State of Illinois
Northern Illinois University
Notes to the Basic Financial Statements, Continued
39
20. Insurance
The University participates in a statutory cooperative known as the Illinois Public Higher
Education Cooperative (IPHEC). Through IPHEC the University has contracted with
commercial carriers to provide various excess liability insurance coverages, including
educators’ legal and other general liability insurance. The University’s liability coverages
have a general $350,000 deductible per occurrence, which may be partially funded by a self-insurance
fund authorized by the NIU Board of Trustees. Additionally, the University
purchases property insurance coverage for replacement value of University real property and
contents. Settled claims have not exceeded commercial coverages in any of the three
preceding years.
The University is afforded coverage by the State for general liability, automobile liability,
worker’s compensation and employers’ liability, and employee indemnity by a number of
State of Illinois Self-Insured Plans administered by the Department of Central Management
Services. Contract and tort claims are also subject to the Illinois Court of Claims Act, under
which proven claims may be satisfied by appropriations by the General Assembly to the
Secretary of State.
21. Commitments and Contingencies
Encumbrances
Encumbrances which represents goods or services that have been ordered for which delivery
has not been made or the services have not been rendered at June 30, 2008, are not recorded
in the accompanying financial statements. Encumbrances were $12,620,000 at June 30, 2008.
Grants and Contracts
The University receives monies from federal and state government agencies under grants and
contracts for research and other activities. The costs, both direct and indirect, charged to
these grants and contracts are subject to audit and disallowance by the granting agency. The
University administration believes that any disallowance or adjustment would not have a
material effect on the University’s financial position.
Legal Action
The University is a defendant in several lawsuits. However, University officials are of the
opinion, based on the advice of legal counsel, that any ultimate liability which could result
from such litigation would not have a material effect on the University’s financial position or
its future operations.
