NASHVILLE, Tenn. (WTVF) — Gov. Bill Lee has vacated the entire Board of Trustees from Tennessee State University. Additionally, the university's finances are in a clearer light after two different audit reports were released on Thursday.
The Republican-led supermajority has said for months they want to dissolve the university's Board of Trustees based on financial issues at the school. Democrats, TSU staff and alumni have tried to prevent this amid a national search for a new top leader. President Glenda Glover will step down this summer.
BREAKING: The Tennessee House passes the Senate version of the TSU Board of Trustees.
— Chris Davis NC5 (@ChrisDavisMMJ) March 28, 2024
Upon the signature of @GovBillLee — which I’m told could happen quickly — the TSU Board of Trustees will be fully vacated immediately. @nc5
While TSU claims its financial house is now in order, both audits said otherwise, noting the school needs to go to great lengths to tighten the reins as TSU continues to grow. But TSU said Thursday morning that wasn't a call to dissolve its governing board.
"Moreover, the audits do not support any of the allegations that had been brought forward as the basis to dissolve the TSU Board of Trustees," a spokesperson said to me.
TSU board vote in the House. It's already been approved by the Senate: Tennessee House votes in support of the full removal of the TSU Board of Trustees
I will break down both financial audits and give space for TSU to respond to both.
What the forensic audit found about TSU
A key finding from the report said financial auditors did not find any fraud or malfeasance by university executive leadership or its foundation.
That doesn't mean the 154-page audit finding cleared TSU of all financial approaches. In fact, auditors noted 56 observations and 60 recommendations for the school.
"These procedural deficiencies demonstrate a need for corrective action to minimize loss of future revenues and other potential financial risks to the university," auditors wrote to the school.
TSU said it would take the findings and put it into practice to better operate it finances.
"TSU finds the report’s observations and recommendations to be helpful as we continue to improve our business operations, but it must be stressed this forensic audit firm was retained specifically to determine if TSU had committed fraud or malfeasance," TSU said in its written statement.
See for yourself: You can read the full audit here.
Here are the key takeaways from the report:
- a lack of sufficient supporting documentation maintained with certain transactions.
- lack of pre-approvals obtained or documented on certain expenditure transactions.
- procedures followed varied from documented policies/procedures.
- processes are insufficient to allow the University the ability to adequately monitor its budget and spending.
- Lack of timely document submission increased the time and effort required of university staff to ensure adequate documentation was provided for certain transactions and collect overpayments made to university employees.
- the level of scholarship spending is not sustainable.
- Deficiencies in accounts receivable collection efforts and student charges have resulted in lost tuition and fees revenue to the university and allowed the student accounts receivable balance to grow by approximately 113% from July 1, 2019 to June 30, 2023.
- Deficiencies were identified in the transparency of the university bank reconciliations and financial reports shared with the Board. Additionally, the foundation does not prepare an endowment roll-forward which would facilitate easy tracking of endowment activity over time.
What the state compliance audit said about TSU
On the same day of the financial audit, the Tennessee Office of the Comptroller also released its 2022 compliance report for TSU.
It is 133 pages.
Fiscal years end in June and begin in July. Seeing that the report was nearly two years old by this point, I asked why that was. In essence, TSU compliance audits are a year behind in the Comptroller's office.
"Years ago, TSU was the only university in the state having trouble closing their finances out," said John Dunn, spokesman for the Comptroller's office. "TSU wasn't ready for them. That first year, we stayed with them and worked with them to get things closed and put the audit report out much later in the year because TSU didn't close its financial statements on time. We have federal mandates that a certain amount of the state's audits need to be done by the March 31 deadline. We made the decision to postpone the TSU audit for a year to allow them time to close their financial statements because we had that certain percentage by March 31."
What does the state audit look like? You can read it here.
