FY11-WIU-Fin-Full

              STATE OF ILLINOIS
WESTERN ILLINOIS UNIVERSITY
FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30,2011
Performed as Special Assistant Auditors for
the Auditor General, State of Illinois
E.C. ORTIZ & CO., LLP
CERTIFIED PUBLIC ACCOUNTANTS
State of Illinois
Western Illinois University
Financial Audit
For the Year Ended June 30, 2011
Table of Contents
Page
University Officials 1
Financial Statement Report
Summary 2
Independent Auditors’ Report 3
Management’s Discussion and Analysis 5
Basic Financial Statements
Statement of Net Assets 13
Statement of Revenues, Expenses and Changes in Net Assets 14
Statement of Cash Flows 15
Notes to the Basic Financial Statements 17
Independent Auditors’ 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 42
Schedule of Findings 44
Prior Findings Not Repeated 49
State of Illinois
Western Illinois University
University Officials
President Dr. Jack Thomas (Effective 07/01/11 to present)
Dr. Alvin Goldfarb (Through 06/30/11)
Vice President for Administrative Services Ms. Julie DeWees, Interim (Effective 06/30/11
to present)
Mrs. Jacqueline K. Thompson (Through 06/29/11)
Director of Business Services Ms. Dana Biernbaum, Interim (Effective 06/01/11
to present)
Mr. Ronald Ward (Through 05/31/11)
Director of Internal Auditing Ms. Rita M. Moore
University offices are located at:
Macomb Campus
1 University Circle
Macomb, Illinois 61455-1390
Quad Cities Campus
3561 60th Street
Moline, Illinois 61265-5881
1
State of Illinois
Western Illinois University
Financial Statement Report
Summary
The audit of the accompanying financial statements of Western Illinois University
(University) was performed by E. C. Ortiz and Co., LLP.
Based on their audit, the auditors expressed unqualified opinions on the University’s basic
financial statements.
Summary of Findings
The auditors identified matters involving the University’s internal control over financial
reporting that they considered to be significant deficiencies. The significant deficiencies are
described in the accompanying Schedule of Findings listed on pages 44 through 48 of this
report as findings 11-1, Inadequate Controls over University Property and Equipment, and
11-2, Inaccurate Accounting for Participation in Public Entity Risk Pool.
Exit Conference
The University waived having an exit conference in a letter dated January 30, 2012 from
Barbara Thompson, University’s Assistant Comptroller.
Responses to the recommendations were provided by Barbara Thompson, on behalf of
management in a letter dated January 30, 2012.
2
E.C. ORTIZ & CO., LLP
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
Honorable William G. Holland
Auditor General
State of Illinois
and
The Board of Trustees
Western Illinois University
As Special Assistant Auditors for the Auditor General, we have audited the accompanying
financial statements of the business-type activities of Western Illinois University (University)
and its 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 as listed in the table of contents. These financial statements are the
responsibility of the University's management. Our responsibility is to express opinions 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 February 4, 2011, we expressed unqualified opinions on the respective financial
statements of the business-type activities and the discretely presented component unit prior to
their restatement. We did not audit the financial statements of the discretely presented
component unit, as described in Note 1 of the fmancial statements. Those financial statements
were audited by other auditors 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 discretely presented
component unit, is based on the report of the 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. 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 other auditors provide a reasonable basis for our opinions.
In our opinion, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the respective financial position of the
business-type activities and the discretely presented component unit 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.
333 SOUTH DES PLAINES STREET, SUITE 2-N CHICAGO , IL 60661 tel: 312.876.1900 fax: 312.876.1911
3
The fiscal year 2010 summarized comparative information of the component unit has been
restated by other auditors as discussed in Note 17, and our opinion, insofar as it relates to the
amounts of the restatements, is based solely on the report of the other auditors.
In accordance with Government Auditing Standards, we have also issued a report dated
February 8, 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 A uditing Standards and should be considered in assessing the results of our audit.
The Management 's Discussion and Analysis on pages 5 through 12 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.
6. c:." . G.J, .~
Chicago, Illinois 0
February 8, 2012
4
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
This section of the Western Illinois University (University) annual financial report presents
management’s discussion and analysis (MD&A) of the financial performance of the
University during the fiscal year ended June 30, 2011. This discussion should be read in
conjunction with the accompanying financial statements and footnotes. The discussion and
analysis are designed to focus on current activities, resulting change, current known facts,
and future outlook. The financial statements, footnotes and this discussion are the
responsibility of University management.
This MD&A focuses on the University. The University’s component unit, Western Illinois
University Foundation (Foundation), issues separate financial statements that may be
obtained at the Foundation’s administrative office as summarized in Note 1.
Using the Financial Report
The University’s annual report includes three financial statements: the Statement of Net
Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement
of Cash Flows. The financial statements are prepared in accordance with generally accepted
accounting principles promulgated by the Governmental Accounting Standards Board
(GASB) which require that financial statements be presented on a consolidated basis to focus
on the University as a whole.
The financial statements are prepared under the accrual basis of accounting. Assets and
liabilities are categorized as current (due within one year) and noncurrent (due in greater than
one year). Current year revenues and expenses are recognized when earned or incurred,
regardless of when cash is exchanged. Revenues and expenses are reported as either
operating or nonoperating. Significant recurring sources of the University’s revenues,
including State appropriations, gifts and investment income, are nonoperating as defined by
GASB. Scholarship discounts and allowances applied to student accounts are shown as a
reduction of tuition and fee revenue and auxiliary enterprise revenue. Stipends and other
payments made directly to students are presented as student aid expenses. Depreciation is
considered an operating expense and capital assets are reported at cost less accumulated
depreciation.
Financial Highlights
Statement of Net Assets
The Statement of Net Assets presents the financial position of the University at the end of the
fiscal year and includes all assets and liabilities. The difference between total assets and total
liabilities, net assets, is one indicator of the financial condition of the University, while the
change in net assets that occurs over time indicates improvement or deterioration in the
5
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
University’s financial condition. Non-financial factors such as enrollment levels and the
condition of facilities are relevant when assessing the overall health of the University. Net
assets are divided into three major categories, as follows: invested in capital assets, net of
related debt, reflects the University’s equity in capital assets; restricted net assets are
available for expenditure by the institution, but must be spent for purposes as determined by
law, donors and/or external entities that have placed time or purpose restrictions on the use of
the assets; and unrestricted net assets are available to the University for any lawful purpose
of the institution.
A comparative summary of the condensed Statement of Net Assets for the years ended
June 30, 2011 and 2010 is as follows:
Condensed Statement of Net Assets
2011 2010
Assets
Current assets $ 119,213,904 $ 82,118,680
Capital assets, net of accumulated depreciation 173,565,011 153,934,104
Other assets 3,380,587 2,500,082
Total assets 296,159,502 238,552,866
Liabilities
Current liabilities 34,214,268 31,687,617
Noncurrent liabilities 97,019,660 66,072,420
Total liabilities 131,233,928 97,760,037
Net assets
Invested in capital assets, net of related debt 122,136,440 106,814,814
Restricted 2,047,052 2,028,285
Unrestricted 40,742,082 31,949,730
Total net assets $ 164,925,574 $ 140,792,829
The University’s financial position continues to remain strong at June 30, 2011 with assets of
$296.2 million and liabilities of $131.2 million. Net assets, the difference between total
assets and total liabilities, increased by $24.1 million or 17.1% over the previous year.
Total assets increased $57.6 million or 24.1% during fiscal year 2011. The largest
components of this change included increases of $11.0 million in cash and cash equivalents
6
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
and $18.0 million in investments from unspent debt issue proceeds. The University
continued to experience delays in reimbursement for state-funded expenditures as the
receivable from the State of Illinois increased $7.4 million from the previous year. Capital
assets increased $19.6 million. An increase of $0.8 million in accounts receivable, net was
primarily due to the increases in receivables from funding agencies for grants and contracts
and third parties.
Total liabilities increased $33.5 million or 34.2% during fiscal year 2011. The University
issued the Series 2010 Revenue Bonds for $25.5 million in August 2010 and the Series 2011
Certificates of Participation for $11.8 million in March 2011. Total long-term debt increased
$32.1 million. Accounts payable increased $2.3 million and the liability for accrued
compensated absences decreased $1.7 million.
Statement of Revenues, Expenses and Changes in Net Assets
The Statement of Revenues, Expenses and Changes in Net Assets presents the University’s
changes in financial position. Revenues and expenses are classified as operating or
nonoperating. A public University’s dependency on State appropriations and gifts usually
results in operating deficits because the GASB reporting standards classify these revenue
sources as nonoperating.
A comparative summary of the condensed Statement of Revenues, Expenses and Changes in
Net Assets for the years ended June 30, 2011 and 2010 is as follows:
Condensed Statement of Revenues, Expenses and Changes in Net Assets
2011 2010
Total operating revenues $148,085,287 $143,738,475
Total operating expenses (262,048,789) (258,803,275)
Operating loss (113,963,502) (115,064,800)
Nonoperating revenues 128,641,657 125,537,604
Nonoperating expenses (2,066,799) (1,780,278)
Income before other revenues, expenses, gains and losses 12,611,356 8,692,526
Capital State appropriations 11,471,389 6,495,559
Capital gifts 50,000 -
Increase in net assets 24,132,745 15,188,085
Net assets, beginning of year 140,792,829 125,604,744
Net assets, end of year $164,925,574 $140,792,829
7
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
Total revenues increased $12.5 million or 4.5% to $288.2 million. The primary sources of
funding for academic programs are student tuition and State appropriations. In fiscal year
2011, tuition revenues increased due in part to an annual increase for tuition and fee rates as
approved by the Board of Trustees. Revenue from Pell grants increased $3.0 million.
