The state auditor’s office has launched an investigation into financial irregularities at the University of North Texas.
State Auditor John Keel told The Dallas Morning News this week that the investigation began after UNT officials approached his office “with some issues they had identified regarding financial statements and accounting.”
“We have initiated an investigation on these accounting issues,” Keel said.
Indications that the university system was grappling with serious budget issues emerged last month, about the same time three top UNT finance officials abruptly resigned.
The UNT System includes the main Denton campus, as well as the Health Science Center, a law school and UNT-Dallas. A memo from UNT System Chancellor Lee Jackson to the Board of Regents indicated the financial issues “primarily arise from transactions” at the Denton school.
UNT officials recently notified a federal regulatory board that the university system may have used state money to fund employee benefits when it shouldn’t have. And Jackson’s memo to the regents said that rating agencies would be notified.
It’s unclear whether UNT will have to pay back the state or suffer cuts in state appropriations. The potential impact on UNT programs and construction projects also is a question mark.
“I am in the process of identifying the size of UNT’s current-year deficit, and we will adjust our budgets as needed in the near future,” Neal Smatresk, UNT’s new president, said Friday. “We’ll deal with our budget challenges through some belt-tightening and reorganization.”
Smatresk said that fixes “won’t be borne on the backs of our students.”
UNT “is in strong shape in spite of some poor budgetary practices in the past,” he said.
Jackson said Friday that the university’s analysis is continuing, “and until it is complete, we cannot reasonably estimate the potential financial impact.” He confirmed that UNT officials had met with banks and rating agencies.
UNT revealed its budget woes in an annual report filed Feb. 27 with the Municipal Securities Rulemaking Board. The reports are filed by large government entities that issue bonds. The report stated that “the degree of impact” of UNT’s budget issues should be known by June 30.
Part of the problems surfaced in November. That’s when UNT budget officials said the campus libraries would have to absorb $1.7 million in cuts to cover employee benefits. The library budget comes almost entirely from student fees, but UNT was paying library employee benefits with state funds. That’s not allowed.
UNT officials have indicated that similar issues may affect other campus operations
“If the law says the University of North Texas cannot pay the benefits for specific employees with state funds, and they’ve done that, then clearly they’ve got a problem,” said Jim Smith, a former chairman of the Texas Society of CPAs and managing director of a Dallas accounting firm.
Smith said he did not know the specifics of UNT’s situation and could only speak in general terms. “It would appear to me that they’re going to have to pay the state back, or they’ll have to absorb a future reduction in state appropriations — which is paying the state back a different way,” he said.
Smith said the developments at UNT — including the abrupt resignations of three senior finance officials — could signal serious problems.
“I don’t know what the outcome will be, but that’s an awful lot of smoke for there not to be a fire,” Smith said.
Jackson told The News that UNT already had initiated several major financial improvements “before the full extent of current issues were discovered.”