Audit slams UH budget

A report to legislators charging an absence of fiscal accountability is met testily by UH

The University of Hawaii at Manoa's $300 million operating budget is underscrutinized and largely unsubstantiated, providing little confidence that funds are managed adequately and impeding the "efficient and effective use of resources," a state audit released yesterday says.

UH budgeting process is criticized The state financial audit of the University of Hawaii at Manoa, conducted from June to October, was released yesterday. Here are a few of the report's key points: Findings » UH-Manoa's budget lacks the "detail and support" necessary to ensure the efficient and effective use of resources. » Management of general and tuition funds at the flagship campus is inadequate and provides "little assurance" that the university has a full understanding of its overall fiscal condition. » The university's cost-per-student calculation, an estimate to guide tuition planning, is based on unreliable data and has "limited value for decision-making." Recommendations » Programs should be continually monitored for performance as part of the budget process. » UH-Manoa's "financial reporting system" needs to be enhanced to ensure it has a better grasp on its expenditures, allowing better monitoring, analysis and decision-making. » The methodology used to arrive at a cost per student should be documented, analyzed and calculated annually. SOURCE: STATE AUDITOR'S OFFICE

"In the course of our audit, we identified issues within the budget process ... that do not fully ensure fiscal accountability," state Auditor Marion Higa wrote in the report.

"At Manoa, these issues include an unsubstantiated base operating budget and a budget request that is not justified to the Legislature. Further, the campus does not have a formal mechanism for monitoring program use of general and tuition funds, resulting in little assurance that the campus has an adequate understanding of its fiscal condition."

The audit also criticized the university's "cost per student" calculation, which UH officials used to justify a 140 percent tuition increase approved by the Board of Regents in May.

Higa contended the formula has "limited value for decision-making" and is "reported without regard for its reliability and accuracy."

In a 17-page response sent to Higa on Dec. 19, interim UH President David McClain rebuffed many of the audit's conclusions and said he was "concerned with the quality of work reflected" in the report.

"After all the effort that went into this audit and the ensuing discussion at the exit conference," McClain said in a news release issued yesterday, "we're frankly puzzled as to how and why these distortions of our intentions remained in the final version."

McClain also said that "while we do not concur with a number of the findings and conclusions in the report, we do agree there is room for improvement." In a telephone interview yesterday, he added that UH-Manoa's budget processes are "the most thorough that have been effected at the university in many years" and that he has "a lot of confidence" in the university's cost-per-student calculation.

The state Legislature asked for the financial audit of UH-Manoa in the last session. It was conducted between June and October.

The audit offers a 14-point list of recommendations, which include restructuring UH-Manoa's budget process to make room for program performance evaluations and analyzing the university's cost-per-student formula.

Higa also recommends UH-Manoa's chancellor provide state legislators with information on how the budget is changed as it moves through the UH administration, Board of Regents and state Department of Budget and Finance.

Interim Manoa Chancellor Denise Konan did not return a call for comment yesterday, but in the university's new release, she said "the Manoa campus is working hard to improve ... fiscal accountability with a greater emphasis on performance measures."

In the audit, Higa said UH-Manoa bases the bulk of its budget requests on previous budgets, focusing attention on additions or deletions -- program change requests and workload increases -- rather than the performance of programs funded in the past.

In this fiscal year, for example, only about $13 million of the nearly $200 million in state funds that UH-Manoa received from the state Legislature "required justification."

"Thus, a significant portion of the funds requested avoids scrutiny," the audit says. "No information is provided on what was accomplished with this money in the previous year or what is expected to be accomplished with this money in the current year."

The audit also said "lax controls" could lead to inappropriate use of tuition funds. In fiscal 2005, UH-Manoa got about $100 million in tuition revenues. Under state law, that money can be used only to "maintain or improve the university's programs or operations."

The university's guidelines for spending tuition funds were drafted in 2003 but have yet to be implemented, the audit said.