Total expenses increased $3.5 million or 1.4% to $264.1 million. Overall functional
expenses decreased during fiscal year 2011. Contributions by the State for on-behalf
payments related to employee benefits increased $3.9 million.
For the fiscal year ended June 30, 2011, all sources of revenues totaled $288.2 million. The
following is a graphical illustration of revenues by source:
Tuition and fees, net
27%
Grants and contracts
4%
Sales and services of
educational departments
2%
Auxiliary enterprises, net
18%
Other operating revenues
1%
State and capital
appropriations
42%
Other nonoperating
revenues
6%
Other
48%
Operating and Nonoperating Revenues
8
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
For the fiscal ended June 30, 2011, expenses totaled $264.1 million. The following is a
graphical illustration of expenses:
Statement of Cash Flows
The Statement of Cash Flows presents information related to the University’s cash receipts
and disbursements during the fiscal year. This provides an assessment of the University’s
ability to generate future cash flows and meet obligations as they come due.
A comparative summary of the condensed Statement of Cash Flows for the years ended June
30, 2011 and 2010 is as follows:
Instruction
23%
Research
1%
Public service
4%
Academic support
6%
Student services
8%
Institutional support
5%
Operation and
maintenance of plant
6%
Student aid expense
4%
Auxiliary enterprises
15%
Staff benefits
2%
Depreciation
4%
On-behalf payments
21%
Other nonoperating
expenses
1%
Operating and Nonoperating Expenses
9
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
Condensed Statement of Cash Flows
2011 2010
Cash provided by (used in):
Operating activities $ (50,339,257) $ (54,579,714)
Noncapital financing activities 65,958,095 61,909,185
Capital and related financing activities 13,207,773 (1,721,979)
Investing activities (17,813,316) (5,879,783)
Net increase (decrease) in cash and cash equivalents 11,013,295 (272,291)
Cash and cash equivalents - beginning of year 43,888,882 44,161,173
Cash and cash equivalents - end of year $ 54,902,177 $ 43,888,882
Major sources for operating activities were tuition and fees, grants and contracts and
auxiliary enterprises. Payments for employee salaries and benefits, goods and services and
scholarships and fellowships continue to comprise the major use of operating funds. Cash
used in operating activities decreased $4.2 million.
Cash inflows from noncapital financing activities consist primarily of State appropriations
and Pell grant revenues. Cash provided from noncapital financing activities increased $4.0
million.
Revenue Bonds and Certificates of Participation issued during the fiscal year provided an
inflow of $36.6 million for capital projects. Funds allocated for the acquisition and
construction of capital assets increased $8.8 million. Interest paid on capital debt increased
$1.4 million.
Cash used in investing activities increased $11.9 million as more funds were available for
investment from unspent debt proceeds.
Capital Assets and Debt Administration
The University had $383.6 million invested in capital assets at the end of fiscal year 2011.
Capital assets net of accumulated depreciation totaled $173.6 million. Depreciation expense
for the current year was $10.3 million.
The Series 2010 Revenue Bonds were issued in the principal amount of $25.5 million to fund
capital improvement renovations to Corbin and Olson Residence Halls including the dining
commons center. The Series 2011 Certificates of Participation were issued in the principal
amount of $11.8 million to fund capital improvements projects to several campus buildings
as well as Phase II of the campus steam line replacement plan.
10
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
Construction in progress at June 30, 2011 increased $14.4 million over the prior year.
Capital appropriations through the Capital Development Board (CDB) funded renovations of
$11.5 million to Memorial Hall and the Quad Cities Riverfront campus. The University
expended $8.3 million for renovations to Corbin/Olson and Lincoln/Washington Residence
Halls in fiscal year 2011. Capital projects completed in fiscal year 2011 include Memorial
Hall.
University’s Economic Outlook
The ability of the University to fulfill its mission and execute its strategic plan is directly
influenced by enrollment, State support and the cost of health care, utilities, employee
compensation and benefits and State and Federal mandates.
A crucial element to the University’s future will continue to be our relationship with the State
of Illinois, as we work to manage tuition to make it competitive while providing an
outstanding college education for our students. There is a direct relationship between the
growth of State support and the University’s ability to control tuition growth, as declines in
State appropriations generally result in increased tuition levels.
State appropriations represent operating support provided by the Governor and General
Assembly for University programs. The fiscal year 2012 budget of $55.5 million, as
approved by the Governor, decreased $0.6 million or 1.1%, from the 2011approved budget.
The University projects an increase in tuition and miscellaneous revenues. The
recommended $71.5 million fiscal year 2012 tuition and miscellaneous revenues budget
represents a $3.7 million or 5.5% increase from fiscal year 2011. The estimated increase in
tuition revenues is the result of a 5.9% tuition rate increase approved by the Board of
Trustees. Western Illinois University offers guaranteed tuition and fees, as well as
guaranteed room and board rates for each new class of entering students. The tuition
increase is only for new students, those enrolling for the first time in Fall 2011.
The University’s Auxiliary Enterprises funds budget for fiscal year 2012 as approved by the
Board of Trustees reflects a $3.2 million increase in spending over fiscal year 2011. Other
institutional funds include revenues from sponsored projects and departmental activity
revenues. The 2012 budget for these funds as approved by the Board of Trustees reflects an
increase in spending over fiscal year 2011.
Private gifts are an important supplement to the University’s sources of funding for operating
costs. In fiscal year 2011, alumni, friends, staff, corporations, and other organizations
contributed nearly $7.9 million to the Foundation in support of the University. The
Foundation distributed nearly $6.0 million in fiscal year 2011 to support academic
11
State of Illinois
Western Illinois University
Management’s Discussion and Analysis
For the Year Ended June 30, 2011
enhancement and instructional initiatives, student scholarships, capital improvements,
cultural activities, athletics, regional outreach efforts, and alumni and Foundation-sponsored
programs at Western Illinois University.
The University is committed to pursuing its goal in developing the Quad Cities campus while
strategically adding, and when appropriate, eliminating programs. Cost containment and
revenue initiatives are challenges the University continues to encounter. While it is not
possible to predict the ultimate results, management believes the University’s financial
condition is strong enough to weather economic uncertainties.
12
2011 2010 2011 2010
ASSETS
Current assets:
Cash and cash equivalents $ 54,825,938 $ 43,706,204 $ 3,540,099 $ 2,647,665
Cash and cash equivalents, restricted 76,239 182,678 - -
Investments 28,004,685 10,000,205 3,918,627 3,854,431
Accounts receivable, net 8,059,275 7,285,370 3,950,355 1,527,254
Student loans receivable, net 388,028 409,363 - -
Due from component unit 98,031 120,770 - -
Due from primary government 25,359,680 17,925,991 - -
Inventories 2,225,104 2,359,401 - -
Prepaid expenses 52,396 49,407 34,580 35,744
Other assets 124,528 79,291 - -
Total current assets 119,213,904 82,118,680 11,443,661 8,065,094
Noncurrent assets:
Investments - - 457,494 1,304,571
Endowment investments - - 6,309,249 5,103,415
Endowment investments, restricted - - 21,566,560 18,089,526
Charitable remainder trusts, restricted - - 2,529,563 2,313,652
Accounts receivable, net - - 1,034,040 771,147
Student loans receivable, net 1,605,086 1,446,130 - -
Capital assets, net of accumulated depreciation 173,565,011 153,934,104 1,140,104 1,138,104
Other assets 1,775,501 1,053,952 626,536 579,253
Total noncurrent assets 176,945,598 156,434,186 33,663,546 29,299,668
TOTAL ASSETS 296,159,502 238,552,866 45,107,207 37,364,762
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 5,095,763 2,791,624 81,628 118,610
Accrued payroll 16,206,185 15,868,039 - -
Due to primary government 179,766 126,282 98,031 120,770
Deferred revenues 5,209,598 5,212,037 118,085 161,608
Charitable remainder trust distributions payable - - 4 3,713 42,218
Other liabilities 1,355,662 758,808 2 9,272 26,219
Notes payable 149,848 259,349 - -
Revenue bonds payable 2,694,602 4,077,680 - -
Certificates of participation 1,484,943 838,081 - -
Compensated absences 1,837,901 1,755,717 - -
Total current liabilities 34,214,268 31,687,617 370,729 469,425
Noncurrent liabilities:
Notes payable 142,980 292,827 - -
Revenue bonds payable 54,290,293 31,474,896 - -
Certificates of participation 30,470,171 20,172,555 - -
Other obligations - 224,175 195,772 172,089
Compensated absences 12,116,216 13,907,967 - -
Total noncurrent liabilities 97,019,660 66,072,420 1 95,772 172,089
TOTAL LIABILITIES 131,233,928 97,760,037 566,501 641,514
NET ASSETS
Invested in capital assets, net of related debt 122,136,440 106,814,814 1,140,104 1,138,104
Restricted - nonexpendable - - 18,576,569 14,305,400
Restricted - expendable
Loans 2,047,052 2,028,285 - -
Other - - 7,825,581 7,799,968
Unrestricted 40,742,082 31,949,730 16,998,452 13,479,776
TOTAL NET ASSETS $ 164,925,574 $ 140,792,829 $ 44,540,706 $ 36,723,248
(With Partial Financial Information as of June 30, 2010)
University Component Unit
STATE OF ILLINOIS
WESTERN ILLINOIS UNIVERSITY
STATEMENT OF NET ASSETS
JUNE 30, 2011
See accompanying notes to financial statements.
