LINCOLN — State Auditor Mike Foley is blasting the University of Nebraska and the state college system after they sidestepped his office by hiring a private firm to perform annual audits required by the federal government.
NU officials deny they hired an outside auditor to avoid working with Foley, who has publicly accused them of stonewalling in the past.
“Absolutely not,” said Regent Hal Daub of Omaha. “He does a great job. If Mike Foley's people ding us, we deserve to be dinged.”
Foley, however, describes it as the latest skirmish in a long-standing turf battle.
The university and state college system “have done everything they can possibly do to make the auditing process as miserable as they can possibly make it,” he said.
Foley said staff had already begun their audit of NU's federal funds when they learned the university had hired the auditing firm KPMG. Though NU submitted the outside report as its official audit to federal authorities, Foley said his staff completed its separate audit, which he provided to the U.S. Department of Education.
Like other state agencies, NU and the state colleges are required to pay Foley's office for audits. NU paid Foley's office $150,000 to audit 2010-11 federal expenditures, but proposed doing the 2011-12 version for $87,000. Instead NU paid KPMG $122,500.
Because NU went outside, it did not pay Foley's office for the audit that it did.
“They have found a very clever way to take $100,000 out of my budget,” he said, estimating that he eventually will have to trim about two positions from his staff of 45 because of reduced revenue.
The dispute with NU arose after the State College Board of Trustees decided to hire a firm to audit its federal funds.
Chancellor Stan Carpenter said the state college board made the change because in 2012, Foley's office was slow in completing the audit — to the point that board members feared the March 31 deadline would be missed, placing federal financial aid for students in jeopardy.
The audit, however, was completed in February and filed with the federal government a full month ahead of deadline.
“We just couldn't get a commitment from him that we were going to get our audit in time to file with the feds,” Carpenter said. “We did not want to be in that position again.”
Foley said the audit was delayed because the state college board didn't promptly answer questions about a NCAA investigation into secret bank accounts maintained by a former football coach.
State Sen. Bill Avery, who is trying to sort out the dispute, said he feels as if he's being pinched in a vise.
Foley has alleged to him that many state agencies drag their feet in supplying him information. But state agencies, including the university and the state colleges, have told him that Foley peppers them with requests that aren't necessary.
Avery, who is chairman of the Legislature's Government, Military and Veterans' Affairs Committee, has introduced legislation to give state agencies a seven-day deadline to respond to Foley's requests. It would place new limits on the auditor's access to records and would make it clear that agencies can hire their own auditors in certain cases.
Current law gives Foley's office unfettered access to all records of public agencies. Foley views Avery's bill as a significant reduction of his office's authority. The proposal has little chance of passage this year, but Avery hopes to keep it alive for the 2014 session.
NU sought advice from Attorney General Jon Bruning's office before proceeding. In a September letter addressed to Bob Phares, who then headed the regents' audit committee, Assistant Attorney General Dale Comer concluded the state auditor does not have exclusive authority to perform federally required audits of state agencies. If Foley decided on his own to do an audit, NU does not have to pay for it, Comer said.
Though the Foley audit revealed no significant deficiencies in how NU handled its federal funds, Foley said he could not give NU a clean bill of financial health because NU leaders refused to sign a letter vouching for the information provided for the audit.
“It's not our audit,” said both Phares and David Lechner, NU's vice president of business and finance.
Carpenter initially refused to sign off on Foley's federal funds audit of the state college system and agreed to do so only after Foley warned him not to risk an unfavorable audit report that could jeopardize the state colleges' standing with the federal government. Carpenter said he felt threatened.
Foley said the basic financial audit and the federal funds audit were performed at the same time, with the same management representation letter applying to both. If Carpenter had not signed the letter, Foley said he could not have issued an unqualified opinion that the state colleges were in sound financial condition.
Foley said state agencies shouldn't pick their own auditors.
“I say flat out, no way,” he said. “There is no way that's good public policy.”
Contact the writer: 402-473-9581, firstname.lastname@example.org