do not contribute towards health, dental,
and vision benefits. For annuitants who retired on or after January 1, 1998, the annuitant’s
contribution amount is reduced 5% for each year of credited service with the State allowing
those annuitants with 20 or more years of credited service to not have to contribute towards
health, dental, and vision benefits. Annuitants also receive life insurance coverage equal to the
annual salary of the last day of employment until age 60, at which time the benefit becomes
$5,000.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
44
The State pays the University’s portion of employer costs for the benefits provided. The total
cost of the State’s portion of health, dental, vision, and life insurance benefits of all members,
including post-employment health, dental, vision, and life insurance benefits, is recognized as
an expenditure by the State in the Illinois Comprehensive Annual Financial Report. The State
finances the costs on a pay-as-you-go basis. The total costs incurred for health, dental, vision,
and life insurance benefits are not separated by department or component unit for annuitants
and their dependents nor active employees and their dependents.
A summary of post-employment benefit provisions, changes in benefit provisions, employee
eligibility requirements including eligibility for vesting, and the authority under which benefit
provisions are established are included as an integral part of the financial statements of the
Department of Healthcare and Family Services. A copy of the financial statements of the
Department of Healthcare and Family Services may be obtained by writing to the Department of
Healthcare and Family Services, 201 South Grand Ave., Springfield, Illinois, 62763-3838.
9. OPERATING LEASES
The University leases various buildings and equipment under operating lease agreements.
Total rental expense for the year ended June 30, 2011 under these agreements was $643,640.
Minimum lease payments for the years ending June 30 are:
10. SELF-INSURANCE
The University participates in the State University Risk Management Association (SURMA), a
self-insurance pool. Through its participation in SURMA, IPHEC (Illinois Public Higher
Education Consortium) and MHEC (Midwest Higher Education Commission), the University has
contracted with commercial carriers to provide general liability insurance. The University’s
general liability coverage has a $250,000 self-insured retention level, which is covered by
SURMA under the same coverage restrictions as the general liability coverage. In most cases,
participant contributions to SURMA are based upon actuarial valuations. Additionally, the
University purchases property insurance coverage for the replacement value of the University’s
property.
Fiscal Year Principal
2012 $ 690,727
2013 464,805
2014 213,634
2015 190,800
2016 31,800
$ 1,591,766
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
45
11. BEVERAGE CONTRACT
The University has entered into a sponsorship contract with the Pepsi-Cola General Bottlers Ill,
LLC (Vendor) to provide beverages for its employees, visitors, faculty, and students. This is a
ten-year agreement commencing on December 18, 2007. Under the agreement, the University
receives 50% of the total revenue derived by the Vendor from the vending machines installed
and serviced on each respective University campus. Such payments will be paid no less
frequently than monthly and will be accompanied by appropriate documentation verifying the
receipts and commission amounts. The commission received from the Vendor for fiscal year
2011 was $68,014. Under the contract, the Vendor extended terms made during its
negotiations with the Illinois Department of Revenue regarding marketing monies due to the
University on an annual basis. The Vendor agreed to allocate statewide $440,000 of marketing
money. This University’s share of the marketing money is 3.5948% of the total allocated
statewide, or $15,817. Payment of these funds is due at the beginning of each year throughout
the term of the contract. The University received its payment of $15,817 for the fourth year of
the agreement. The Vendor also agreed to honor the agreement made during negotiations with
the Illinois Department of Revenue regarding the guaranteed annual vending commitment,
which for the University is $13,631. This amount will increase in direct proportion to any price
increases implemented by the Vendor during the life of this agreement.
