Minnesota Office of the Legislative Auditor
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Report Summary
Minnesota State Colleges and Universities

Transition of Technical Colleges into State Government

Selected Scope Financial Audit

For the Year Ended June 30, 1996

 

Public Release Date: August 30, 1996 No. 96-35

Agency Background

The Minnesota State Colleges and Universities System (MnSCU) began operations on July 1, 1995. The new MnSCU system combined two state-level higher education systems, state universities and community colleges, that had previously existed as independent systems. It also incorporated a series of technical colleges into state government. The technical colleges had formerly existed as either independent units of local government or had been affiliated with local school districts.

The merger of Minnesota higher education facilities was a tremendous challenge and took several years to plan and implement. The Higher Education Board, created by the 1991 Legislature, was responsible for the initial planning of the merger. The 1995 Legislature created the current MnSCU organizational structure and affirmed that the merger would occur. A 15 member board of trustees was appointed by the Governor on July 1, 1995, to oversee the activities of MnSCU. Dr. Judith Eaton was appointed as the first MnSCU chancellor effective August 15, 1995.

Selected Audit Areas and Conclusions

Our audit scope focused on the development of MnSCU's new business systems and the transition of the technical colleges into the state's system. We visited 19 technical colleges and consolidated campuses.

We found that, after its first year of operations, MnSCU continues to face many fundamental financial management problems. It has not fully implemented its business systems and cannot yet provide accurate and reliable financial information. MnSCU does not have a uniform payroll process for its campuses. Most colleges had positive fund balances; some technical colleges joined the system with deficit balances, however. Furthermore, some technical colleges did not properly record the final transfer of fund balances in the statewide accounting system (MAPS). While MnSCU had an adequate system for transferring land and buildings to the state, the technical colleges did not have an adequate inventory system for equipment.

MnSCU properly classified employees and established payrates for its employees in accordance with the transition laws and employee bargaining agreements. However, because of the cumbersome payroll system used for the technical colleges, occasional errors occurred in processing employees' payroll checks. On several occasions, some employees did not receive payroll checks on a timely basis. Some colleges also had an inadequate segregation of duties in the personnel/payroll function.

Most technical colleges did not have adequate controls over the collecting, depositing, recording, and reconciling tuition and fee revenue. We found various control weaknesses in the tuition and fee revenue accounting system. In addition, we found colleges granting tuition deferments without explicit authority.

The technical colleges have adequate internal controls to reasonably ensure compliance with federal student financial aid laws and regulations. However, some aspects of internal controls could be improved. We also found some instances of noncompliance with federal guidelines.

MnSCU Chancellor, Dr. Judith Eaton, has responded to the audit report and acknowledged the internal control weaknesses shown in the audit report. MnSCU is developing a plan to correct each problem. In addition, MnSCU plans to work with the presidents of all institutions to stress the importance of financial controls and methods of developing effective control systems.

 

Office of the Legislative Auditor ♦ Room 140, 658 Cedar St., St. Paul, MN 55155