Audit finds discrepancies of millions of dollars in SRU’s budget

Jonathan Janasik, News Editor
December 5, 2013
Filed under News

The Association of Pennsylvania State College and University Faculties (APSCUF) released the results of an independent audit of seven of the 14 Pa. State System of Higher Education (PASSHE) public schools, including SRU. The audit claims that the universities have been dishonest and wasteful with funds.

The other six schools examined were Cheyney, Clarion, East Stroudsburg, Edinburg, Kutztown, and Mansfield universities.

Research was commissioned by the accounting firm Boyer & Ritter and used financial data from June 30, 2009 to June 30, 2013.

“PASSHE and the 14 schools presented a picture of their finances that in many instances was painted very gloomy,” explained president of the SRU chapter of APSCUF, Patrick Burkhart “When they moved toward a widespread retrenchment action we wanted to interrogate the finances to see if the financial picture was as gloomy as the presented it. That is why we hired an external audit.”

According to the audit, SRU has under-budgeted tuition revenue on an average of  $1.3 million dollars from 2008/09 to 2012/13, fees revenue was under-budgeted an average of $1.2 million from 2008/09.

State subsidies were over-budgeted in 2011/12.

SRU reportedly over-budgeted salaries and wages by $1.9 million in 2009/10, $3 million in 2010/11 and $5.3 million in 2011/12.

“When compared to the actual financial results for these years, it would appear the university has budgeted conservatively, consistently under-budgeting revenue and over-budgeting salaries and benefits,” the audit states. “This has created a large disparity in budget to actual Educational and General operational income.”

“We believe that and public accounting principles are sufficient to budget within a few percent of error,” Burkhart explained. “And therefore, I think in essence, they’re playing dirty pool. They’re opening up by projecting horrific deficits, when in the end they don’t materialize. They project those deficits in a manner to defend proposed retrenchment actions at some universities.”

Burkhart stated that the audit cannot be used to prevent retrenchment, but it is still beneficial to APSCUF.

For example, APSCUF has requested that the auditor general of the commonwealth to review the data in the audit.

“The auditor general can move in and say, ‘you have been doing inappropriate accounting and henceforth, that is unacceptable,’” explained Burkhart. “Then at least, we can have a discussion about financial difficulties with disclosure and confidence that both sides understand, a reasonably accurate picture of what’s going on.”

“In general, there appears to be minimal accountability for budgeting at the university level with the PASSHE Board of Governors,” stated the audit. “Without strict oversight of these budgets, University management should extremely cautious when utilizing these budgets to project faculty and other personnel retrenchment 2013/14 and forward.”

PASSHE media relations manager Kenn Marshall explained that he had doubts about the audit.

“The accounting firm doesn’t understand the way our budgets are done, there are very specific responsibilities for the university presidents, the consul of trustees, and the board of governors,” Marshall explained. “There are three different entities that oversee the budgets. We at PASSHE are very committed to financial management and we’re confident that our universities are practicing that.”

Burkhart explained he understands why some people may see the audit as an attack on the universities.

“I suppose that if I was in the accounting departments in some of these places, I would feel like this was an attack,” Burkhart said. “It clearly is a statement of distrust that we’ve gone to an external auditor. “

“In instances where there is a statement of distrust and you disclose to one another in good faith, then you can strengthen or rebuild trust,” Burkhart added. “In instances where there’s distrust and then you collect independent evidence that the distrust was valid, that is a challenging circumstance for people to face. Ideally we want to build a trusting relationship where we come to the table for discussions and have good faith and believe that everyone is discussing honestly.”

A blog post about the audit on the APSCUF website Tuesday stated, “In every case, the accounting firm discovered that the university created affiliated entities or used foundations to take on debt for new construction. In many cases, the affiliated entities are taking on debt to pay for new dormitories and other lavish construction.”

“A lot of the assertions in the news release that APSCUF put out are not from the report from the firm that they hired, so I’m not sure why they were included,” explained Marshall. “The news release claims that the PASSHE universities are hiding their debts and entering their debts to affiliated entities. That is absolutely not true. They’re talking about the affiliated entities that universities, including Slippery Rock have been using for over 15 years to help fund new residence halls. We’ve been very open about that process.”

President Cheryl J. Norton and SRU vice president for finance and administration Molly Mercer were unavailable for comment.

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