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$2 million audit finds accounting problems but no fraud at Tennessee State University • Tennessee Lookout [1]
['Sam Stockard', 'More From Author', '- April']
Date: 2024-04-02
Despite decades of underfunding for Tennessee State University, Gov. Bill Lee appointed a new board of directors amid two audits that show numerous findings but no fraudulent activity by the historically Black university and less than $4,000 in questionable expenses.
The governor acted quickly last week even though the reports showed no malfeasance, replacing eight board members after the House followed Senate action to vacate trustees as the Comptroller’s Office wrapped up two audits, including one multi-million dollar investigation. The Comptroller’s Office agreed to pay up to $1.8 million to CliftonLarsonAllen, LLP for a forensic audit of TSU designed to determine whether the university committed fraud.
A separate state audit of the university came up with nine findings, including lack of “appropriate oversight,” which allowed a “breakdown of controls that created an error-prone environment” that led to financial errors. Similarly to five earlier audits, the audit found that management disregarded “basic” controls dealing with financial transactions.
TSU supporters downplayed the audits during a Monday rally in the State Capitol, contending instead that state lawmakers started attacking the university following reports of underfunding. Those were followed by complaints that the university allowed enrollment to escalate in 2021-22 and then had to request hotel space at the last minute to house students.
Outsi de auditor CliftonLarsonAllen, didn’t find any evidence that indicated fraud or malfeasance by the university’s executive leadership or foundation and identified seven transactions costing $3,952 that couldn’t be substantiated as university business.
Since then, lawmakers have knocked TSU officials on their heels, forcing them to defend their policies amid poor audits. TSU President Glenda Glover is slated to retire at the end of June, but the board appointments take effect immediately as the university tries to find a new leader.
“We’ve allowed others to determine our path, and we’ve almost forgotten that HBCUs are our home here in America,” former TSU student trustee Shaun Wimberly said Monday in a rally at the State Capitol. “The fight to prevent the state overreach of the board of trustees has been lost. But I’m hopeful for the future of our university with new leadership in place.”
Rep. Harold Love, who questioned the expense for the outside audit last year, said Monday he was glad the audit didn’t find anything that could lead to criminal prosecution.
“That helps the university build its case for support for funding. It also provides a level of trust for the Legislature to say, clearly we can see now that the administration at Tennessee State was not engaged in that kind of activity,” Love said.
Nevertheless, Senate finance committee chairman Bo Watson of Hixson, a leader in calling for change at the university, said the financial report shows the level of problems at TSU.
“When you get an audit … and you celebrate the fact that there’s a lot of mismanagement but, fortunately, there’s nothing illegal, that speaks for itself,” Watson said last week.
Protesters claimed Monday state lawmakers didn’t start targeting TSU until reports surfaced that it failed to receive billions of dollars.
The federal government claimed last year as part of a national report that TSU had been underfunded by $2.1 billion over 30 years. A previous state study determined the land grant university was shorted by $150 million to $540 million over the course of a century.
At the governor’s request, lawmakers approved $250 million for improvements at the Nashville campus two years ago, but those funds can’t be used for housing. TSU is working on a separate dorm project.
After weak state audits in which Comptroller Jason Mumpower suggested the president and board be replaced, he requested an outside probe of the university’s finances.
In interviews with numerous TSU administrators and two whistleblowers, outside auditor CliftonLarsonAllen, didn’t find any evidence that indicated fraud or malfeasance by the university’s executive leadership or foundation. The audit found one transaction in which TSU’s vice president of student affairs stayed three extra nights at a hotel paid for with a university card without showing a business purpose. In addition, the investigation identified seven transactions costing $3,952 that couldn’t be substantiated as university business, including a $100 donation to a student’s Miss TSU campaign by the assistant dean of student engagement and leadership.
The outside audit also found “significant procedural deficiencies” that show the need for “corrective action” to cut down on the loss of revenue and financial risk. In several areas, auditors found incomplete support for transactions, as well “a lack of pre-approvals” for certain expenses.
When you get an audit … and you celebrate the fact that there’s a lot of mismanagement but, fortunately, there’s nothing illegal, that speaks for itself. – Sen. Bo Watson, R-Hixson
In addition, the audit turned up “insufficient” budget processes to enable the university to monitor its budget and spending. The audit identified one instance when TSU’s foundation moved $3 million to the university to fund payroll before the funds were transferred back a week later. Some athletic and band expenses were paid through foundation funds, “which is appropriate,” according to the report, but auditors determined foundation money was used sometimes without following the correct process.
Further, the university lost tuition and fees revenue because of “deficiencies” in collection efforts, allowing student account balances to grow by 113% from July 2019 to June 30, 2023.
TSU increased scholarships by 250% over the four years of the forensic audit, from $22.1 million to $55.5 million in fiscal 2023, with the biggest increase coming in fiscal 2022 when the university received federal COVID-19 funds, a one-time source that couldn’t sustain the scholarships.
Senators threatened to fire TSU President Glenda Glover and vacate the board in 2022 because of those post-pandemic scholarship increases after TSU requested a large number of hotel rooms to house students amid an HBCU renaissance. UT-Knoxville also leases hotel space but faces no sanctions.
Before last week’s vote, House leaders said they were negotiating the legislation to vacate only five of eight board seats. Instead, they moved forward with removing the entire board.
Lee signed Senate Bill 1596 into law just minutes after it passed on the House floor and announced new appointees, all of whom are TSU graduates:
Trevia Chatman, President, Bank of America Memphis
Jeffery Norfleet, Provost and Vice President for Administration, Shorter College
Marquita Qualls, Founder and Principal, Entropia Consulting
Terica Smith, Deputy Mayor and Director of Human Resources, Madison County
Charles Traughber, General Counsel, Division of Real Estate, Retail, and Financial Services at Bridgestone Americas
Dwayne Tucker, CEO of LEAD Public Schools
Kevin Williams, President and CEO of GAA Manufacturing
Dakasha Winton, Senior Vice President and Chief Government Relations Officer at BlueCross BlueShield of Tennessee
Lookout reporter Adam Friedman contributed to this article.
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