13
2011 2010 2011 2010
OPERATING REVENUES
Tuition and fees, net $ 75,988,377 $ 73,193,414 $ - $ -
Grants and contracts 12,492,123 12,200,079 - -
Sales and services of educational departments 5,106,058 5,152,143 - -
Auxiliary enterprises, net 50,574,372 49,638,751 - -
Student loan activities 84,142 114,279 - -
Other operating revenues 3,840,215 3,439,809 7,719,203 6,572,337
Total operating revenues 148,085,287 1 43,738,475 7 ,719,203 6,572,337
OPERATING EXPENSES
Instruction 61,150,804 61,811,875 926,587 938,719
Research 3,142,658 2,979,445 121,885 22,806
Public service 10,557,238 10,521,948 152,021 120,023
Academic support 17,268,784 17,687,263 118,160 141,376
Student services 20,013,208 19,746,898 581,083 427,260
Institutional support 12,814,727 12,485,295 2,052,185 1,423,449
Operation and maintenance of plant 15,463,334 16,908,879 58,795 143,684
Student aid expense 9,533,397 8,134,983 1,975,463 1,946,081
Auxiliary enterprises 40,884,119 40,065,528 - -
Staff benefits 6,595,910 7,800,322 - -
Depreciation 10,268,225 10,167,598 - -
On-behalf payments 54,313,978 50,455,685 - -
Other operating expenses 42,407 37,556 - -
Total operating expenses 262,048,789 2 58,803,275 5 ,986,179 5,163,398
OPERATING INCOME (LOSS) (113,963,502) (115,064,800) 1,733,024 1,408,939
NONOPERATING REVENUES (EXPENSES)
State appropriations 110,504,651 106,856,785 - -
Gifts 320,827 301,803 - -
Nonoperating grants 17,324,135 14,293,498 - -
Gain (loss) on disposal of capital assets (45,816) 30,170 - -
Investment income 298,293 97,094 4,336,649 2,356,946
Interest on capital asset - related debt (2,020,983) ( 1,780,278) - -
Change in value of charitable remainder trusts - - 186,100 58,054
Other nonoperating revenues 193,751 3,958,254 673,020 304,445
Net nonoperating revenues 126,574,858 1 23,757,326 5 ,195,769 2,719,445
INCOME BEFORE CAPITAL ITEMS 12,611,356 8,692,526 6,928,793 4,128,384
Capital State appropriations 11,471,389 6,495,559 - -
Additions to permanent endowments - - 888,665 1,344,890
Capital gifts 50,000 - - -
Total capital items 11,521,389 6,495,559 8 88,665 1,344,890
INCREASE IN NET ASSETS 24,132,745 15,188,085 7,817,458 5,473,274
NET ASSETS, BEGINNING OF YEAR AS 140,792,829 125,604,744 36,723,248 31,146,862
PREVIOUSLY REPORTED
PRIOR PERIOD ADJUSTMENT - - - 103,112
NET ASSETS, BEGINNING OF YEAR
AS RESTATED 140,792,829 125,604,744 36,723,248 31,249,974
NET ASSETS, END OF YEAR $ 164,925,574 $140,792,829 $ 44,540,706 $ 36,723,248
(With Partial Financial Information for the Year Ended June 30, 2010)
University Component Unit
STATE OF ILLINOIS
WESTERN ILLINOIS UNIVERSITY
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2011
See accompanying notes to financial statements.
14
2011 2010 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Tuition and fees $ 75,604,571 $ 73,473,385 $ - $ -
Grants and contracts 12,846,007 1 1,199,313 - -
Gifts for other than capital and endowment purposes - - 3 ,796,977 4,630,775
Payments for employee salaries and benefits (135,159,128) (134,810,198) - -
Payments for goods and services (52,874,202) (53,737,854) (3,316,019) (2,281,815)
Payments to annuitants - - (165,967) (222,648)
Payments for scholarships and fellowships (10,098,991) (8,952,679) (1,975,463) (1,946,081)
Student loans issued (594,251) (478,207) - -
Student loans collected 479,098 5 18,056 - -
Student loans interest and fees collected 81,861 1 12,666 - -
Auxiliary enterprises charges 50,314,890 4 9,617,385 - -
Sales and services of educational departments 5,220,673 5 ,038,611 - -
Other receipts 3,840,215 3 ,439,808 717,523 490,390
Net cash provided by (used in) operating activities (50,339,257) (54,579,714) (942,949) 670,621
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State appropriations 48,161,022 4 3,814,632 - -
Gifts 231,987 2 24,306 888,665 1,344,890
Nonoperating grants 1 7,324,135 1 4,293,498 - -
Nonoperating revenues, net 240,951 3 ,576,749 587,150 387,462
Net cash provided by noncapital financing activities 65,958,095 6 1,909,185 1,475,815 1,732,352
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition of capital assets (14,466,683) (5,646,819) - -
Proceeds from issuance of certificates of participation 11,600,260 1 1,266,413 - -
Proceeds from issuance of revenue bonds 25,001,721 - - -
Payments of bond issuance costs (181,945) (87,631) - -
Principal paid on capital debt and leases (5,244,349) (5,153,246) - -
Interest paid on capital debt and leases (3,501,231) (2,100,696) - -
Net cash provided by (used in) capital and related financing activities 13,207,773 (1,721,979) - -
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of investments 22,005,073 6 ,017,834 4,545,872 6,067,200
Earnings on investments 187,465 1 02,818 2,255,949 1,078,022
Purchase of investments ( 4 0 , 0 0 5 , 8 5 4 ) ( 1 2 , 0 0 0 , 4 3 5 ) ( 6 , 4 4 2 , 2 5 3 ) ( 9 , 8 7 0 , 9 8 3 )
Net cash provided by (used in) investing activities (17,813,316) (5,879,783) 359,568 (2,725,761)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,013,295 (272,291) 892,434 (322,788)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 43,888,882 4 4,161,173 2 ,647,665 2,970,453
CASH AND CASH EQUIVALENTS, END OF YEAR $ 54,902,177 $ 43,888,882 $ 3 ,540,099 $ 2,647,665
(With Partial Financial Information for the Year Ended June 30, 2010)
University Component Unit
STATE OF ILLINOIS
WESTERN ILLINOIS UNIVERSITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2011
15
2011 2010 2011 2010
(With Partial Financial Information for the Year Ended June 30, 2010)
University Component Unit
STATE OF ILLINOIS
WESTERN ILLINOIS UNIVERSITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2011
Reconciliation of operating income (loss) to net cash provided by
(used in) operating activities:
Operating income (loss) $ (113,963,502) $ (115,064,800) $ 1 ,733,024 $ 1,408,939
Adjustments to reconcile operating income (loss) to net
cash provided by (used in) operating activities:
On-behalf payments 54,313,978 5 0,455,685 - -
Capital assets donated - - (2,000) -
Depreciation expense 10,268,225 1 0,167,598 - 2,102
Actuarial adjustment to annuities payable - - 26,736 (12,300)
Changes in assets and liabilities:
Receivables, net (58,680) (1,017,107) (2,600,124) (894,086)
Student loans receivables, net (137,621) (22,273) - -
Inventories 134,297 2 20,878 - -
Prepaid expenses and other assets 104,518 65,986 1,164 6,031
Accounts payable and accrued liabilities 464,852 (2,426) (36,982) 8,804
Accrued payroll 338,146 1 ,004,620 - -
Due to University - - (22,739) 107,788
Charitable remainder trust distribution payable - - 1,495 14,950
Other liabilities (93,903) (111,292) (43,523) 28,393
Compensated absences (1,709,567) (276,583) - -
Net cash provided by (used in) operating activities $ (50,339,257) $ (54,579,714) $ (942,949) $ 670,621
NONCASH OPERATING, NONCAPITAL FINANCING, AND
CAPITAL AND RELATED FINANCING ACTIVITIES
On-behalf payments $ 54,313,978 $ 50,455,685 $ - $ -
Capital asset acquisition via notes and leases payable - 1 64,170 - -
Capital asset acquisition via capital appropriations 11,471,389 6 ,495,559 - -
Capital asset acquisition via support from Foundation 88,840 77,497 - -
Capitalized interest 1,974,207 5 03,148 - -
Capital asset changes in accounts payable 1,893,170 (1,020,895) - -
Other capital asset adjustments 50,000 2 ,296,490 - -
Gifts in kind - - 561,056 585,479
Gain (loss) on disposal of equipment (45,816) 30,170 - -
16
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Financial Reporting Entity
Western Illinois University (University), a component unit of the State of Illinois (State),
with a primary focus on instruction and an additional commitment to research and public
service, has campuses located in Macomb and Moline, Illinois. The governing body of
the University is the Board of Trustees of Western Illinois University (Board). As
required by accounting principles generally accepted in the United States of America,
these financial statements present the financial position and financial activities of the
University and its component unit, the Western Illinois University Foundation
(Foundation). The Foundation is included in the University’s reporting entity because of
the significance of its financial relationship with the University. Complete financial
statements for the Foundation may be obtained by contacting the WIU Foundation,
1 University Circle, Macomb, IL 61455-1390.
The Foundation is a University-related organization as defined under University
Guidelines adopted by the State of Illinois Legislative Audit Commission in 1982 as
amended in 1997. The Foundation was formed for the purpose of providing fundraising
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.
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’s comprehensive annual financial report.