The Comptroller's office has scrutinized TSU in the past. In 2023, TSU received 86 pages of findings, detailing some financial reporting irregularities. The 2023 report made 12 policy suggestions that range from requesting more paperwork from TSU to severe punishments like placing TSU under the authority of the Tennessee Board of Regents, vacating and restructuring the TSU Board of Trustees and replacing current TSU management.
This compliance report from 2022 noted these nine findings:
- TSU management lacks appropriate oversight, allowing a breakdown of controls that created an error-prone environment that has resulted in errors in the financial statements, inadequate daily operations, and deficiencies in oversight of federal programs.
- As noted in the prior five audits, management has continued to disregard basic financial controls by not sufficiently performing bank reconciliations and management has recorded unsupported financial transactions to improperly eliminate differences in the reconciliations.
- As noted in the prior seven audits, management allowed controls to break down, resulting in errors in the financial statements.
- The university has not properly reported costs associated with construction projects.
- The university did not appropriately charge tuition for some courses and did not charge student fees in accordance with the approved fee chart.
- The university did not adequately support or identify student withdrawal dates and types.
- As noted in the prior five audits, university personnel did not perform adequate collection procedures for accounts receivable.
- The university did not discharge student debt within federal guidance or their internal policy, and scholarship determinations and award calculations were not adequately documented in compliance with federal guidelines for Higher Education Emergency Relief Funds.
The university did not provide adequate internal controls in one specific area.
WTVF
Tennessee State University's full statement
Today, the Comptroller’s Office released two audits of Tennessee State University, which were conducted simultaneously. A forensic audit was conducted by the independent certified public accounting firm of CliftonLarsonAllen, LLP (CLA). And a financial statement audit was conducted by the staff in the Tennessee Comptroller’s office.
The forensic audit concluded, “Based upon the procedures performed, CLA did not identify evidence indicative of fraud or malfeasance by executive leadership of the University or Foundation.” The forensic auditors also stated their primary objective as requested by the Comptroller’s office "was to conduct procedures to examine whether there was evidence indicative of fraud or malfeasance by certain members of executive leadership of the University and Foundation.”
The forensic audit follows a thorough eight-month review of TSU’s operations, financial and business practices, and covers the four-year period from July 1, 2019 through June 30, 2023. The report’s conclusion that there was no evidence of fraud or malfeasance comes after the forensic audit firm reviewed 2,084,899 emails of TSU executive leadership and over 500,000 other documents.
TSU is pleased but not surprised by the report’s conclusions. In addition to the overall conclusion that there was no fraud or malfeasance, the report contains over 50 references that there was no fraud or malfeasance.
TSU finds the report’s observations and recommendations to be helpful as we continue to improve our business operations, but it must be stressed this forensic audit firm was retained specifically to determine if TSU had committed fraud or malfeasance.
In addition to the release of the forensic audit report, today, the State Comptroller’s office released its FY 22 Financial Audit Report for TSU. This report covers the period from July 1, 2021 through June 30, 2022 and contains findings pertaining to operational activities that occurred approximately two years ago.
TSU has challenged each finding the Comptroller’s office levied at the university in the FY22 financial report, and points out that each year the TSU audits are scheduled six to eight months later than that of our peer universities and released almost two years after the period under review. These findings in this report cover a period that began in 2021, and do not reflect the substantial improvements that TSU has made to its business operations over the past two years, and gives the impression that TSU is committing the same infractions in the present, which is not the case. Additionally, the audits do not mention the gross underfunding of TSU.
Moreover, the audits do not support any of the allegations that had been brought forward as the basis to dissolve the TSU Board of Trustees.
TSU is committed to engaging in additional measures to address the items covered in the FY 22 Financial Audit Report. TSU has been and will continue to be good stewards of state funding, and the University remains committed to further improving all operational practices.
Fostering Hope provides Christmas for kids in foster care. I'm delighted to see Fostering Hope expand this year to expand their reach to now include kids in Foster care in metro AND foster kids in East TN hard hit by Helene.
-Bree Smith
