UH med school
spending authority
suspended

The move came after an
audit by Coopers & Lybrand
showed questionable practices

By Pat Omandam
Star-Bulletin

The University of Hawaii has suspended the authority of the John A. Burns School of Medicine to make any administrative or financial decisions until management problems revealed in a recent audit are addressed.

UH President Kenneth P. Mortimer told the Board of Regents yesterday that the three-part audit identified several deficiencies in the medical school's internal control structure, as well as in other areas.

Mortimer was told of the problems a few months ago when the audit for fiscal year 1997 was completed.

The suspension was to ensure that all UH and state regulations are followed, he said.

"The authority delegated to the school of medicine was suspended," Mortimer said.

"The majority of personnel actions and financial transactions must now be submitted to the Office of Research Services for review.

"This has added a series of checks and balances designed to assure managerial compliance with university policies and state statutes," he said.

The June 30 report by Coopers & Lybrand examined the financial statements of the school, its internal control structure and its compliance with laws, rules, regulations, policies and procedures.

'Questionable' practices

It showed questionable practices within the school in handling service, salaries and fringe benefit agreements with certain health care organizations.

The audit also found some UH funds were being held by outside organizations.

And it found weaknesses by school officials to safeguard, identify and account for property and equipment.

For example, a review of the equipment log for 55 items worth $2.3 million showed that two of the items could not be located. Also, 11 of the 55 items didn't have any UH identification, and 13 items located were either in disrepair or not in use.

In another example, the audit found a lack of segregation of duties for accounts receivable. It noted the school's administration officer bills hospitals and other agencies for reimbursement, but also receives payments and deposits those funds.

And the report noted equipment was stored on walkways in the Biomedical Science Building on several occasions without proper safeguards.

Corrective action taken

Sherrel L. Hammar, interim dean of the medical school, said in a April 17 letter to UH administrators that action has been taken to correct the problems. Already, Hammar said, a complete inventory has been conducted to account for any missing items and to remove all obsolete and unserviceable items from records.

"All accounts are current and will be maintained and reviewed on an annual basis," he said.

Hammar said three people have been assigned to handle billings and collections.

He acknowledged that furniture and equipment had been stored in a courtyard at the school while laboratory space was being renovated. He said the school did discuss hiring a security guard or renting storage space, but that both options were not feasible. Most of the equipment in the courtyard was either damaged or obsolete and has been removed from the school's inventory accounts, he said.

Contracts under review

Mortimer added that all hospital contracts with the school are being reviewed for consistency in rates and services provided. A solid working relationship with local hospitals is vital because the UH does not have its own teaching hospital.

Mortimer hopes the "immediate and forceful" steps taken will prevent a recurrence of these problems.

He has ordered a follow-up audit for the school for the fiscal year that ended June 30, 1998.

"As you can see, we are not taking this matter lightly," he said.

"The effectiveness and the viability of the school of medicine has far-reaching consequences throughout the state."