B. Basis of Accounting and Presentation
The accompanying financial statements have been prepared using the economic resources
measurement focus and the accrual basis of accounting. The University reports as a
Business Type Activity. Business Type Activities are those financed in whole or in part
by fees charged to external parties for goods and services.
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.
In accordance with GASB Statement No. 20, Accounting and Financial Reporting for
Proprietary Funds and Other Governmental Entities That Use Proprietary Fund
Accounting, the University follows all applicable GASB Pronouncements. In addition,
the University applies all applicable Financial Accounting Standards Board (FASB)
17
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Statements and Interpretations, Accounting Principles Board (APB) Opinions and
Accounting Research Bulletins (ARBs) of the Committee on Accounting Procedures
issued on or before November 30, 1989 unless those pronouncements conflict with or
contradict GASB pronouncements. The University has elected not to apply FASB
pronouncements issued after November 30, 1989.
C. Prior-Year Information
The basic financial statements include certain prior-year partial comparative information.
Such information does not include full comparative footnote disclosures required for a
presentation in conformity with accounting principles generally accepted in the United
States of America. Accordingly, such information should be read in conjunction with the
University’s financial statements for the year ended June 30, 2010, from which the partial
information was derived. Certain 2010 amounts have been reclassified to conform to the
2011 presentation. However, as more fully discussed in Note 17, the prior year partial
comparative information of the component unit reflects the correction of errors in the
2010 financial statements.
D. 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, liabilities, and net
assets, and disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues, expenses and other changes in net
assets during the reporting period. Actual results could differ from those estimates.
E. Cash Equivalents
The University considers all liquid investments with original maturities of three months
or less to be cash equivalents. At June 30, 2011, cash equivalents consisted primarily of
money market and similar funds.
F. Investments
The University accounts for its investments at fair value as determined by quoted market
prices in accordance with GASB Statement No. 31, Accounting and Financial Reporting
for Certain Investments and for External Investment Pools. Changes in unrealized gain
(loss) on the carrying value of investments are reported as a component of investment
income in the Statement of Revenues, Expenses, and Changes in Net Assets.
18
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Illinois statutes and Board policy authorize the University to invest in certificates of
deposit, The Illinois Funds, United States Government Securities, securities guaranteed
by the full faith and credit of the United States government, and any other security
permitted by law and approved by the Board.
G. Accounts Receivable
Accounts receivable consists of tuition and fee charges to students, amounts receivable
from funding agencies for grants, amounts receivable from third parties and charges for
auxiliary enterprise services provided to students, faculty and staff. Accounts receivable
is presented net of estimated uncollectible amounts.
H. Deferred Bond and Certificates of Participation Issue Costs
Bond and certificates of participation issue costs incurred on the revenue bond and
certificates of participation issues have been deferred and are being amortized over the
life of the bonds/certificates of participation using the straight-line method. Total
amortization for the year ended June 30, 2011 was $108,167.
I. Student Loans Receivable
The University makes loans to students under various federal and other loan programs.
Such loans receivable is presented net of estimated uncollectible amounts.
J. Inventories
Inventories are carried at the lower of cost (determined by first-in, first-out or average
cost method, depending on the nature of the inventory item) or market.
K. Capital Assets
Capital assets are recorded at cost at the date of acquisition, or fair value at the date of
donation. The University’s capitalization policy for capital assets is as follows:
equipment - $5,000 or greater; land or buildings - $100,000 or greater; and, site or
building improvements - $25,000 or greater. Intangible assets which are purchased are
capitalized at $100,000 or greater. Internally-generated intangible assets which are
primarily software are capitalized at $1,000,000 or greater. Renovations to buildings and
land improvements that increase the value or extend the useful life are capitalized.
Routine repairs and maintenance are charged to operating expense in the year in which
the expense is incurred. Depreciation is calculated on a straight-line basis over the
estimated useful lives of the class of assets. The following estimated useful lives are
being used by the University:
19
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Site improvements 25 years
Buildings 60 years
Building improvements 20 years
Computer equipment 3 years
Trucks greater than 1 ton 12 years
Capital lease equipment Life of lease
All other equipment 7 years
University capital assets financed by the State of Illinois Capital Development Board
(CDB) are recorded by the University as the funds are expended by the CDB.
L. Deferred Revenues
Deferred revenues represent unearned student tuition and fees and advances on grants and
contract awards for which the University has not met all of the applicable eligibility
requirements.
M. Compensated Absences
University policies permit most employees to accumulate vacation and sick leave benefits
that may be realized as paid time off or, in limited circumstances, as a cash payment.
Expense and the related liability are recognized as vacation benefits are earned whether
the employee is expected to realize the benefit as time off or in cash. Expense and the
related liability for sick leave benefits are recognized when earned to the extent the
employee is expected to realize the benefit in cash determined using the termination
payment method. Sick leave benefits expected to be realized as paid time off are
recognized as expense when the time off occurs and no liability is accrued for such
benefits employees have earned but not yet realized. Compensated absences liabilities
are computed using the regular pay and termination pay rates in effect at the Statement of
Net Assets date plus an additional amount for compensation-related payments such as
social security and Medicare taxes computed using rates in effect at that date.
N. Net Assets
Net assets of the University are classified in four components:
Invested in capital assets, net of related debt - consists of capital assets net of
accumulated depreciation and reduced by the outstanding balances of borrowing used to
finance the purchase or construction of those assets.
Restricted net assets - nonexpendable - are required to be retained and invested in
perpetuity.
20
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Restricted net assets - expendable - are noncapital assets that must be used for a
particular purpose as specified by laws, creditors, grantors or donors external to the
University, including amounts deposited with trustees as required by bond indentures,
reduced by the outstanding balances of any related borrowings.
Unrestricted net assets - are remaining assets less remaining liabilities that do not meet
the definition of invested in capital assets, net of related debt, restricted nonexpendable or
restricted expendable.
O. Classification of Revenues
The University has classified its revenues as either operating or nonoperating according
to the following criteria:
Operating revenues include activities that have the characteristics of exchange
transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales
and services of auxiliary enterprises, and (3) interest on student loans.
Nonoperating revenues include activities that have the characteristics of nonexchange
transactions, such as gifts and contributions, and other revenue sources, such as State
appropriations and investment income, that are defined as nonoperating revenues by
GASB Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust
Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB
Statement No. 34, Basic Financial Statements - and Management’s Discussion and
Analysis - for State and Local Governments. The State of Illinois General Revenue Fund
appropriations are reported as non-operating revenues to the extent that they are
expended during the current fiscal year. The University relies on these appropriations to
provide funding for operations.
P. Scholarship Discounts and Allowances
Student tuition and fee revenues, and certain other revenues from students, are reported
net of scholarship allowances in the Statement of Revenues, Expenses and Changes in
Net Assets. Scholarship allowances are the difference between the stated charge for
goods and services provided by the University, and the amount that is paid by students
and/or third parties making payments on the students’ behalf. Certain governmental
grants, such as Pell grants, and other federal, State or nongovernmental programs, are
recorded as either operating or nonoperating revenues in the University’s financial
statements. To the extent that revenues from such programs are used to satisfy tuition
and fees and other student charges, the University has recorded a scholarship allowance.
The scholarship allowances on tuition and fees and housing for the year ended June 30,
2011 were $10,563,353 and $3,920,121, respectively.
21
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Q. Collections
The University has collections of rare manuscripts and art that it does not depreciate.
These collections adhere to the University’s policy to (a) maintain them for public
exhibition, education or research, (b) protect, keep unencumbered, care for and preserve
them, and (c) require proceeds from their sale to be used to acquire other collection items.
R. Endowments
On June 30, 2009, the Illinois Governor signed the Uniform Prudent Management of
Institutional Funds Act (UPMIFA) into law. UPMIFA replaced the Uniform
Management of Institutional Funds Act and eliminates the historic dollar value rule with
respect to endowment fund spending. UPMIFA also updated the prudence standard for
the management and investment of charitable funds. The Foundation Board utilizes
UPMIFA’s provisions in spending decisions regarding the Foundation’s endowment
funds.
For donor restricted endowments, the UPMIFA permits the Board of Directors of the
Foundation to appropriate an amount of donor restricted endowments. The Board of
Directors has established an investment policy with the objectives of protecting the
principal of these funds and maximizing total investment return without assuming
extraordinary risks. A similar strategy has been implemented for Foundation designated
endowments.
For both donor restricted endowments and Foundation designated endowments, it is the
goal of the Foundation to provide spendable income levels that are reasonably stable and
sufficient to meet budgetary requirements and to maintain a spending rate, currently
established at 4.25% for endowment purposes and 1.40% for operational purposes, of a
36-month moving average of endowment market value, which ensures a proper balance
between the preservation of corpus and enhancement of the purchasing power of
investment earnings. The Foundation’s policy is to retain the endowments’ unrealized
appreciation with the endowment (either donor restricted or Foundation designated) after
spending rule distributions. As of June 30, 2011, the Foundation had a total of
$5,468,946 of net cumulative appreciation from investment of donor-restricted
endowments and Foundation designated endowments available for expenditure. This
amount is allocated between expendable restricted net assets and unrestricted net assets in
the Statement of Net Assets based on the classification (restricted non-expendable vs.
unrestricted) of the underlying asset upon which the income was earned.
