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Local

Northern Illinois University found in noncompliance over bond covenants

DeKALB – An audit report from the Office of the Illinois Auditor General found that Northern Illinois University was in noncompliance with its bond agreements after transferring revenues reserved for certain facilities to other accounts.

As of June 30, NIU had outstanding revenue bonds whose proceeds were reserved to finance certain projects within a “closed system” of facilities not directly related to NIU’s instruction, research or service units.

These facilities include athletic facilities, such as Huskie Stadium and the Convocation Center; recreational facilities, such as the Student Recreation Center; dining facilities; certain housing facilities; and student service facilities, such as the Holmes Student Center and Campus Life Building.

Meanwhile, the university also manages certain facilities owned by a private entity through a public-private partnership, including the New Residence Hall and Northern View Community. Accounts for revenues drawn from these facilities were established in fiscal 2011.

As the accounts were reviewed, a $2.5 million net transfer from closed system resources to the public-private partnership was observed, which violated university bond law. On Feb. 2, the university returned $2.6 million from the public-private partnership accounts to the closed system funds.

The report recommended that NIU review its bond covenant compliance on a routine basis to prevent and detect instances of noncompliance.

A response from the university said it accepts the auditor’s recommendation and has taken corrective measures to ensure appropriate segregation of the public-private partnership and its auxiliary facilities system to maintain compliance with the bond debt covenants.

“While we are disappointed that the auditors identified several findings from fiscal year ’17, we are working to address all issues in a timely manner,” a statement from NIU reads. “NIU’s new leadership team takes these matters seriously and is committed to making necessary changes to ensure we are following best practices as a good steward of our resources.”

A full copy of the audit report is available on the Illinois auditor general’s website.

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