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Week of Thursday, July 15, 2004Audit: By PETE
HEYN A state audit of the University House project at Eastern Michigan University contradicts EMU officials’ previous statements about the cost of the project and the source of the funds to pay for the project. The audit was released Tuesday morning. In a media briefing held Tuesday at the university, Eastern Michigan University Board of Regents Chairman Philip Incarnati said the university has already implemented many of the changes the audit proposes. Incarnati, who at one point characterized the audit as "opinion," also said the university disputes some of the findings. After seeing the audit, State Rep. Paul Gieleghem D-Clinton Township, said he will issue a formal request to the head of the Higher Education Committee to present a resolution to the Michigan House of Representatives, calling for the resignation of the EMU Board of Regents. "The audit confirms an ongoing pattern of disregard for the proper procedures to spend public dollars." Gieleghem said. State Rep. Ruth Ann Jamnick, D-Ypsilanti Township, asked the Michigan Auditor General’s office to review the University House project after she said she received numerous complaints about it from constituents. University House is a combined fundraising/entertainment facility and president’s residence that was completed last year. The audit addressed five issues: • The audit found that as of December 2003, funding for University House included $229,500 in gifts and pledges, $347,407 transferred from the auxiliary fund to the plant fund and $1 million of future corporate royalties revenue. The source of remaining funding was operating revenues of the university, the audit stated. • The audit found that there have been total direct expenditures of $5.3 million and other costs, including the cost of a forensic audit commissioned by the board of regents, of $700,000, bringing the total cost of University House to approximately $6 million. • The audit found that the university did use operating revenues for the project without obtaining approval from the Michigan Department of Management and Budget and the Joint Capital Outlay Subcommittee. • The audit found that the project funding and expenditures were not accounted for in accordance with applicable statutes. The audit further found that the University did not maintain sufficient budgetary control over the project and that the University did not comply with the annual capital outlay appropriations acts with respect to the projects capital outlay funding. • The audit found that the University did not maintain sufficient management control over the project. In EMU’s preliminary responses contained in the audit, the university strongly disagrees with many of the findings, including the audit’s conclusions that the project did impact tuition and fees for students. The audit also provided four recommendations, to which the university agreed. The recommendations were as follows: • That the university obtain approval from the DMB and JCOS before using operating revenues to fund capital outlay projects. • That the university maintain sufficient budgetary control over capital outlay project expenditures. • That the university comply with annual capital outlay appropriations acts with respect to capital outlay projects. • That the university improve its competitive bidding process for selecting contractors and awarding construction contracts. Incarnati said at the press conference that the school would use the state audit of the University House project to "improve our business standards." In his statement Incarnati said, "The University agrees in principle with all of the recommendations." Incarnati later added that, "the board was very clear in its intent that no tuition and fees or state appropriated dollars be used, although the Board has the authority to do so." He also refuted the audits implication that the board raised tuition and fees to pay for the project. "This is absolutely not true. Tuition increases are decided by the Regents to assure the long-term viability of the University. These increases were not used to underwrite this project." Incarnati, finished his statement by saying, "Although we disagree with some of the findings, we found the audit helped us to more carefully examine our business processes. We continue to develop plans to clarify lines and levels of authority and to strengthen our system of checks and balances. This diligence will help us be consistent with best practices." In the question and answer session that followed Incarnati’s statement, John Beaghan, interim vice president for business and finance, said that $1.7 million for the project came from general operating funds. Beaghan also said that when the University refinanced bonds to obtain $2 million that was used for the project it incurred a one-time interest payment of $200,000 because of the timing of the refinance. Incarnati said EMU President Sam Kirkpatrick, who recently announced his resignation, was not asked to attend the briefing. Jamnick, who has voiced concerns about University House, said the audit points out that the university failed in its fiduciary responsibility. "It’s a shame that they continue to point their finger at other state institutions instead of accepting their responsibility for misspending public money," Jamnick said. EMU now has 60 days to provide a written response to the recommendations to the Auditor General, the House and Senate fiscal agencies and the state budget director. The response is to specify the actions taken by EMU in response to the report’s recommendations. To read the complete audit go to http://audgen.michigan.gov/audgen.htm |
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