22
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
S. Split-Interest Agreements
The Foundation’s split-interest agreements with donors consist of irrevocable charitable
remainder trusts and irrevocable charitable trusts for which the Foundation is a
beneficiary. The fair value of the trust assets are reported in the Statement of Net Assets
and changes in the fair value of the assets are recognized in the Statement of Revenues,
Expenses, and Changes in Net Assets. It is management’s intent to record the
contribution income from these agreements in the fiscal year the Foundation becomes the
irrevocable beneficiary. The Foundation received $29,810 of new contribution income
during fiscal year 2011. Management did identify during fiscal year 2011 a previously
unrecorded split-interest agreement contribution that irrevocably named the Foundation
the beneficiary during a prior fiscal year. The fiscal year 2011financial statements reflect
this contribution’s assets and related activities. Any outstanding liabilities relating to the
annual distributions required by the trust agreements are recorded in the Statement of Net
Assets.
T. Income Taxes
As a State institution of higher education, the income of the University is generally
exempt from federal and state income taxes under Section 115(a) of the Internal Revenue
Code and a similar provision of state law. However, the University is subject to federal
income tax on any unrelated business taxable income.
NOTE 2 - DEPOSITS
University
State law requires collateralization of all deposits with federal depository insurance; bonds
and other obligations of the U.S. Treasury, U.S. agencies or instrumentalities of the State of
Illinois; bonds of any city, county, school district or special road district of the State of
Illinois; bonds of any state; or a surety bond having an aggregate value at least equal to the
amount of the deposits.
At June 30, 2011, the book balance of various University bank accounts and certificates of
deposit was $31,125,384, while the bank balance was $31,142,530. The difference between
these amounts primarily represents checks that have been issued but have not yet cleared the
bank as of June 30, 2011.
23
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Foundation
At June 30, 2011, the book balance of the Foundation’s various bank accounts was $274,586,
while the bank balance was $316,660. The difference between these amounts primarily
represents checks that have been issued, but have not yet cleared the bank, and deposits in
transit as of June 30, 2011.
Reconciliation of cash and cash equivalents to deposits:
University Foundation
Cash and cash equivalents $ 54,825,938 $ 3,540,099
Cash and cash equivalents, restricted 76,239 
Less: Money market funds classified as cash
and cash equivalents (51,716,267) (3,366,090)
Cash on hand (65,211) (200)
Add: Certificates of deposit 28,004,685 100,777
Carrying amount of deposits $ 31,125,384 $ 274,586
NOTE 3 - INVESTMENTS
University
At June 30, 2011, the University had investments with carrying and fair market values of
$51,716,267 invested in the Illinois Funds Money Market. The Illinois Funds Money Market
Fund had maturities of less than one year and a Standard and Poor’s AAA rating.
Custodial Credit Risk
Custodial credit risk is the risk that in the event of a financial institution’s failure, a
government’s deposits, investments or collateral securities that are in the possession of an
outside party may not be returned to it. The University’s policy for custodial credit risk
requires compliance with the provisions of State law.
Interest Rate Risk
As a means of limiting its exposure to fair value losses arising from rising interest rates, the
University’s investment policy limits maturity of its investments to five years or less from the
date of purchase.
24
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Credit Risk
Credit risk is the risk that an issuer or counterparty to an investment will not fulfill its
obligations. The University’s policy limits its investments to the Illinois Funds investment
pool, United States Treasury bills, United States Treasury notes, United States Treasury
bonds, Federal Farm Credit Banks bonds, Federal Home Loan Banks notes, Federal National
Mortgage Association, Federal Land Bank bonds, Government National Mortgage
Association, and Federal Home Loan Mortgage Corporation.
Foundation
At June 30, 2011, the Foundation held investments with the following maturities:
Maturities in Years
Type
Total Fair
Value
Less Than
One Year or
No Maturity
1-5
Years
6-10
Years
Over 10
Years
U.S. Treasury notes $ 739,751 $  $ 512,095 $227,656 $ 
U.S. Treasury bonds 508,638    508,638
U.S. agency obligations
(FHLM, FNMA) 1,268,887 303,013 355,439 392,362 218,073
Municipal bonds 166,251  145,607 20,644 
Corporate debt securities 1,128,235 257,202 400,256 234,973 235,804
Corporate equity securities 25,380 25,380   
International equity securities 1,771,973 1,771,973   
Cash equivalents held in investment pools 623,950 623,950   
Real asset tax-exempt 528,073 528,073   
Real assets exchange traded funds 1,581,040 1,581,040   
Absolute return 5,117,633 5,117,633   
Mutual funds, international equity 4,647,312 4,647,312   
Mutual funds, domestic equity 6,430,222 6,430,222   
Open ended mutual funds, U.S. debt 6,580,507 6,580,507   
Private equity 1,033,301 1,033,301   
Certificates of deposit 100,777 100,777   
Total investments $ 32,251,930 $ 29,000,383 $1,413,397 $875,635 $ 962,515
The Foundation adheres to the total return concepts of investment management. Total return
is defined as the aggregate sum of current income and changes in the market value of the
assets under management.
Custodial Credit Risk
Custodial credit risk is the risk that when, in the event a financial institution or counterparty
fails, the Foundation would not be able to recover the value of deposits, investments, or
25
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
collateral securities that are in the possession of an outside party. The Federal Deposit
Insurance Corporation and Security Investor Protection Corporation insured account balances
were of $2,722,764 as of June 30, 2011. Illinois Funds are in the custody of the State
Treasurer and are pooled and invested with other State funds in accordance with the Deposit
of State Moneys Act (15 ILCS 520/11). See http://www.treasurer.il.gov/programs/illinois-funds/
about-illinois-funds.aspx for information on the Illinois Funds. The Foundation’s
deposits in other institutions’ money market funds are subject to the Funds’ collateralization
and investment policies.
Concentration Risk
The Foundation does not have any investments representing 5% or more of the total assets in
any single issuer. Managers may not purchase securities on margin or leverage. The
Foundation does not have a policy that specifically addresses concentration risk.
Interest Rate Risk
Interest rate risk is the risk when there is a possibility that changes in interest rates could
adversely affect an investment’s value. The Foundation does not have a policy that
specifically addresses interest rate risk. The Foundation had the following assets, at fair
values, exposed to interest rate risk at June 30, 2011:
U.S. Treasury notes $ 739,751
U.S. Treasury bonds 508,638
U.S. agency obligations (FHLM, FNMA) 1,268,887
Municipal bonds 166,251
Corporate debt securities 1,128,235
Cash equivalents held in investment pools 623,950
Open ended mutual funds, U.S. debt 6,580,507
Certificates of deposit 100,777
Sub-total investments 11,116,996
Bank money market funds 2,526,704
Illinois Funds money market funds 839,386
Sub-total cash and cash equivalents 3,366,090
Total assets subject to interest rate risk $ 14,483,086
Foreign Currency Risk
Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair
value of an investment. The Foundation’s short-term investments generally are not exposed
to foreign currency risk.
26
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
The Foundation’s investments in international stock and mutual funds represent 20% of the
total Foundation investments as of June 30, 2011. The Foundation does not have a policy on
foreign currency risk. The U.S. dollar balances of the Foundation’s investments exposed to
foreign currency risk as of June 30, 2011 are listed below.
Currency
United States
Dollar Equivalent
Euro $ 1,272,140
United Kingdom British Pound 1,237,265
Japanese Yen 1,039,124
Swiss Franc 446,826
Yuan Renminbi (China) 404,402
Brazilian Real 317,870
Australian Dollar 306,939
Other currencies, individually less
than 1% of fund portfolio 1,388,694
Total $ 6,413,260
Credit Risk
Credit risk is the risk that an issuer or other counterparty to a debt investment will not fulfill
its obligations. Credit quality ratings are not required for U.S. government securities that are
explicitly guaranteed by the U.S. government. The Foundation’s mutual funds are invested
in funds held by Citizens, a division of Morton Bank, and Charles Schwab.
At June 30, 2011, the Foundation had the following investments and their ratings:
Credit Rating per Standard and Poor’s
Type
Total Fair
Value AAA AA A+ BBB+ Not Rated
U.S. Treasury notes $ 739,751 $ 512,095 $  $  $  $ 227,656
U.S. Treasury bonds 508,638 248,447    260,191
U.S. agency obligations
(FHLM, FNMA) 1,268,887 760,088    508,799
Corporate debt securities 1,128,235 102,910 31,126 204,922 69,271 720,006
Other 28,606,419     28,606,419
Total investments $ 32,251,930 $ 1,623,540 $ 31,126 $204,922 $ 69,271 $30,323,071
27
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Summary of Carrying Values
The carrying values of cash and cash equivalents and investments shown on previous pages
are included in the Statement of Net Assets as follows:
University Foundation
Cash and cash equivalents $ 54,825,938 $ 3,540,099
Cash and cash equivalents, restricted 76,239 
Investments 28,004,685 32,251,930
Total $ 82,906,862 $ 35,792,029
Investments at June 30, 2011 are as follows:
University Foundation
Current:
Investments $ 28,004,685 $ 3,918,627
Noncurrent:
Endowment investments  6,309,249
Endowment investments, restricted  21,566,560
Other investments  457,494
Sub-total 28,004,685 32,251,930
Money market funds classified as
cash and cash equivalents 51,716,267 3,366,090
Total investments $ 79,720,952 $ 35,618,020
Credit Rating per Moody’s
Total Fair Not
Value Aaa Aa2 Aa3 A1 A2 A3 Baa1 B3 Rated
U.S. Treasury notes $ 739,751 $ 512,095 $  $  $  $  $  $  $  $ 227,656
U.S. Treasury bonds 508,638 248,447        260,191
U.S. agency obligations
(FHLM, FNMA) 1,268,887 1,268,887        
Corporate debt securities 1,128,235  200,504 38,758 110,051 315,529 133,563 69,271 48,430 212,129
Other 28,606,419    166,251     28,440,168
$ 32,251,930 $ 2,029,429 $ 200,504 $ 38,758 $ 276,302 $315,529 $133,563 $ 69,271 $ 48,430 $29,140,144
28
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Investment income for the year ended June 30, 2011 consisted of:
University Foundation
Interest, dividends, realized gains
and market value changes $ 298,293 $ 4,336,649
NOTE 4 - ACCOUNTS AND STUDENT LOANS RECEIVABLE
Accounts receivable are reported net of allowances for uncollectible accounts of $3,172,600
at June 30, 2011. Accounts receivable consisted of the following as of June 30, 2011:
Receivables from students $ 7,629,196
Receivables from funding agencies 2,272,646
Receivables from third parties 1,330,033
Total gross receivables 11,231,875
Allowance for doubtful accounts (3,172,600)
Total net receivables $ 8,059,275
Student loans receivable totaling $2,447,414 are reported net of allowance for uncollectible
loans of $454,300 at June 30, 2011.
