State auditor will conduct performance audits of university foundations
BISMARCK - University foundations will be receiving performance audits after all, and the legislator who requested them said he did so because he's concerned the president of North Dakota State University spends too much time fundraising.
With an amendment to Senate Bill 2004, which the governor signed into law last week, state lawmakers expanded the duties of the state auditor's office to include performance audits of state "agencies' blended component units or discreetly presented component units." This would include university foundations.
That wording was a direct response to Assistant Attorney General Nate Martindale's finding in late February that university foundations are not state agencies and therefore not subject to performance audits, said Rep. Gary Kreidt, R-New Salem, chairman of the Legislative Audit and Fiscal Review Committee.
On Tuesday, for the second time, Kreidt's committee ordered the state auditor's office to conduct performance audits of foundations at NDSU, the University of North Dakota and Dickinson State University for fiscal years 2012, 2013 and 2014.
A performance audit looks at an entity's work practices and compares them to others in the field.
"We believe that it will be kind of focused on the relationships and contracts between this building and the president's office," Keith Bjerke, interim CEO at NDSU's foundation, said at a meeting Tuesday of the foundation's executive committee.
That's certainly the intent of Rep. Bob Skarphol, R-Tioga, who proposed the audits in January. He said Wednesday that he wants to know who's in charge of entities as powerful as the university foundations.
"When a president says he spends a third of his time working for the foundation, who is he really working for?" asked Skarphol, referring to a 2013 Forum article about the amount of time NDSU President Dean Bresciani spends with donors. "And is that appropriate? I think there's a lot of members at least in the House that would think that's not appropriate."
Kreidt said lawmakers' interest stems from a more recent controversy at the DSU Foundation involving the misuse of scholarship funds.
"The audit committee would just like some assurances that there's nothing that's happening in any of the other foundations that would lead to the same situation that happened there," he said.
Kreidt said the committee is not looking for anything in particular at NDSU or UND, and on Tuesday Bresciani said he guessed as much.
"We've been accused of no wrongdoing, there isn't an assertion, there isn't a tip. I think it'd be fair to say this is a fishing trip," he told the foundation's executive committee. "Like most of the things along these lines, they're not going to find anything."
Because Bresciani's initial reaction to the performance audit proposal was more negative, though, Skarphol said that made him suspicious.
"One of the institutions (NDSU) had real angst over it, and that angst instantly creates suspicion," he said. "If the IRS decided to audit me, I wouldn't lose a minute of sleep."
Bjerke said the foundation was not concerned about what the performance audit would find, just what it would cost.
"We are not, you know, jumping up and down and screaming and hollering because we don't want them to find out who we are," Bjerke said at the executive committee meeting. "We just think that the process was a little flawed and the cost to our foundation to prove innocence is going to be significant."
Although the state auditor's office cannot charge the foundations for the performance audits, the foundations will be charged if the office needs to hire a special consultant, which Bresciani said is likely.
"With no slight to the auditor's office, their auditors are young, typically not experienced and broadly much less in higher education, so they do their best, but their level of expertise on what's normal in public higher education is challenged," he said.
Skarphol rejected that possibility.
"I do not believe that's a valid concern," he said. "They do performance audits all the time," and he said he did not believe foundations were unique. "They're all about financial transactions."
DeAnna Carlson Zink, the CEO of UND's foundation, said her sole concern with the performance audits is maintaining the confidentiality of donors. She said she would be concerned if the audit cost fell to the foundation, "but from what i see right now, it probably would not be."
The interim CEO of DSU's foundation did not return a request for comment.