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Audit: NDSU, UND inappropriately spent student fees

FARGO -- Students applying to North Dakota State University's graduate school bought an $11,000 first-class ticket to India for the school's dean for a recruiting trip, and the University of North Dakota's graduate school applicants indirectly bought five iPads for university employees -- but they didn't know it at the time.

The state auditor's office released a report Tuesday that found both universities had "inappropriately" spent some of the millions of dollars they take in each year through student fees.

It also raised concerns over a general lack of accountability and transparency about how this money is spent, with auditors at times unable to determine what funds were used to cover certain expenses.

Some fees are charged to all students, like UND's health fee of $111.84 per semester during the 2010-11 academic year.

Other fees are charged to students in certain courses or programs, such as the pharmacy program fee at NDSU that added up to $2,820 each semester two years ago.

The 82-page report found several examples of questionable spending. A "transcript fee" at UND provided $7,600 toward new blinds and furniture, and NDSU paid $20,000 to an employee through a separation agreement using program fees to cover the expense.

In a written statement, UND President Robert Kelley said officials appreciated the "thoroughness and the diligence" of the state staff members who compiled the audit.

"The University of North Dakota will continue to act as good stewards of the public trust, and we are working with the Chancellor, the State Board of Higher Education and the State Auditor's office to understand and resolve outstanding concerns," he wrote.

An NDSU spokeswoman said the university is withholding further comment until Thursday morning, when lawmakers and university officials will discuss the report at length during a Legislative Audit and Fiscal Review Committee meeting in Bismarck.

The audit suggested several ways the universities can come up with more-consistent policies for establishing new fees and ways to make student fees more accountable.

But university officials disputed some of the claims in the report. In their response, NDSU management said the school already effectively tracks how the money is used and argued the fees are reasonable compared to peer universities.

The report found several examples of student fees seemingly collecting far more money than needed to cover extra program costs, one main argument administrators have used over the years to justify fees that have been added to a student's expenses each semester.

Mandatory fees for the fall 2010 semester totaled just under $512 at NDSU and $641 at UND -- adding up to 15 percent of the overall cost to attend NDSU and 18 percent at UND that semester.

NDSU's pharmacy program fee took in enough money to grow to a balance of more than $1 million by fall 2008. Management told the auditors these reserves are "maintained at a fiscally prudent level" to avoid deficits with future expenses, according to the report.

UND also was called out for this issue, with its College of Business and Public Administration collecting nearly $290,000 in surplus fees by last summer -- a big leap from the $9,000 cash balance in the fall of 2008 shortly after the fee was increased from $100 to $150 each semester.

Board of Higher Education President Duaine Espegard had not seen the final report by Tuesday afternoon, but he said some of the conclusions about how student fees had been spent "would not be appropriate to me, and that would need to be corrected."

He said up until now, the 11 higher education institutions administered through the North Dakota University System were each in charge of establishing and spending their own student fees. That could change after this audit, Espegard said.

"If the report is such that it needs to have our oversight, it will get our oversight," he said.