Uncertain numbers

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A recent internal financial audit shows Colorado State University-Pueblo’s budget woes may run much deeper than the reported poor enrollment figures.

Questionable accounting practices, an undertrained finance department, lack of staff, staffing turnover and ineffective accounting technology all show the university was unable to deal with the school’s finances long before the announcement of the budget crisis last year.

The audit, which was conducted by BKD CPAs and Advisors in June, made recommendations to correct these problems, but in some areas, the department has yet to comply.

The audit found in one case, 17 new entries were recorded after the fiscal year ended that totaled $20 million. Of those, 14 affected at least one account by $100,000. In simple terms, additions to the books of CSU-Pueblo after they were submitted resulted in accounts changing to the tune of $20 million.

If internal controls are working correctly, the audit said, it shouldn’t have happened.

In another case, accrued interest totalling $890,000 was incorrectly recorded. Twice.

Many of the mistakes pointed out in the audit can be credited to improper recording and lack of supervision. Finance management was unable to provide auditors with the department’s methods in collecting commercial accounts receivables.

In other words, the finance department could not explain how they got their numbers.

The audit also points out that the department failed to adhere to a Governmental Accounting Standards Board guideline that requires accounting departments to define certain payments and fees as deferrals.

Another recording mistake occurred when $683,000 of technology fees were classified as “deferred” when they should have been categorized as “earned.”

In terms of technological errors, 49 accounting entries were simply deleted when instead, they should have corrected for mistakes, according to the audit.

A new accounting software system was recently implemented to help fix the problems that the audit found.

In other words, the finance department could not explain how they got their numbers.

In 2013, several faculty members questioned whether budget cuts were made based on sound financial data because of the software data the university was using.

Di Mare said in a faculty senate meeting in December 2013, just after the budget crisis announcement, that it was very difficult to track the money coming in and going out of CSU-Pueblo.

The software system, AIS, was “home-grown,” said Vice President for Finance and Administration Karl Spiecker.

“That software package had significant limitations. We recognized that a year ago and Fort Collins has assisted in migrating us to a new system,” Spieker said. “So, the audit findings that were identified last year will be addressed now because we are on the new financial system.”

Staffing problems within the finance department, however, might not have as an easy fix.

“The current challenges are associated with vacancies we have,” Spiecker said. “We need to fill vacancies so that we have enough staff with the right expertise.”

Perhaps the most palpable vacancy is the university’s lack of a certified public company secretarial service provider in Singapore. One of the audit’s recommendations was to hire a CPA, but so far, no real progress has been made there.

“I am working with the president on a job description and we are posting to hire someone to hire with CPA and higher education experience,” Spiecker said. “That’s certainly a finding in the audit that we need to address.”

The staffing problems that became evident in the audit also extend to a lack of training in existing staff members.

The university also failed to report accurate enrollment numbers to the National Student Loan Data System in a timely manner.

“CSU-P does not have adequate controls in place to ensure that student enrollment data is reported to the NSLDS timely, as required,” the audit said.

The university is obligated to report the enrollment status of students so that loan repayment deadlines can be determined.

One of the audit’s recommendations was to hire a CPA, but so far, no real progress has been made there.

The finance staff told the auditor that they use a manual process determine if students meet degree requirements upon graduation. Sometimes, it takes them two months after graduation to decide this.

The department’s explanation for the error was that, “they did not understand the required deadlines for receipt of enrollment status changes by the NSLDS,” according to the audit.

The result of an error like this could make students face consequences like missing payment deadlines, the audit said. Students who have not yet graduated can also be inaccurately placed into repayment status.

According to the audit, the financial staff “indicated that, in part, policies and procedures were not followed during fiscal year 2014 due to turnover in the accounting department and a lack of proper training for new staff on required procedures.”

During fiscal year 2014, the finance staff at CSU-Pueblo was straying away from procedures it didn’t even necessarily know existed.

Plus, consistent changes in staffing made the procedures even more difficult to learn and follow.

One major audit recommendation is to ensure that the finance staff is equipped for the next fiscal cycle.

But, perhaps ironically, in order to solve its problem with staffing, it has to hire better-trained staff, which will create even more turnover.

“In the course of really the last two fiscal years, we have had significant turnover in our financial staff, and anytime you have the turnover, you lose that institutional knowledge,” Spiecker said.

And that type of turnover applies even further back than two years. For the past three-and-a-half years, the financial body at CSU-Pueblo has been facing transition.

Much of CSU-Pueblo’s administration, as a whole, is relatively new. President Lesley Di Mare was hired in October 2011, after former President Joe Garcia moved on to become Lieutenant Governor of Colorado.

“We need to make sure we don’t ever get into this situation again.” – Karl Spiecker, Vice President for Finance and Administration

The vice president for finance and administration under Garcia was Joanne Ballard, who resigned shortly after he did.

Since Ballard resigned in June 2011, the university has gone through five finance and administration vice presidents, including two who acted in an interim position.

Martin Hanifin, who left the university in the middle of its 2013 budget crisis, was the first VPFA hired under President Di Mare. Spiecker replaced Hanifin as VPFA in January 2014.

Hanifin did not respond to PULP’s requests for comment.

Spiecker was appointed directly by Chancellor Martin, because, “given the difficult budgetary challenges ahead for the university, it was imperative that no time was lost in the leadership transition,” according to a university news release.

Usually, there’s an interview process for the position.

Spiecker has been working as chief finance officer and in other high-level budget analysis positions for the past 17 years. Before he came to CSU-Pueblo, he was the CFO and director of finance and administration at the Colorado Department of Corrections.

Having to dole out budget cuts was not necessarily a new task to him but having to present a university with a largely unpopular budget plan was.

“It’s a little tough to come in and basically present the campus with a cut plan that I didn’t help develop. I came in mid-cycle,” Spiecker said. “By the time we were presenting to the campus what we were doing, a lot of those decisions had already been made by the president and her cabinet.”

When the budget crisis was first announced, university officials said the school had been operating on budget deficits for close to six years. The software’s reliability was questionable. The audit pointed out a lack of staff and the staff that exists is undertrained.

While the audit doesn’t directly correlate the problems to the deficits, it raises the question of if the finance department would have been stronger, could CSU-Pueblo have avoided a budget crisis?

Spieker couldn’t be reached for contact after his initial interview to answer that question. But he previously said, “We need to make sure we don’t ever get into this situation again.”

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