The University changed its basis for estimating the allowance for doubtful accounts in fiscal
year 2011. In the prior year, the allowance was calculated on 1% of current year charges for
the fiscal year. In 2011, the University changed the allowance calculation to 1% of current
year outstanding accounts receivable at yearend.
NOTE 5 - CAPITAL ASSETS
The University capitalizes net interest costs incurred on borrowed funds during the
construction of capital assets. Net interest of $1,974,207 was capitalized during fiscal year
2011.
29
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Capital asset activities for the University for the year ended June 30, 2011 were as follows:
Balance
June 30, 2010 Additions Retirements Transfers
Balance
June 30, 2011
Non-depreciable capital assets:
Land and land improvements $ 3,221,432 $ 50,000 $ (35,000) $  $ 3,236,432
Works of art and historical treasures 471,569    471,569
Construction in progress 15,715,051 26,777,548  (12,368,186) 30,124,413
Total non-depreciable capital assets 19,408,052 26,827,548 (35,000) (12,368,186) 33,832,414
Depreciable capital assets:
Site improvements 28,638,147    28,638,147
Buildings and building improvements 233,180,970 1,556,361  12,368,186 247,105,517
Equipment 73,736,645 1,595,545 (1,331,582)  74,000,608
Total depreciable capital assets 335,555,762 3,151,906 (1,331,582) 12,368,186 349,744,272
Less accumulated depreciation:
Site improvements 14,084,887 931,649   15,016,536
Buildings and building improvements 121,351,849 6,587,508   127,939,357
Equipment 65,592,974 2,749,068 (1,286,260)  67,055,782
Total accumulated depreciation 201,029,710 10,268,225 (1,286,260)  210,011,675
Total depreciable capital assets, net 134,526,052 (7,116,319) (45,322) 12,368,186 139,732,597
Capital assets, net $ 153,934,104 $ 19,711,229 $ (80,322) $  $ 173,565,011
Capital asset activities for the Foundation for the year ended June 30, 2011 were as follows:
Balance
June 30, 2010 Additions Retirements
Balance
June 30, 2011
Land and land improvements $ 1,138,104 $ 2,000 $  $ 1,140,104
NOTE 6 - DEFERRED REVENUES
Deferred revenues consist of the following as of June 30, 2011:
Tuition and fees $ 2,549,381
Grants and contracts 1,694,143
Sales and services of educational departments 252,181
Auxiliary enterprises 713,893
Total $ 5,209,598
30
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
NOTE 7 - NOTES PAYABLE
The University has entered into installment purchase agreements for equipment and vehicles
with an original cost of $1,023,651. The related notes payable obligations were recorded at
the present value of the future minimum installment payments, discounted using applicable
discount rates, which range from 3.55% to 5.33%. Notes payable activities for the year
ended June 30, 2011 were as follows:
Balance, beginning of year $ 552,176
Payments (259,348)
Balance, end of year $ 292,828
Current Portion $ 149,848
Following is a schedule by years of the total future minimum note payments under these
agreements together with the present value of the net minimum note payments as of June 30,
2011.
2012 $ 160,452
2013 113,049
2014 36,497
Total minimum note payments 309,998
Less: amount representing interest (17,170)
Present value of net minimum note payments $ 292,828
NOTE 8 - REVENUE BONDS PAYABLE
General
At June 30, 2011, revenue bonds payable consists of Western Illinois University Auxiliary
Facilities System Revenue Bonds, Series 2010, Western Illinois University Auxiliary
Facilities System Revenue Bonds, Series 2006, Western Illinois University Auxiliary
Facilities System Revenue Bonds, Series 2005, and Western Illinois University Auxiliary
Facilities System Revenue Bonds, Series 2002.
Series 2010 Bonds
On August 5, 2010, the Series 2010 Revenue Bonds (Build America Bonds) were issued in
the principal amount of $25,510,000. The Series 2010 bonds are due April 1, 2033, with
annual principal payments ranging from $1,120,000 to $2,010,000 commencing on April 1,
2017 and semi-annual interest payments beginning April 1, 2011 at 4.35% to 6.60%.
31
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Proceeds from the sale of the Series 2010 Bonds will be used for issuance costs and to
finance capital improvement renovations to Corbin and Olson Residence Halls including the
dining commons center.
Series 2006 Bonds
On March 9, 2006, the Series 2006 Bonds were issued in the principal amount of
$15,250,000. The Series 2006 Bonds are due April 1, 2027, with annual principal payments
ranging from $265,000 to $1,170,000 commencing April 1, 2009 and semi-annual interest
payments beginning October 1, 2006 at 3.5% to 4.5%.
Proceeds from the sale of the Series 2006 Bonds were used to install fire sprinkler systems in
residence hall facilities and graduate and family apartments and to construct an expansion to
the Donald S. Spencer Student Recreation Center. In addition, proceeds from the sales of the
Series 2006 Bonds, together with other funds of the University, were used to provide for the
advance refunding of a portion of the Series 1999 Bonds and to pay certain expenses related
to the issuance of the bonds. A portion of bond proceeds plus funds provided by the
University were deposited in an irrevocable trust with an escrow agent to provide for a
portion of the debt service payments on the 1999 Series Bonds. As a result, a portion of the
Series 1999 Bonds are considered defeased and the liability for that portion of the bonds has
been removed from the University’s Statement of Net Assets. The Series 1999 Bonds were
retired on April 1, 2009.
Although the advance refunding resulted in the recognition of an accounting loss of
$249,562, for the year ended June 30, 2006, the University in effect reduced its aggregate
debt service payments by $401,922 over the next 19 years and obtained an economic gain of
$365,626.
Series 2005 Bonds
On February 16, 2005, the Series 2005 Bonds were issued in the principal amount of
$25,715,000. The Series 2005 Bonds are due April 1, 2020, with annual principal payments
ranging from $580,000 to $2,845,000 commencing April 1, 2006 and semi-annual interest
payments beginning October 1, 2005 at 3.00% to 4.25%.
Proceeds from the sale of the Series 2005 Bonds, together with other funds of the University,
were used to provide for the advance refunding of a portion of the Series 1993 Bonds and the
Series 1995 Bonds and to pay certain expenses related to the issuance of the bonds. The net
proceeds plus funds provided by the University were deposited in an irrevocable trust with an
escrow agent to provide for all future debt service payments on the 1993 and 1995 Series
Bonds. As a result, the 1993 and 1995 Series Bonds are considered defeased and the liability
for those bonds has been removed from the University’s Statement of Net Assets.
32
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Although the advance refunding resulted in the recognition of an accounting loss of
$1,345,010, for the year ended June 30, 2005, the University in effect reduced its aggregate
debt service payments by $7,682,725 over the next 15 years and obtained an economic gain
of $2,548,409.
Series 2002 Bonds
On February 6, 2002, the Series 2002 Bonds were issued in the principal amount of
$12,605,000. The Series 2002 Bonds are due April 1, 2022, with annual principal payments
ranging from $450,000 to $970,000 commencing April 1, 2004 and semi-annual interest
payments beginning April 1, 2002 at 3.50% to 5.00%.
Proceeds from the sale of the Series 2002 Bonds were used to construct a new residence hall,
to renovate existing residence halls, to renovate married student and family housing
apartments, and to purchase property adjacent to the University. In addition, Series 2002
Bonds proceeds were used to pay interest on the Series 2002 Bonds through October 1, 2003,
to fund a deposit to the Debt Service Reserve Account and to pay the costs of issuing the
Series 2002 Bonds.
Advance Refunded Bonds
Certain revenue bonds of the University have been defeased in prior years through advance
refunding and, accordingly, have been accounted for as if they were retired. The principal
amount of advance refunded bonds was fully paid as of June 30, 2010.
