University of North Texas President Neal Smatresk said he was aware of the university’s financial woes before accepting his job in February — but not the extent of the millions of dollars misspent.
In the past several months, UNT has reported an excess of $83.5 million in state funds misspent over the past decade, most of it for employee benefits and the rest for salaries. The discovery of the financial irregularities has led to a state auditor investigation.
Last week, Gov. Rick Perry also sent a letter to all major Texas higher education institutions asking them to report employee benefit payment processes back to his office because the UNT situation raises questions about how it occurred without drawing the attention of the state.
UNT also overstated its finances by $23 million in 2012 and 2013, including $5.9 million in cash, according to the Denton Record-Chronicle.
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“So I didn’t walk in with my chin up,” Smatresk told the Star-Telegram editorial board Thursday. “I knew there were going to be challenges.”
Smatresk said he is not sure how much the university will have to pay back, but he’s proposed 2 to 3 percent budget cuts for fiscal 2015. The budget will be submitted to UNT System next week for review, and won’t be approved by the UNT System Board of Regents until August.
UNT’s budget for next year is expected to be about $545 million, he said.
“I can’t imagine the state wants to see our university unable to deliver on its mission,” Smatresk said of a repayment plan. “… I can’t imagine the state would want to compromise that. I can’t speculate what kind of repayment we would have.”
Perry pens letter
Smatresk said the UNT System and board of regents are working with the state on how much the university might need to pay back.
In the meantime, the governor sent out a letter May 29 mandating Texas higher education institutions to review their procedures and get back to him.
The letter reads, “Based on recent audit findings at the University of North Texas, I am requesting that all institutions of higher education ensure that proportionality is being applied according to the established guidelines.”
He went on to say that each university must have its internal auditor review its state benefit practices if the state auditor has not done so in the past three years.
“The inappropriate and inaccurate accounting of taxpayer funds by the University of North Texas is inexcusable and our office is taking steps to determine if other institutions of higher education are using similar methods that could result in the misuse of taxpayer money,” Perry’s press secretary Lucy Nashed said in a prepared statement.
“The results of the UNT audit underscore Gov. Perry’s reminder of the importance of appointees to state agencies and institutions remaining vigilant and pro-active in their oversight of state entities to prevent or correct activities that are not in the best interest of Texas,” Nashed added.
University of Texas at Arlington “did an extensive internal review of processes in March and April” after the UT System controller asked for it, spokeswoman Kristin Sullivan said.
The university is in compliance, she said.
Cuts on the way
Proposed budget cuts for UNT include 2 percent from academic units and 3 percent from administrative units overall, but not across the board.
Division vice presidents helped make the cuts on things like travel, office expenses and overtime, school officials said.
The university is not cutting positions and will not cut anything that directly affects the quality of education and student services, said Deborah Leliaert, vice president for communications and marketing at UNT.
The university will also be “lean” when it comes to hiring any new staff next year, Smatresk said.
Some small-scale construction projects and will be put off, and the athletics department will also have to cut back while doing more, he said.
Smatresk said his four-year presidency at the University of Nevada, Las Vegas taught him how to deal with financial hardships when the state cut $74 million in funding.
“Compared to some of the things I’ve had to deal with in the past, I’m going to call this ‘garden-variety,’ and that doesn’t mean it’s not significant,” Smatresk said. “So I’m not trying to diminish what has occurred. What I am telling you is that we put a good team together and we know how to get ourselves back on track.”
Three finance officials have resigned in light of the findings. The university has hired a new vice president for finance and administration, while the UNT System has hired an assistant vice chancellor for financial planning and reporting, and a vice chancellor of finance.
In an April press release, Moody’s Investors Service stated it had given UNT a rating of Aa2 and that the school’s outlook went from stable to negative. The university’s financial crisis was cited in the explanation of the change.
“We had an inadequate control function, and inadequate audit functions, which are, of course, related. When those functions are missing … unfortunate things can happen and it’s a cautionary tale. I assure you we are on it, and it will never happen again,” Smatresk said.