12. Operating Expenses by Natural Classification
Operating expenses by natural classification for the year ended June 30, 2011 are summarized
as follows:
Compensation
and Benefits
Supplies and
Services Scholarships Depreciation Total
Instruction $ 67,390,184 $ 3,141,272 $ 213,573 $ - $ 70,745,029
Research 619,438 111,480 34,028 - 764,946
Public service 8,003,629 5,390,233 45,690 - 13,439,552
Academic support 7,886,891 1,716,233 174 - 9,603,298
Student services 6,241,449 5,347,654 19,125 - 11,608,228
Institutional support 11,046,002 2,394,060 - - 13,440,062
Operation and
maintenance of
plant 10,311,050 3,703,019 - - 14,014,069
Scholarships and
fellowships - - 9,124,810 - 9,124,810
Auxiliary 3,242,930 807,378 2,200 - 4,052,508
Depreciation - - - 4,944,041 4,944,041
Other operating
expenses 33,226 1,730,640 - - 1,763,866
Total $ 114,774,799 $ 24,341,969 $ 9,439,600 $ 4,944,041 $ 153,500,409
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
June 30, 2011
46
UNIVERSITY FACILITIES REVENUE BOND FUNDS
INSURANCE IN FORCE
(Unaudited)
Type of Coverage Required Coverage Coverage in Force (a)
Fire and lightning, extended
coverage
Not stipulated $100,000,000 Primary
Use and occupancy insurance
(business interruption)
None (b) Actual sustained within policy
limits (c)
General liability insurance $100,000/person
$300,000/accident
$10,650,000/occurrence
$19,650,000/aggregate
Corporate surety bonds $4,334,007 (d) $5,000,000 (e)
Each University employee
blanket crime policy
None $2,000,000
(a) This statement is prepared from the policies and is intended only as a descriptive summary.
The auditors do not express an opinion as to the adequacy of the coverage.
(b) Excess of debt service requirements for the year ended June 30, 2011 over cash and short-term
investments in the Bond Account and Bond Reserve at June 30, 2011.
(c) Estimate of coverage is directly related to loss of fee income.
(d) The sum of the amounts established to be deposited in the Revenue Fund Account during the
succeeding fiscal year.
(e) This is a combination of bond and crime policies.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
June 30, 2011
47
UNIVERSITY FACILITIES REVENUE BOND FUNDS
RATES AND CHARGES
(Unaudited)
The Board of Trustees of Northeastern Illinois University is responsible for establishing rates and
charges for the use of the University’s Student Union. This income is pledged for payment of the
University’s Student Union operating expenses and making reserve deposits and bond payments
in accordance with the bond indenture.
Effective the fall semester of 2010, students enrolling at Northeastern Illinois University pay a fee
of $6.75 per credit hour for the right to use the University’s Student Union.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
June 30, 2011
48
UNIVERSITY FACILITIES REVENUE BOND FUNDS
SUMMARY OF RESERVES FOR DEBT SERVICE
AND RENEWAL AND REPLACEMENT
(Unaudited)
The comparison of the maximum reserve requirements with the actual amounts transferred to the
bond account and the three reserve accounts established under the bond indenture as of June 30,
2011 is as follows:
Balance of
Assets
Reserved
Deposits
Required to
Date
Maximum
Reserve
Requirement
Bond account (a) $ 699,330 $ 550,445 $ 550,445
Bond reserve account 1,334,577 1,312,020 1,312,020
Renewal and replacement reserve
account (b) 332,166 1,800,000 500,000
Non-instructional facilities reserve
account - - -
Equipment reserve account 134,885 134,885 134,885
Notes:
(a) The amounts required for the deposit in the bond account were remitted from the
revenue fund account to the Trustee, U.S. Bank National Association, for payment of the
bond principal and interest installments coming due on July 1, 2011.
(b) Total expenditures for extraordinary repairs, as defined in the bond indenture, as of
June 30, 2011, amounted to $2,116,531. Amounts used in this manner are to be
replaced in the reserve by extending the periodic payments until the maximum is
accumulated.
CliftonLarsonAllen LLP
1301 West 22nd Street, Suite 1100
Oak Brook, IL 60523
630-573-8600 | fax 630-573-0798
www.cliftonlarsonallen.com
49
Independent Auditor’s Report on Internal Control over Financial Reporting
and on Compliance and other Matters Based on an Audit of Financial
Statements Performed in Accordance With Government Auditing Standards
Honorable William G. Holland
Auditor General of the State of Illinois
and
Board of Trustees
Northeastern Illinois University
As Special Assistant Auditors for the Auditor General, we have audited the financial statements of
the business-type activities of Northeastern Illinois University (University) and its aggregate
discretely presented component unit, collectively a component unit of the State of Illinois, as of and
for the year ended June 30, 2011, which collectively comprise the University's basic financial
statements and have issued our report thereon dated February 10, 2012. Our report was modified
to include a reference to other auditors. We conducted our audit in accordance with auditing
standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards issued by the Comptroller General of
the United States. Another auditor audited the financial statements of the University’s discretely
presented component units, as described in our report on the University’s financial statements.
This report does not include the results of the other auditor’s testing of internal control over financial
reporting or compliance and other matters that are reported on separately by that auditor.
