University of Nebraska employees have violated university policy by using NU credit cards for first-class airline tickets, gifts, personal expenses and more, State Auditor Mike Foley said Thursday.
In releasing an exhaustive audit of NU's $40 million-a-year credit card program, Foley said his findings highlight "significant deficiencies" in NU's control over employee use of the cards.
"They haven't done a good job of monitoring and enforcing the rules," Foley said.
He cautioned he's not alleging fraud and said he doesn't anticipate action by law enforcement.
NU leaders responded to the audit swiftly, saying although they saw no evidence of intentional wrongdoing by the 2,600 employees who have the credit cards, they're welcoming Foley's suggestions for improvement.
They also said some of the potentially questionable purchases were appropriate because they were made using private money. Foley refuted that claim -- highlighting a debate over whether privately donated money becomes public once it reaches university coffers.
Nevertheless, NU leaders pledged to put new policies in place to improve oversight of what they say is a valuable program.
"We're not happy these people broke our rules," said David Lechner, NU vice president for business and finance.
"We're disappointed. But we're going to try to make it better, and I really do mean that."
Foley's staff reviewed a sampling of about 1,600 Visa credit-card transactions that took place during an 18-month period ending in December.
Among the team's discoveries:
- NU employees used the cards, known as purchasing cards, to buy more than $283,000 worth of first-class airline tickets. That includes a round-trip ticket to China for a University of Nebraska Medical Center senior employee worth more than $15,000. (NU says the ticket was business-class.)
- Foley deemed numerous purchases questionable, including a $628 fountain pen from Borsheim's and a $250 Nintendo Wii gaming system that hadn't been opened.
- Employees used the cards to buy thousands of dollars in gift cards meant to recognize co-workers' exceptional service, even though three of the four NU campuses prohibit the use of the credit cards to buy merchandise gift cards.
- Foley identified numerous examples of "pyramiding," dividing large purchases into multiple transactions to avoid surpassing a card's spending limit.
- Employees sometimes used the cards for cash advances.
- In some cases, the buyer and the reviewer of a purchase were the same person, even though purchases are supposed to be independently reviewed by a second university employee.
- Some purchases lacked proper documentation, such as an invoice or receipt that could support the need for the items.
Those and other findings, Foley said, represent "systemic" problems.
NU leaders, while vowing to take a hard look at guidelines and remind employees of the rules, said a number of the purchases were funded with private money.
And even though those private dollars do come to university bank accounts, they remain private, Lechner said.
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Foley strongly disagreed. Once money comes to the university, he said, it becomes public.
That's why Foley questions purchases like the $15,000 airline ticket.
But Lechner said the ticket, which was for Rodney Markin, senior associate dean of the medical center's College of Medicine, was paid for almost entirely with money donated to the university by the private Nebraska Physicians Group.
Markin sat in business class because he had neck surgery before the trip and needed extra comfort, said Don Leuenberger, the medical center's vice chancellor for business and finance.
The fountain pen, Leuenberger said, was a speaker's gift bought with funds donated to the university's alumni association.
He also defended the Nintendo Wii, saying the medical center's physical therapy department, reasoning the gaming systems would be hard to come by, bought two games and simply hadn't opened one yet.
Foley maintained he'd seen no evidence that private money funded some of the purchases.
"It's a disingenuous attempt to spin what really happened," he said.
Said Lechner: "Our records, our books support what we told (reporters)."
In some cases, Foley said, employees used purchasing cards for personal reasons.
One former University of Nebraska-Lincoln employee, for example, asked cardholders to make purchases for her totaling more than $3,500 that included office furniture and decorations that other staffers questioned. The purchases also included cell phone bills that appeared to include personal calls on nights and weekends.
In another case, a University of Nebraska at Omaha employee used the card for a $50 golf outing during a conference.
That employee realized his mistake and will repay the university, said Bill Conley, UNO vice chancellor for business and finance.
NU aims to have new policies -- including stronger oversight of the purchasing card program, more thorough training exercises and better documentation practices -- in place by June 30, Lechner said.
He maintained NU leaders have "high confidence" in the card program.
It is cost-efficient, Lechner said, because it eliminates the need for excess paperwork. It also earns NU about $500,000 in rebates each year.
A document prepared by the office of Christine Jackson, UNL vice chancellor for business and finance, shows that in the time span of Foley's review, UNL employees used their cards for many routine purposes: the showing of an educational movie about binge drinking, caramel flavoring for ice cream at the Dairy Store, academic magazine subscriptions, lab chemicals, clothing items to be used for costumes in theater courses, lodging for athletes and more.
Still, NU officials say Foley's audit gives them an opportunity to become stronger.
NU remains committed to good stewardship of taxpayer money, said Regent Jim McClurg of Lincoln, chairman of the Board of Regents' Audit Committee.
Said Lechner: "People are doing their best out there."
Reach Melissa Lee at 473-2682 or firstname.lastname@example.org.