FAMU Audit Reveals Serious Problems
By Roosevelt Wilson
Florida A&M University has a lot of explaining to do , according to the
preliminary and tentative findings of a state audit covering President Fred
Gainous' first full calendar year at the university.
The audit, conducted by the state's auditor general's office, covers the
period of Jan. 1, 2003 through Dec. 31, 2003 "and selected transactions through June 30, 2004."
Gainous assumed the FAMU presidency July 1, 2003.
Called "one of the worst" he has seen by one state official, the audit lists
16 findings that critize the FAMU administrative operation for everything
from the the failed Urban Broadcasting Company television contract to
inconsistencies among departments in reporting faculty activity.
The document, which also contains recommendations for addressing the
findings, is preliminary and tentative because FAMU has not responded to the findings.
Larry Reese, FAMU vice president for fiscal and administrative affairs, tod
the Capital Outlook last week, "We have just received the report and we have 30 days to respond." However, he said his will be working to get a response ready by the Sept. 14 meeting of the FAMU Board of Trustees.
The audit's first finding seems to contradict reasons given by FAMU for the delay in submitting financial reports that caused the university so much public embarrassment and led to the withholding of paychecks for some employees, including Gainous'.
FAMU officials said the delay was because the books of the previous
administration were not balanced, but the audit finding says it was because all the people who had prepared previous reports had been fired and along with them went the institutional memory.
The official summary of the findings follows:
Finding No. 1: The University terminated staff that previously prepared the financial statements without providing adequate knowledge transfer and training to the new financial statement prepares. Consequently, the University incurred an additional expense of $80,000 for an accounting firm to assist in the preparation of the financial statements for the year ended June 30, 2003.
Finding No. 2: Bank reconciliations were untimely, incomplete, contained
numerous errors, and indicated a lack of understanding on the part of the
preparer.
Finding No. 3 deficiencies in the University's check writing system for
local bank accounts included the potential for unauthorized access to the check writing machine, duplicate checks issued without detection, checks written without approval, and incomplete written procedures.
Finding No. 4: Deficiencies in the administration of electronic fund
transfer included incompatible employee duties, lack of restrictions on accounts to which transfers can be made and the amounts that can be transferred, and lack of documentation for processing transfers.
Finding No.5 Journal vouchers (manual accounting entries) were not
adequately documented and controlled.
Finding No. 6: The University entered into a contract with a contractor
without soliciting competitive proposals or exercising due diligence, resulting, in part, in additional costs to the University and a shortfall in the Athletic department of approximately $950,000.
Finding No. 7: We noted some deficiencies in the University's monitoring of its contracts for auxiliary operations.
Finding No.8: We again noted that vendors were not always paid in a timely manner.
Finding No. 9: We again noted that medical providers were not paid timely for services rendered to the University's student athletes.
Finding No. 10: The University's purchase of passenger vehicles does not
always appear to be cost effective.
Finding No. 11: Cellular phone charges have more than doubled since the year ended June 30, 2003. However, the University had no coordinated procedure for determining the most economic and efficient use of cellular phones.
Finding No. 12: The University did not perform a complete and timely annual physical inventory of its tangible personal property for the year ended June 30, 2003, contrary to law.
Finding No. 13: The University paid three employees as independent
contractors even though they were performing their normal University duties. This practice does not comply with Internal Revenue Service regulations regarding employees and independent contractors.
Finding No. 14: The University is in the process of reviewing and closing
over 900 expired contract and grant accounts that had either positive or
negative cash balances. However, because of the age of many of the grant accounts, the likelihood of collecting amounts due is low and may result in a significant loss to the University.
Finding No. 15: The University administers a scholarship program in which there is inadequate monitoring of the number of students awarded, the amount of money available to pay the students, and the record keeping for actual awards and disbursements.
Finding No. 16: Work effort reported on the faculty activity reports was
inconsistent among departments, resulting in a decreased ability to evaluate comparability of work effort or determine optimum faculty workload.
More detail
Each of the findings is discussed in more detail in the "Findings and
Recommendations" section of the audit. For example, details of Finding No. 6 regarding the UBC agreement points out: "The Athletic Department increased its operating budget by the anticipated $1.5 million revenue expected from the contract. The The Department's expenses, as of May 2004 for the 2003-04 fiscal year, exceeded available revenues by approximately $3.45 million. After spending available reserves, this left a deficit of approximately $950,000."
Under Finding No. 11 regarding cell phones, the audit says, in part:
"Cellular phone charges for the fiscal year ended June 30, 2003, totaled $59,771. Charges from July 1, 2003, through April 2004, more than doubled to $123,020."
Among other notes about control: "University management had no knowledge of the number of minutes used by employees, the number of calling plans, or the number of phones in use."