Internal Control over Financial Reporting
Management of the University is responsible for establishing and maintaining effective internal
control over financial reporting. In planning and performing our audit, we considered the
University’s internal control over financial reporting as a basis for designing our auditing procedures
for the purpose of expressing our opinion on the financial statements and not for the purpose of
expressing an opinion on the effectiveness of the University’s internal control over financial
reporting. Accordingly, we do not express an opinion on the effectiveness of the University's
internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be prevented, or
detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and was not designed to identify all deficiencies
in the internal control over financial reporting that might be deficiencies, significant deficiencies
or material weaknesses. We did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses, as defined above. However, we
identified certain deficiencies in internal control over financial reporting, described in findings 11-
50
1 and 11-2, in the accompanying Schedule of Findings that we consider to be significant
deficiencies in internal control over financial reporting. A significant deficiency is a deficiency or
combination of deficiencies in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the University's financial statements are
free of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion
on compliance with those provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed no instances of noncompliance or
other matters that are required to be reported under Government Auditing Standards.
The University's responses to the findings identified in our audit are described in the accompanying
Schedule of Findings. We did not audit the University's responses and, accordingly, we express no
opinion on them.
This report is intended solely for the information and use of the Auditor General, the General
Assembly, the Legislative Audit Commission, the Governor, University management, the
University’s Board of Trustees, and federal awarding agencies and pass-through entities and is not
intended to be and should not be used by anyone other than these specified parties.
a
Oak Brook, Illinois
February 10, 2012
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
For the Year Ended June 30, 2011
SCHEDULE OF FINDINGS
51
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS
Finding 11-1 - Failure to Identify and Refund Title IV Aid in a Timely Manner
Northeastern Illinois University (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.
ED requires (Dear Colleague Letter DCL GEN 04-03 Revised) 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 ED (34 CFR 668.22).
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 to ED.
However, 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 to ED (34 CFR 668.21(a)).
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
For the Year Ended June 30, 2011
SCHEDULE OF FINDINGS
52
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS (continued)
Finding 11-1 - Failure to Identify and Refund Title IV Aid in a Timely Manner (continued)
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 ED and for which the
University has recourse against the students for payment.
Since the liability to ED 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.
Generally accepted accounting principles require the proper identification, valuation and
reporting of assets and liabilities. Additionally, the Fiscal Control and Internal Auditing
Act (ILCS 30 10/3001), requires the University to establish and maintain a system, or
systems, of internal fiscal and administrative controls, which shall provide assurance that
revenues, expenditures, and transfers of assets, resources or funds applicable to
operations are properly accounted for to permit the preparation of accounts and reliable
financial reports.
 We also noted that the University did not make a timely determination of the withdrawal
date for students who withdrew from the Fall 2010 semester without providing
notification to the University (37 days after the end of the enrollment period).
Federal Regulations require an institution that is not required to take attendance to
determine the withdrawal date for a student who withdraws without providing notification
to the institution no later than 30 days after the end of the earlier of (i) the payment
period of enrollment; (ii) academic year in which the student withdrew; or (iii) educational
program from which the student withdrew (34 CFR 668.22 (j)(2)).
 In addition to the testing described above, we tested the calculation of unearned Title IV
funds for 20 students who officially withdrew from the University. We noted that one
student’s refund was made for an incorrect amount although the refund calculation was
prepared correctly resulting in a $340 under-refund to ED.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
For the Year Ended June 30, 2011
SCHEDULE OF FINDINGS
53
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS (continued)
Finding 11-1 - Failure to Identify and Refund Title IV Aid in a Timely Manner (continued)
OMB Circular A-110 requires nonfederal entities receiving federal awards establish and
maintain internal controls designed to reasonably ensure compliance with federal laws,
regulations, and program compliance requirements. Effective internal controls should include
procedures to ensure that the amount of Title IV aid earned by students is calculated accurately
and that unearned portions are returned in a timely manner.
University officials indicated that the conditions noted in this finding were the result of an
employee’s failure to perform their assigned function.
Failure to perform accurate and complete refund calculations and timely remittances of
unearned Title IV funds resulted in inaccurate financial reporting and may jeopardize future
federal funding. (Finding Code 11-1, 10-5).
