An audit released Tuesday morning by the state contends that Eastern Michigan did not properly report costs associated with the construction of the University House.

The long-awaited audit says the university spent $6 million on the project – including tuition and fees derived from operating revenues. The audit says that by neglecting to come to the state for approval, EMU did not follow state regulations.

The university is harshly criticized in the audit, which denounces officials for initially calling the University House a $3.5 million project. The audit says university officials should have kept a tighter reign on the project.

“The university did not maintain sufficient budgetary control over the University House project expenditures,” the audit says. “As a result, the university’s Board of Regents was not appropriately apprised of escalating costs related to the project.

In a quickly arranged press conference Tuesday morning at Welch Hall, Board of Regents Chairman Philip Incarnati said the confusion over how much the University House cost should be attributed largely to outdated accounting practices. EMU President Samuel Kirkpatrick, whose June resignation will take effect July 31, was not present at the meeting.

Incarnati said it was his decision to keep the president out of the press conference. He said the University mostly agrees with the audit’s recommendations – although he called the findings a collection of “opinions.”

“The university views this report as a tool that will help us to improve our business processes,” Incarnati said in a prepared statement. “We acknowledge the work of the Office of the Auditor General and, in principle, agree with the recommendations set forth in the audit.”

The audit executives concluded that the main source of funding for the University House was EMU’s operating revenues. The audit draws a link between the University House construction and recent tuition and fee increases at EMU.

“In its use-and-financing statement submitted for JCOS approval on July 7, 2003, the university stated that there would be no increase in tuition and fees to finance the project,” the audit says. “However, the University’s funding of the University House project did require the use of operating revenues, which are derived from student tuition and fees and state appropriations.”

Incarnati, however, denied that the Board of Regents authorized the increase of tuition and fees to finance the University House project.

“I do want to strongly object to the report’s implication that the Board raised tuition and fees to pay for University House. That is simply not true,” Incarnati said. “Tuition increases are decided by the regents to assure the long-term financial viability of the university. These increases were not used to underwrite this project.”

John Beaghan, EMU’s interim vice president for business and finance, said the university is not denying that the project cost more than first intended. But he disputed the auditor general’s assertion that the university used operating revenues on the project.

“We have consistently stated that those costs were incurred,” Beaghan said.

While acknowledging that more was spent on the project than first intended, Incarnati said it was “unreasonable” to suggest the regents should have played a day-to-day role in the construction and budgetary process. But he criticized the project’s administration for not being upfront about costs that were directed toward other campus accounts.

“No one acted outside the scope of their authority,” he said. “Should they have brought that out to us? It’s my opinion that they should have. … Did they misappropriate funds? Clearly no.”

One of the audit’s main points of criticism is the university’s failure to submit a timely use-and-finance statement to the state Joint Capital Outlay Subcommittee, which oversees such projects.

Incarnati said the university’s failure to submit the use-and-finance statement on time was done “inadvertently,” but he said it was not an uncommon occurrence among public universities in the state.

An audit ordered several months ago by the university – and conducted by the accounting firm Deloitte & Touche – found no wrongdoing. That audit found essentially the same figures as the state audit, but was not as directly critical of the University.

University officials – including Incarnati and Kirkpatrick – have defended the project throughout the controversy. They’ve said the University House is a tool for fundraising because EMU’s endowment pales in comparison to comparable local schools.

Kirkpatrick’s resignation will take effect July 31 – and the Board is expected to have an interim president in place by Aug.1. Incarnati reiterated Tuesday that the University House controversy and the release of the state audit had nothing to do with Kirkpatrick’s resignation.

Kirkpatrick told reporters at a press conference following his resignation last month that the University House was “behind us.”

The controversy flared up throughout the 2003-04 school year, primarily after investigative reports conducted by the Ann Arbor News and WXYZ Channel 7 revealed that the project costs far exceeded the $3.5 million EMU originally claimed.

The controversy led to the introduction of a resolution in the state legislature calling for the resignation of the Board of Regents. The resolution, introduced by Rep. Paul Gieleghem, D-Clinton Township, has not gained any noticeable traction in the legislature.

Outdated accounting practices constituted one of the primary reasons for the controversy, Incarnati said. Because the original $3.5 million figure didn’t take into account any costs outside a 10-foot perimeter, the project actually cost about $5.3 million. With other related costs, the project totaled $6 million, according to the audit.

The university has taken steps to change accounting practices to avoid confusion on future projects, Incarnati said.

“There was no violation of policy,” he said. “There was no usurping of authority.”