State Auditor Susan Montee says Missouri State University officials need to tighten the school's accounting methods.
Auditor comes down on Missouri State
Missouri State University was nicked in its state audit for improper documentation and lack of controls, State Auditor Susan Montee reported to school officials on campus Oct. 19.
In the presentation, Montee highlighted the major points of the 58-page audit, which can be viewed in its entirety online at www.auditor.mo.gov/press/2010-125.htm. The audit examined the fiscal years ending June 30, 2008, and June 30, 2009, but it wasn’t necessarily limited to those years, according to the audit.
The audit states that between January 2007 and June 2009, the university installed a $7.6 million computer system for processing payroll, human resources, financial aid, student admissions, registration information and accounting information for the university and the Missouri State University Foundation.
A major problem arose during the computer system implementation, Montee said, as documentation settings were not added properly.
“Many standard reports were not set up in that system,” Montee said. “We were very unhappy when we asked for what we considered basic financial statements, and the university could not produce those for us.”
Montee concluded the computer system was not keeping track of financials on a daily basis, preventing officials from controlling those finances adequately.
“When the university is handling $270 million of in-and-out, they ought to be routinely producing income statements (and) cash flow statements for planning and working tools,” Montee said. “That was really a concern for us.”
Child Development Center confusion Montee pointed specifically to the Child Development Center, which the audit states could not be accounted for properly. She said the CDC portion of the audit was probably the biggest issue.
Montee noted discrepancies between the amount spent and the amount transmitted to the treasurer, with no supporting documents clarifying the differences. According to the audit, expenses between the infant/toddler operations and preschool operations had been improperly allocated, with the CDC paying all expenses from infant/toddler operations. As a result, financial statements appeared to show that the infant/toddler program was operating at a loss of nearly $200,000 per year, while the preschool was operating with a large surplus.
“There were no controls. There were no oversights. Some of the money was not accounted for,” Montee said, pointing to missing attendance records and receipts. “I’m not going to say there was fraud, but I’m also not going to say there wasn’t fraud.”
However, Montee noted that since the years audited, the university has taken strides to correct missteps in the CDC, particularly through internal auditing services provided by BKD LLP.
“I feel confident the internal auditors are on top of it and will be following up on any of that themselves,” she said.
Another issue Montee pointed out was the blurred line between the university and its fundraising arm, the MSU Foundation.
She said in some instances, monies were crossing over between the two entities.
“You either draw the line and operate as separate entities or you just try to not have the smokescreen that says they are separate entities,” she said. “If you are separate, you are separate.”
JQH’s loose records Concerning JQH Arena, Montee said personnel expenses charged to it, the Hammons Student Center and Plaster Sports Complex were not accurately allocated. Expenditures that were allocated to the Hammons Student Center and Plaster Sports Complex, she said, should have been allocated to the JQH Arena. Additionally, operating transfers from the Intercollegiate Athletics Fund – supported by the university Operating Fund – were used to subsidize losses during the 2008–09 basketball season.
As a result, the arena’s financial condition appeared in better shape than reality. She said the arena has had two consecutive years of loss and has been projected to have a third.
“We don’t have a problem with the fact that (JQH Arena) is operating at a loss as long as the university recognizes that the arena is operating at a loss and documents it as such and has some type of plan in place to address that,” Montee said, adding that doing so would result in greater transparency. “They need to have it in a separate place and then work toward having it be self-sufficient as opposed to combining it so you can’t tell specifically what is an arena expense and what is a sports center expense.”
Lacking guidelines concerning the men’s head basketball coach position also turned the auditor’s head. The audit states that $96,000 is added to the coach’s budget for “promotional compensation” without any regulation of the promotional activities.
She said the extra funds might be justified, but the auditor was unable to find backing justifiable evidence.
“In this particular case, he gets paid that money because he is the basketball coach,” Montee said. “There’s no special duties or special things that he has to do in order to earn that promotional money. If you’re going to pay it and you’re going to call it something beyond his pay for being the basketball coach, then it should probably have duties assigned to it or at least some kind of understanding as to the types of things he should do in order to earn that.”
Eye on improvement Other primary issues in the report involved presidential tenure, the Missouri Sunshine Law and ticket sales.
Montee concluded that most of MSU’s problems were documentation issues.
“We’re not saying the university has a real problem here,” she said. “We’re saying that we are in a different climate than we have been in the past, and we have to be tighter on everything out there. … The issues in here are not major, red flag, huge problem issues, but everything could be tighter.”
In response to the audit, the MSU Board of Governors wrote a letter Sept. 30 to Montee stating its willingness to use the advice in the audit to improve the university.
“The review and report from the state auditor provides another fresh perspective for us to consider toward our goal of making the university a better place to work and study,” wrote Gordon Elliott, vice chairman. “Please know that the board of governors, President Cofer and the entire campus community believe in constantly improving.”[[In-content Ad]]