Recommendation
We recommend 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’s Response
The University concurs with this recommendation.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
For the Year Ended June 30, 2011
SCHEDULE OF FINDINGS
54
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS (continued)
Finding 11-2 - Generally Accepted Accounting Principles (GAAP) Not Properly Applied to
the State Universities Risk Management Association (SURMA) Asset
The University did not properly account for its participation in the State Universities Risk
Management Association (SURMA) in accordance with accounting principles generally
accepted in the United States of America (GAAP).
The University has been a member of SURMA since its inception on February 1, 1996. SURMA
was created as a successor to the Board of Governors’ Self-Insurance Liability Program.
SURMA was initially funded by the surplus of the Board of Governors’ Self-Insurance Liability
Program upon its termination (treated as capital contributions of the original participants), as
well as additional contributions which were assessed to the members. The SURMA members
are Chicago State University, Eastern Illinois University, Governors State University,
Northeastern Illinois University, and Western Illinois University. Each university has an
employee appointed as a member to the SURMA Board, which meets on a quarterly basis.
While all past payments made by the University to SURMA have been recorded as insurance
expense, the capital contributions to SURMA have not been recorded as an asset on the books
of the University. The University’s share of the excess capital contributions to SURMA was
$406,284 and $386,166 as of June 30, 2011 and June 30, 2010, respectively. SURMA’s bylaws
state that in the event of termination, if there are surplus funds available, such surplus shall be
distributed to the then existing members in the same proportion that each existing member’s
contributions over the immediately previous five years were in proportion to the contributions of
all members. Similar provisions also apply to members who elect to withdraw (if approved by
the remaining participants) prior to the termination of SURMA. An adjusting entry was proposed
to the University to correct this error, which the University did not record.
Further, we noted the University did not adequately monitor SURMA to ensure SURMA
underwent an annual audit and biennial actuarial valuation to provide assurance as to the
accuracy of financial information required to be reported by the University.
Governmental Accounting Standards Board (GASB) Interpretation No. 4 - Accounting and
Financial Reporting for Capitalization Contributions to Public Entity Risk Pools was issued in
February 1996 with an effective date of periods beginning after June 15, 1996. It states, “A
capitalization contribution to a public entity risk pool with transfer or pooling of risk should be
reported as a deposit if it is probable that the contribution will be returned to the entity upon
either the dissolution of or approved withdrawal from the pool. An entity’s determination that a
return of the contribution is probable should be based on the provisions of the pooling
agreement and an evaluation of the pool’s financial capacity to return the contribution.”
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
For the Year Ended June 30, 2011
SCHEDULE OF FINDINGS
55
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS (continued)
Finding 11-2 - Generally Accepted Accounting Principles (GAAP) Not Properly Applied to
the State Universities Risk Management Association (SURMA) Asset
(continued)
Further, the Fiscal Control and Internal Auditing Act (30 ILCS 10/3001) requires the University to
establish and maintain a system of fiscal and administrative controls to ensure resources are
properly recorded and accounted for to permit the preparation of accounts, reliable financial and
statistical reports, and to maintain accountability over the State's resources.
University officials indicated that the SURMA by-laws were adopted cooperatively by the five
universities formerly under the Board of Governors and SURMA. The member universities have
been operating under those by-laws since 1995, prior to the issuance of GASB Interpretation
No. 4. The condition found is the result of SURMA's failure to review and revise the by-laws and
the member institutions’ interpretation that the return of the funds is not probable and hence the
failure to record the related accounting entries, as pointed out in the new audit finding this year.
Failure to adequately monitor SURMA’s activities and properly account for the University’s
participation in SURMA resulted in an understatement of assets on the University’s financial
statements. (Finding Code 11-2).
Recommendation
We recommend that the University implement controls to monitor the activities of SURMA and
properly account for its participation in SURMA in accordance with GAAP.
University’s Response
The University concurs with this recommendation.
STATE OF ILLINOIS
NORTHEASTERN ILLINOIS UNIVERSITY
For the Year Ended June 30, 2011
SCHEDULE OF FINDINGS
56
PRIOR FINDINGS NOT REPEATED - GOVERNMENT AUDITING STANDARDS
A. Generally Accepted Accounting Principles (GAAP) Not Properly Applied to Grant
Revenue Recognition
Northeastern Illinois University (the “University”) did not properly interpret and apply
GAAP in recognizing grant revenue.
Status: Not Repeated
In the current year, we did not note any inaccuracies in the determination and timing of
grant revenue recognition.