Debt Service Activity Requirements and Collateral
Following is a schedule depicting Revenue Bonds Payable activities for the year ended
June 30, 2011:
Beginning
Balance Additions Deletions
Ending
Balance
Current
Portion
Series 2002 Bonds $ 9,085,000 $  $ 585,000 $ 8,500,000 $ 610,000
Series 2005 Bonds 12,970,000  2,845,000 10,125,000 1,425,000
Series 2006 Bonds 14,305,000  710,000 13,595,000 730,000
Series 2010 Bonds  25,510,000  25,510,000 
Unamortized premium 47,733  16,482 31,251 9,481
Unamortized discount (124,154)  (9,488) (114,666) (10,566)
Deferred loss of refunding (731,003)  (69,313) (661,690) (69,313)
$35,552,576 $ 25,510,000 $ 4,077,681 $ 56,984,895 $ 2,694,602
33
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Aggregate maturities of the bonds outstanding as of June 30, 2011 are as follows:
Principal Interest
2012 $ 2,765,000 $ 2,866,555
2013 2,870,000 2,762,618
2014 2,975,000 2,652,335
2015 3,095,000 2,529,678
2016 3,215,000 2,401,707
2017-2021 17,375,000 9,800,420
2022-2026 12,400,000 5,935,477
2027-2031 9,095,000 2,997,760
2032-2033 3,940,000 392,700
57,730,000 32,339,250
Unamortized premium 31,251 
Unamortized discount (114,666) 
Deferred loss of refunding (661,690) 
$ 56,984,895 $ 32,339,250
None of the bonds described above constitute obligations of either the State of Illinois or the
Board of Trustees of Western Illinois University, but together with interest thereon, are
payable solely from and are collateralized by: a) the net revenues of the Western Illinois
University Auxiliary Facilities System, b) certain pledged student fees, and c) a pledge of
student tuition. Maximum annual debt service as defined for all outstanding revenue bonds
is $5,632,618. The estimated debt service coverage ratio based on revenues generated from
operations is 2.13. The future pledged revenues for principal and interest in fiscal year 2011
are $90,069,250. Pledged revenue coverage is 15.68 in fiscal year 2011. Pledged revenues
have a term of commitment through 2033.
NOTE 9 - CERTIFICATES OF PARTICIPATION PAYABLE
General
At June 30, 2011, certificates of participation consist of Western Illinois University Series
2011 Certificates of Participation, Western Illinois University Series 2010 Certificates of
Participation and Western Illinois University Series 2005 Certificates of Participation.
Series 2011 Certificates of Participation
On March 30, 2011, the Series 2011 Certificates of Participation were issued in the principal
amount of $11,775,000. The Series 2011 Certificates of Participation are due October 1,
2025 with annual principal payments ranging from $600,000 to $1,060,000 commencing
34
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
October 1, 2011 and semi-annual interest payments beginning October 2, 2011 at 2.50% to
5.375%.
Proceeds from the sale of the Series 2011 Certificates of Participation will be used for
issuance costs and to finance capital improvements projects to several campus buildings as
well as Phase II of the campus steam line replacement plan.
Series 2010 Certificates of Participation
On February 23, 2010, the Series 2010 Certificates of Participation were issued in the
principal amount of $11,585,000. The Series 2010 Certificates of Participation are due
October 1, 2029 with annual principal payments ranging from $415,000 to $825,000
commencing October 1, 2010 and semi-annual interest payments beginning October 1, 2010
at 1.30% to 6.375%.
Proceeds from the sale of the Series 2010 Certificates of Participation will be used for
issuance costs and to finance heating plant capital improvements and steam line
replacements. Additionally, proceeds from the sale will reimburse the University for a
portion of the cost of the sprinkler system installation in Thompson and Tanner Halls.
Series 2005 Certificates of Participation
On December 7, 2005, the Series 2005 Certificates of Participation (Capital Improvement
Projects) were issued in the principal amount of $10,290,000. The Series 2005 Certificates
of Participation are due October 1, 2025 with annual principal payments ranging from
$400,000 to $805,000 commencing October 1, 2008 and semi-annual interest payments
beginning April 1, 2006 at 3.3% to 4.5%.
Proceeds from the sale of the Series 2005 Certificates of Participation were used to renovate
the student section of the football stadium, to construct a new multicultural center, and to
construct a combination Document and Publication Services and Property Accounting and
Redistribution Center. In addition, Series 2005 proceeds were used to pay the costs of
issuing the Series 2005 Certificates of Participation.
35
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
Debt Service Activity Requirements and Collateral
Following is a schedule depicting Certificates of Participation activities for the year ended
June 30, 2011:
Aggregate maturities of the certificates of participation outstanding as of June 30, 2011 are as
follows:
Principal Interest
2012 $ 1,485,000 $ 1,419,305
2013 1,525,000 1,376,117
2014 1,570,000 1,330,002
2015 1,620,000 1,279,625
2016 1,670,000 1,221,826
2017-2021 9,380,000 5,003,104
2022-2026 11,660,000 2,523,957
2027-2030 3,080,000 402,000
31,990,000 14,555,936
Unamortized premium 7,559 
Unamortized discount (42,445) 
$ 31,955,114 $ 14,555,936
The Certificates of Participation described above do not constitute obligations of either the
State of Illinois or the Board of Trustees of Western Illinois University, but together with
interest thereon, are payable solely from and are collateralized by lawful appropriations by
the General Assembly for such purposes and legally available nonappropriated funds on an
annual basis.
Beginning Ending Current
Balance Additions Deletions Balance Portion
Series 2005 $ 9,475,000 $  $ 430,000 $ 9,045,000 $ 445,000
Series 2010 11,585,000  415,000 11,170,000 440,000
Series 2011  11,775,000  11,775,000 600,000
Unamortized premium  9,988 2,429 7,559 6,270
Unamortized discount (49,364)  (6,919) (42,445) (6,327)
$ 21,010,636 $ 11,784,988 $ 840,510 $ 31,955,114 $ 1,484,943
36
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
NOTE 10 - ACCRUED COMPENSATED ABSENCES
Vacation pay earned but not taken may be accumulated up to a specified maximum from 24
to 56 work days, and received as a lump sum payment upon termination. At June 30, 2011,
such accumulated benefits totaled $7,484,291.
Administrative and faculty unused sick leave may be accumulated up to a specified
maximum, generally 300 calendar days. Unused and unpaid sick leave can be applied toward
the service time requirements for computing retirement benefits. Civil service exempt and
nonexempt employees have no specified maximum accumulation of unused sick leave days.
One-half of any unused sick leave earned from January 1, 1984 through January 1, 1998 can
be received as a lump sum payment upon termination. At June 30, 2011, such accumulated
benefits totaled $6,469,826. Compensated absences activity for the year ended June 30, 2011
was as follows:
Balance, beginning of year $ 15,663,684
Deductions (1,709,567)
Balance, end of year 13,954,117
Less: current portion (1,837,901)
Balance, end of year - noncurrent portion $ 12,116,216
NOTE 11 - RETIREMENT PLAN
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 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 by calling 1-800-275-7877.
37
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
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 for FY12 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 employer
contributions to SURS for the years ending June 30, 2011, 2010, and 2009 were $22,432,857,
$20,300,347, $12,794,632, respectively, equal to the required contributions for each year.
NOTE 12 - POSTEMPLOYMENT 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 five
percent for each year of credited service with the State allowing those annuitants with twenty
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.
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 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.
38
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
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.
NOTE 13 - INSURANCE
The University participates in the State University Risk Management Association (SURMA),
a self-insurance pool. Through its participation in the Illinois Public Higher Education
Cooperative (IPHC), the University has contracted with commercial carriers to provide
various insurance coverages, including educators’ legal and other general liability insurance.
The University’s liability coverages have a $250,000 to $350,000 deductible per occurrence.
SURMA member schools may request reimbursement for claim related expenses from
SURMA funds. Additionally, the University purchases property insurance coverage for the
replacement value of University real property and contents. Settled claims have not
exceeded commercial coverage in any of the three preceding years.
NOTE 14 - OPERATING EXPENSES BY NATURAL CLASSIFICATION
Operating expenses by natural classification for the year ended June 30, 2011, for the
University are summarized as follows:
Compensation
and Benefits
Supplies and
Services
Scholarships
and
Fellowships Depreciation Total
Instruction $ 58,279,174 $ 2,797,195 $ 74,435 $  $ 61,150,804
Research 2,491,368 651,290   3,142,658
Public service 7,180,529 3,354,733 21,976  10,557,238
Academic support 12,606,435 4,662,290 59  17,268,784
Student services 10,854,294 9,105,480 53,434  20,013,208
Institutional support 10,918,042 1,896,685   12,814,727
Operation and maintenance of plant 9,113,014 6,350,320   15,463,334
Student aid   9,533,397  9,533,397
Auxiliary enterprises 15,757,427 24,731,296 395,396  40,884,119
Staff benefits 6,595,910    6,595,910
Depreciation expense    10,268,225 10,268,225
On-behalf payments 54,313,978    54,313,978
Other operating expenses  42,407   42,407
Total $ 188,110,171 $ 53,591,696 $ 10,078,697 $ 10,268,225 $262,048,789
39
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
NOTE 15 - CONTRACT WITH WESTERN ILLINOIS UNIVERSITY FOUNDATION
The University has a contract with the Western Illinois University Foundation in which the
Foundation has agreed to aid and assist the University in achieving its educational, research,
and service goals by developing and administering its gifts. These gifts received by the
Foundation are to be used for the benefit of the University in its scholarship, loan, grant and
other supporting programs. The University agreed, as part of this contract, to furnish certain
services necessary to the operation of the Foundation.
For fiscal year 2011, the Foundation did not specifically reimburse the University for
$684,700 of personal service costs or for facility use provided by the University. However,
the Foundation gave the University $3,327,112 for fiscal year 2011, in totally unrestricted
funds or funds restricted as to department but generally available for on-going University
operations.
NOTE 16 - COMMITMENTS AND CONTINGENCIES
Claims and Litigation
The University is currently involved in various claims and pending legal actions related to
matters arising from the ordinary conduct of business. The University administration
believes that ultimate disposition of the actions will not have a material effect on the
financial statements of the University.
