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University of Minnesota Medical School

Financial Audit

For the Period July 1, 1993 through December 31, 1994;

Public Release Date: October 18, 1995 No. 95-44

Agency Background

The University of Minnesota Medical School has 23 departments. The five basic science departments center their activities around teaching and research. The 18 clinical departments have the added responsibility of patient care. Doctors involved in patient care do so through various departmental practice groups (DPGs). DPG revenues and expenses were estimated at $100 million for fiscal year 1995. In a 1993 audit of the Medical School, we found that the private practice administrative system did not provide for adequate oversight of the DPGs. In July 1993, the Board of Regents adopted a new policy governing the University's relationship with the practice groups.

Audit Areas and Conclusions

Our audit focused on Medical School oversight of the departmental practice groups. In addition, we reviewed the DPG reorganization process required by the new Regents' Policy. Our audit scope included expenditures of the departmental practice groups associated with selected Medical School departments.

We found that the Medical School has made progress in implementing the Regents' Policy but has not established effective oversight of the DPGs. The Medical School does not adequately review annual budgets or monitor quarterly financial information submitted by the DPGs. In addition, the Medical School does not ensure that DPGs only incur ordinary and necessary business expenses. It has not provided DPGs with allowable business expense criteria and is not billing DPGs for internal departmental services. Also, the Medical School needs to clarify its audit requirements to ensure outside accountants verify DPG expenses. The Medical School is currently monitoring faculty compensation. However, some departments have established procedures that could result in faculty compensation exceeding established limits. In addition, the Medical School has not addressed administrative salary limits and does not control the use of DPG professional service contracts.

The Medical School developed sound procedures for establishing DPG governing structures. However, the reorganization process is taking much longer and is more complex than originally anticipated. Some departments cannot reach a consensus on an acceptable DPG structure and are not in compliance with the Regent's Policy.

Contact the Financial Audit Division at (651) 296-1235

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