UNT audit sparks order from Perry

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Texas public universities told to review how they pay employee benefits

Gov. Rick Perry is ordering all of the state’s public universities to review how they pay employee benefits after an audit found the University of North Texas misspent $83.5 million in state funds throughout a decade.

“The inappropriate and inaccurate accounting of taxpayer funds by the University of North Texas is inexcusable,” Rich Parsons, a Perry spokesman, said Wednesday. “Our office is taking steps to determine if other institutions of higher education are using similar methods that could result in the misuse of taxpayer money.”

Perry, citing “recent audit findings” at UNT, told state university leaders in a May 29 letter to make sure they’re paying their fair share of employee benefits.

The letter came one day after UNT disclosed that it received an excess of $83.5 million in state funds from 2004 through early this year. Most of the money that was improperly drawn from state coffers — $80.6 million — was used to pay for employee benefits. The rest went to ineligible salaries.

The discovery has raised questions about how UNT was able to obtain millions of excess taxpayer dollars over a decade — while nobody at the state, the campus or the UNT System seems to have noticed.

And it raises concerns about whether other schools have done the same thing. If so, that could mean millions drained from the state’s general revenue fund during a period when the Texas Legislature cut education funding and Perry pushed for cost controls on higher education costs.

The state’s budget system requires universities to pay employee salaries and benefits from the same pot of money.

If an employee’s salary comes from state funds, then so should the benefits.

If the salary comes from local funds, such as student fees, then the benefits must be paid from local funds.

Each year, universities report to the state the amounts spent on health insurance, retirement plans and other employee benefits. The State Auditor’s Office periodically reviews the way universities and state agencies account for their benefits spending.

A 2010 audit found that universities and state agencies “generally complied with the requirement to report employee benefit expenses proportionately to funding sources.”

In his letter, Perry told universities to conduct internal audits of their state benefit practices and give the results to his office.

He did not set a deadline.

University leaders contacted Wednesday said they’ll do so.

UNT leaders say they’re working with the State Auditor’s Office, governor’s office and other state offices to resolve the financial problems.

“The UNT System uncovered and investigated the benefits funding errors made by UNT staff. We took quick investigative and corrective actions and disclosed the problem to state officials some months ago,” UNT Chancellor Lee Jackson said Wednesday. “The system and its Board of Regents are committed to remediating the financial deficiencies and ensuring the integrity of the university’s financial records. With the assistance of outside consulting firms, a systemwide financial transformation project is underway.”

To the best of their knowledge, University of Houston officials have complied with state benefit spending rules, said Richard Bonnin, a spokesman for the university.

“The university has multiple levels of review to detect any errors in the reporting and compliance process,” Bonnin said.

He said that the internal auditors will do additional review “to provide another level of assurance.”

The comptroller for the University of Texas System regularly advises business officers at each UT campus about the benefits issue, said UT spokeswoman Jenny LaCoste-Caputo.

Given the recent concerns at UNT, the UT System comptroller had already advised campus business officers to review the way they handle benefits, she said.

State Sen. Kirk Watson, who is vice chairman of the Senate Committee on Higher Education, said the governor’s letter is an appropriate step.

“Something happened that resulted in UNT having more money than they should have,” said Watson, D-Austin. “Based upon the report that I’ve seen with UNT and the conversations I’ve had, that ought to cause us to pause and say, ‘Let’s make sure this is not happening elsewhere.’”

Watson said he’ll wait to see what colleges find in their internal audits before deciding whether the Legislature should take any action.

Parsons, the Perry spokesman, said, “The results of the UNT audit underscore Gov. Perry’s reminder of the importance of appointees to state agencies and institutions remaining vigilant and proactive in their oversight of state entities to prevent or correct activities that are not in the best interest of Texas.”

Over a decade, UNT should have received $207.9 million in state-funded benefits.

Instead, it collected an extra 39 percent — for a total of $288.5 million.

UNT leaders say they’re overhauling their financial reporting and accounting practices and have replaced several finance administrators.

The benefits issue isn’t the only recent financial problem at UNT, which has an annual budget of about $520 million.

The university also disclosed that it overstated its financial position by as much as $23 million.


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