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Audit finds problem with BAC funding

Dickinson State University, along with two other state universities, was found to be in noncompliance with capital projects requirements, according to a performance audit released Wednesday.

Audit information states approval to change the financing of the Badlands Activities Center project was not obtained properly from the state Board of Higher Education.

Initially the project was approved by the SBHE to be paid for with donations and gifts, but was paid for in part by an increase in student fees, according to the audit.

In 2007, DSU student leaders approached the DSU Foundation and DSU officials with a proposal to increase student fees to help support the building and maintenance of the Badlands Activities Center project, said Constance Walter, DSU university relations director.

"This had been mentioned in an earlier report to the state Board of Higher Education," Walter said. "However, it was inadvertently left out of the 2008 report (to the SBHE)."

The university plans to submit a request to the SBHE proposing a revision to their 2008 action approving the financing plan for the BAC, which would include student fees, Walter said, adding she doesn't foresee any problems with the request.

"We also need to seek budget section approval for the change," Walter said.

The fee increase, approved by the students of DSU in February 2008, would charge students $5 per credit hour with a cap of $60 a semester per student for a period of five years. After five years, the fee decreases to $1 per credit hour with a cap of $12 a semester. Fees collected by DSU are then paid to the DSU Foundation. At the end of 2009, about $300,000 had been paid to the Foundation, according to audit information.

Gordy Smith, an audit manager with the Office of the State Auditor, said performance audits are not a "repeat engagement," and are done when requested by officials such as the state auditor or the legislature.

"We have a typical agency audit done once every two years in accordance with law, that would look more at financial aspects and some compliance things and internal controls," Smith said. "In this case, the board of higher ed became concerned about reports of expenditures down at the president's house at NDSU. They requested we take a look at things."

In order to maintain independence, the agency broadened the scope to include 14 selected projects at five institutions, he added.

About 18 months after the report is issued, the OSA will go back in and do an audit follow-up, which will check to see if those institutions found to be in noncompliance have implemented the agency's recommendations.

Smith said the audit was requested in October of last year by the SBHE and began in early November, and an estimated about 1,200 man were hours spent on the audit.

He said he doesn't believe the agency has ever conducted a performance audit on the university system's capital projects.

The University of North Dakota and North Dakota State University were found to be in noncompliance for a number of projects, including presidents' houses.

Officials at NDSU and UND failed to get approval to exceed authorized amounts for presidents' houses and both campuses also split remodeling projects of presidents' offices into smaller projects to avoid bringing them to the board.

NDSU is using public funds to make lease payments for Richard H. Barry Hall, which was approved to be funded with donations. An attorney general's opinion has been requested on this project, according to the audit.

Four pages of the 29-page audit focus on UND. In addition to concerns about the president's house and office, UND did not obtain board approval to spend more on the National Center for Hydrogen Technology.

Overall, the audit stated capital projects in the North Dakota University System are not adequately monitored. Auditors say improvements need to be made to ensure proper approval when projects are significantly changed or when authorized amounts are exceeded.

Bill Goetz, North Dakota University System chancellor, said he was surprised at the amount of projects to be found in noncompliance.

"I was surprised, I was taken aback that we had decisions being made at the campus level by leadership that were going around policy, circumventing policy, and to me as chancellor, that was very disturbing," Goetz said. "When we have that kind of business being done, transactions being conducted, it certainly is something that takes us off focus in terms of what the university system, higher education should be about in the state of North Dakota."

Goetz said some change in policy regarding university system projects has taken place in recent months, and the board will continue to look at policies with the possibility of future revisions.

"As chancellor, I am going to emphasize that presidents, in their work objectives, will have defined the importance of capital project management, and the importance of adhering to policy," Goetz said. "This is not acceptable, we will not tolerate this. It's about stewardship of the dollars, it's about transparency, it's about accountability, it's about trust. Those things have been violated."

-- Reporter Amy Dalrymple of The Forum contributed to this story. The Dickinson Press and The Forum are owned by Forum Communications Co.