Government Grants
The University is currently participating in numerous grants from various departments and
agencies of the federal and State governments. The expenditures of grant proceeds must be
for allowable and eligible purposes. Single audits and audits by the granting department or
agency may result in requests for reimbursements of unused grant proceeds or disallowed
expenditures. Upon notification of final approval by the granting department or agency, the
grants are considered closed.
40
State of Illinois
Western Illinois University
Notes to the Basic Financial Statements
June 30, 2011
NOTE 17 - FOUNDATION PRIOR PERIOD ADJUSTMENTS
The Foundation restated the beginning net assets balance in fiscal year 2010 from $31.1
million to $31.2 million, as follows:
 Certain 990-T income taxes remained prepaid during the prior period. As a result,
unrestricted net assets were restated and increased by $9,682 due to correction of errors
in reporting prior prepaid expense.
 Certain charitable remainder trusts were not reported as income in the year it became
known to the Foundation that the trusts were irrevocable. As a result, restricted
expendable net assets were restated and increased by $58,430 due to correction of errors
in reporting prior charitable remainder trusts.
 Certain capital assets previously reported as owned by the University, is now reported
by the Foundation in order to be consistent with the deed. As a result, net assets
(invested in capital assets, net of related debt) were restated and increased by $35,000
due to correction of errors in reporting capital asset during the prior period.
41
E.C. ORTIZ & CO., LLP
CERTIFIED PUBL IC ACCOUNTANTS
Independent Auditors' 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
State of Illinois
and
The Board of Trustees
Western Illinois University
As Special Assistant Auditors for the Auditor General, we have audited the fmancial statements
of the business-type activities of Western Illinois University (University) and its 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 8, 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 A uditing Standards issued by the Comptroller General
of the United States. Other auditors audited the financial statements of the University's
discretely presented component unit, as described in our report on the University's financial
statements. This report does not include the results of the other auditors' testing of internal
control over financial reporting or compliance and other matters that are reported on separately
by those auditors.
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 opinions 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
333 SOUTH DES PLAINES STREET, SUITE 2-N CHICAGO, IL 60661 tel: 312.876.1900 fax: 312.876.1911 42
43
State of Illinois
Western Illinois University
Schedule of Findings
For the Year Ended June 30, 2011
Current Findings - Government Auditing Standards
Finding No. 11-1 - Inadequate Controls Over University Property and Equipment
Western Illinois University (University) has not established adequate internal controls over
property records to ensure proper calculation and recording of depreciation expense. In
addition, the management control created to account for missing property and review the missing
property report was not operating as intended.
During our review of capital asset depreciation, we noted 4 of 29 (14%) assets examined
were not accurately depreciated during FY 2011. Through further examination of all capital
assets, it was determined that depreciation expenses on capital assets with additional
capitalized costs in a fiscal year subsequent to the capitalized fiscal year were incorrectly
calculated. To calculate depreciation expenses on these assets, the University’s fixed assets
inventory system rounds down the assets’ useful lives by omitting the last two decimal digits
(i.e., asset net useful life of 6.67 years was replaced by 6 years). Thus, useful lives of these
assets were shortened which resulted in net overstatement of the University’s depreciation
expense and corresponding accumulated depreciation by approximately $71,858 in FY 2011.
During our review of the FY 2011 annual inventory certification submitted to the Department
of Central Management Services (DCMS), we noted the University reported 459 missing
inventory items totaling $811,467. Details showed that 184 items totaling $456,703 are
under the custodianship of the one Department (Department) and represent 62% of the
Department’s total inventory accountability totaling $736,530 as of fiscal year end. As of
June 30, 2011, the reported missing items were still included in the fixed assets inventory
because the University generally reflects deletion of the missing property from the fixed
assets inventory system two years after it was reported or discovered missing. Upon
auditors’ notification, the Department further investigated the missing items and found 99
items totaling $293,898. Subsequently, we performed a physical observation of the
equipment for this Department and found two of 25 (8%) items from the revised list of
missing equipment. These items were located in a room different from the location indicated
in the property accounting records.
The University calculates its depreciation using the straight line depreciation method by
spreading the cost evenly over the life of the fixed assets. According to University policy,
additional capitalized costs are depreciated over the remaining useful life of the main asset.
Government Accounting Standards Board (GASB) Statement No. 34 paragraph 22, states
that depreciation expense should be measured by allocating the net cost of depreciable assets
(historical cost less estimated salvage value) over their estimated useful lives in a systematic
and rational manner.
44
State of Illinois
Western Illinois University
Schedule of Findings
For the Year Ended June 30, 2011
Current Findings - Government Auditing Standards (Continued)
Finding No. 11-1 - Inadequate Controls Over University Property and Equipment
(Continued)
The University policy also states that equipment belonging to the University is controlled
under the provisions of the State Property Control Act and is subject to the regulations of the
DCMS as “State-owned property.” Each department’s Director, considered as the inventory
custodian, is delegated the responsibility of maintaining proper accountability and control of
the equipment within their jurisdiction. Once the annual physical inventory is complete and
the Inventory Certification Discrepancy Report has been completed and signed, each Vice
President is asked to review a listing of missing items within their area and determine
whether to continue searching for the missing equipment, request a Public Safety
investigation to determine if the equipment was stolen or request Business Services to
remove the item from the departmental inventory. If the equipment is later located, it is
reinstated on the departmental inventory listing.
The Illinois Administrative Code (Title 44, Subtitle D, Chapter 1, Part 5010.400) requires
agencies to adjust property records within 30 days of acquisition, change or deletion of
equipment items.
University management stated that the error in the computation of depreciation expense is
due to the University’s fixed assets inventory system’s limitation in calculating depreciation
of capital assets with additional capitalized costs. WIU management also stated that a former
employee did not keep track of the inventory, equipment location transfers, and did not fulfill
the duties of the job as outlined. Further, some items listed as “missing” on the inventory list
are actually items that have lost their inventory control tags or are very old pieces of
equipment that have been cannibalized for parts or the items broke/stopped working and
were thrown away. In either case these items were not properly reported to Property
Accounting and thus, were inaccurately reported to DCMS as discrepancies.
Failure to properly calculate depreciation may result in the overstatement or understatement
of capital asset records and an inaccurate presentation of the University’s financial
statements. The lack of thorough inventories and delay in the investigation of missing
equipment increases the potential for possible loss or theft of State property. Inaccurate
property reporting reduces the reliability of University capital asset information. (Finding
Code No. 11-1)
45
State of Illinois
Western Illinois University
Schedule of Findings
For the Year Ended June 30, 2011
Current Findings - Government Auditing Standards (Continued)
Finding No. 11-1 - Inadequate Controls Over University Property and Equipment
(Continued)
Recommendation
We recommend the University make the necessary adjustments to its capital asset
depreciation calculations to ensure all assets have the correct depreciation amounts and book
values at year end. In addition, we recommend the University work with its system
administrators to update the values in the fixed assets inventory system so that these
miscalculations do not continue in the future. We also recommend the University ensure that
oversight review is being performed on results of the annual physical inventory by custodial
departments and responsible Vice Presidents to assure inventory accuracy and prompt
resolution of inventory discrepancies.
University Response
The University agrees with the finding. The University will review existing procedures in
these areas and take corrective action to address the recommendations in the finding.
46
State of Illinois
Western Illinois University
Schedule of Findings
For the Year Ended June 30, 2011
Current Findings - Government Auditing Standards (Continued)
Finding No. 11-2 - Inaccurate Accounting for Participation in Public Entity Risk Pool
Western Illinois University (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 to prepaid
insurance and amortized over the term of the current insurance policies, 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 $667,071 and
$700,503 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 the error. The University did
not record the entry as it was considered immaterial to the financial statements.
Further, we noted the University did not adequately monitor SURMA to ensure SURMA
underwent an annual audit in FY 2010, 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
47
State of Illinois
Western Illinois University
Schedule of Findings
For the Year Ended June 30, 2011
Current Findings - Government Auditing Standards (Continued)
Finding No. 11-2 - Inaccurate Accounting for Participation in Public Entity Risk Pool
(Continued)
of the pooling agreement and an evaluation of the pool’s financial capacity to return the
contribution.”
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 management stated they do not believe SURMA would approve a withdrawal
from the pool due to the effect it would have on the remaining member’s contribution rates.
Management believes the requirement of GASB interpretation No. 4 to report contributions
as deposits will therefore not apply. Management further stated they will not record the
proposed adjustment since the amount is immaterial to the financial statements.
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 No. 11-2)
Recommendation
We recommend the University implement controls to monitor the activities of SURMA and
properly account for its participation in SURMA in accordance with GAAP.
University Response
The University agrees with the finding. The University will implement controls to monitor
the activities of SURMA and properly account for its participation in SURMA in accordance
with GAAP.
48
State of Illinois
Western Illinois University
Prior Findings Not Repeated
For the Year Ended June 30, 2011
A. Inadequate Controls Over Acquisition of Public TV Station
In the prior examination, the University did not perform adequate due diligence regarding
the acquisition of a public television station. Errors were made in recording the value of
capital assets and there were inadequate controls over physical inventory and records of
fixed assets. (Finding Code No. 10-1)
Status: Not repeated
In the current examination, the University had no business acquisition transactions.
Errors noted in recording related transactions were corrected, physical inventory was
properly conducted and equipment records were accurately maintained and updated.
B. Inadequate Process for Evaluating the Estimated Allowance for Doubtful Accounts
Receivable
In the prior examination, the University did not have an adequate process for evaluating
the estimated allowance for doubtful accounts. (Finding Code No. 10-2)
Status: Not repeated
In the current examination, the University developed a process to evaluate the
reasonableness of the accounting estimate.
49