Report No. 2010-125
October 2010
Complete Audit Report

Findings in the audit of Missouri State University

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Financial Reporting and Accounting
Missouri State University was unable to easily and accurately produce basic financial reports. Many of the reports requested during our audit work, including basic budget to actual comparison reports; statements of revenues, expenses, and changes in net assets; and profit/loss statements for various funds, departments, auxiliaries and service centers, had to be created by financial services employees. These reports contained several errors made by management and staff when obtaining the information from the computer system and creating the reports. In addition, the system does not clearly identify which expenses have been reimbursed by the foundation. Further, the university has not properly allocated some expenses, such as expenses associated with the Child Development Center, personnel expenses related to the JQH Arena and the Hammons Student Center/Plaster Sports Complex and faculty salaries at the School of Social Work. Finally, the university's statements of cash flows for the year ended June 30, 2008, contained a transposition error of approximately $5 million.

University Operations
The university paid 48 faculty members more than $2.2 million during the 2 years ended June 30, 2009, for sabbatical leave without ensuring required reports documenting work completed and justifying the expense were filed. Additionally, university administration has not completed a documented review of some university operations, such as the Greenwood Laboratory School, intercollegiate athletics, the JQH Arena, and printing services, to ensure these operations are efficient and do not create an additional burden on operating funds. Our review of university budgets showed significant budget to actual variances that appear to be due to unrealistic projections of expenses. Further, the university does not have a policy addressing what monies can be transferred to the President's Carry Forward account and how these monies should be used. Also, adequate supporting documentation was not maintained of the calculation of increases in room and board rates.

Child Development Center
Cash receipts of at least $4,038 received by the Child Development Center between July 1, 2007, and December 31, 2009, were not remitted to the Bursar. Receipt amounts reported to the Bursar were less than amounts actually received. Numerous weaknesses were noted in the procedures used to account for monies received. In addition, some receipt slips issued and attendance records were not retained. Other policy and procedural issues are also noted in the audit.

Ticket Sales
University procedures to account for receipts from ticket sales for athletic and entertainment events need improvement. During the year ended June 30, 2009, gross sales of approximately $6.2 million were recorded for events held at the JQH Arena, Hammons Student Center, Juanita K Hammons Hall and other venues. Weaknesses include inadequate segregation of duties, untimely reconciliations, and unverified cash drawer reconciliations.

Disbursements
The university could benefit from a more comprehensive procurement policy that addresses the documentation of procurement decisions, procuring items purchased for resale, and timeframes for which various bid threshold amounts will apply. Additionally, the university does not have a comprehensive food policy, and needs to improve controls over the tracking and monitoring of institutional and individual memberships. Further, some contribution disbursements did not have written contracts that clearly indicated the benefit to the university, and the contracts with the university's state and federal lobbyists do not require documentation to support the specific services provided. Also, the university contracts with the City of Springfield to provide dedicated law enforcement services within and around the campus; however, invoices received from the City of Springfield do not contain adequate detail, and university procedures to review related billings are not adequate.

President’s Tenure and Retreat
Some terms in the contracts of the former and current university presidents may not be in the best interest of the university. The university's contract with former President Dr. Michael T. Nietzel included a tenure and retreat clause granting the option to retreat to a tenured professorship within the Department of Psychology and be compensated 60 percent of his current presidential salary. The contract also provided the option to take a paid leave of absence. Effective July 31, 2010, Dr. Nietzel resigned and is currently on a leave of absence from the university at a salary of $80,211 for one semester. According to the university's legal counsel, Dr. Nietzel plans to accept a professorship within the Department of Psychology and will be compensated at the rate of $160,423 annually, which is approximately $68,000 more than the highest paid faculty member in the Department of Psychology. The purpose or justification for the leave of absence and excessive salary for a professorship is not included in the employment contract. Further, Dr. Nietzel is under no legal obligation to perform any services for the university during his paid leave of absence. A similar contract was signed by the university's new President effective August 1, 2010.

Employment Contracts and Personnel Issues
The university compensated the Men's Head Basketball Coach $96,000 in "promotional compensation" without requiring documentation of the promotional activities performed. The Associate Head Football Coach and one Assistant Football Coach did not submit a report of all athletic related income and benefits received from sources outside the university as required by the NCAA and their employment contracts. Additionally, the university made vehicle allowance payments totaling $93,200 to 18 employees, but did not have documentation to support how these amounts were determined. Further, the university's gift policy needs clarification.

Other Issues
The audit also raised concerns regarding procurement cards, the Sunshine Law, renovations of the Kenneth E. Meyer Alumni Center, and various controls, policies and procedures of the university.

Missouri State University Foundation
The foundation has not established purchasing policies and procedures, and does not always follow university procurement policies and procedures. Additionally, the foundation Board of Trustees did not always approve contracts or construction budgets to be paid using foundation funds and some reimbursements of university expenses did not appear to be properly approved prior to payment. Also, the foundation's lack of competitive bidding and documentation of the selection of professional services has resulted in possible conflicts of interest.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov