System checks audit process

In the wake of a million-dollar scandal at the N.C. School of the Arts discovered in October, UNC-system President Molly Broad has directed the system's governing body to consider stricter supervision of campus finances.

"It is time for this board to carefully consider taking on additional oversight duties," Broad told the Board of Governors during its Friday meeting.

In response to Broad's recommendation, the BOG has formed a task force to examine what kind of role it should play in reviewing campus finances.

"I think the task force is designed to determine what additional oversight there ought to be, as well as who should be responsible for it," said Jim Phillips, chairman of the board's Budget and Finance Committee.

Robert Warwick, the only certified public accountant on the board, will serve as chairman of the task force.

"We're going to look at the current internal audit function within the campuses and with the Board of Governors and see if there are some things that we need to be doing differently," he said.

Broad already has made a number of suggestions for the task force's consideration. They include an annual review of the state auditor's reports for all system schools, along with a yearly meeting with the state auditor to ensure that any concerns can be addressed quickly.

"If (the auditor) comes up with some issues, then obviously we need to know about that, and we need to look into it and see what he's recommending," Warwick said.

Task force members also will decide whether the board should begin thoroughly evaluating financial statements for nonprofit groups and endowments at each campus.

"Largely, we make policy and look to the staff - either to the finance staff at the system level or on the campuses - to implement it," Phillips said.

"It has not been the practice for us to review the audits," he added, but that might change.

In her report, Broad said the Sarbanes-Oxley Act has raised expectations for the handling of public finances.

The legislation, passed in 2002 after a number of high-profile corporate scandals, tightened auditing regulations for publicly traded companies.

Though it doesn't technically apply to public universities, BOG members said the spirit of the law should guide their debate on UNC-system finances.

"Sarbanes-Oxley has raised the awareness," Warwick said. "It has definitely changed some folks' perception."

Jeff Davies, vice president for finance for the university system, has been meeting with the vice chancellors for business and finance on many campuses to determine what policies might need to be implemented at the campus level.

He is expected to issue a report sometime before the board's January meeting.

BOG members were quick to stress that problems with campus finances are rare.

"We read about problems when they occur, and rightly so," Phillips said. "I think as a general rule, the finance staffs around the university are doing a very good job."

Warwick said that he expected few issues to arise but that it is important for the board to do everything possible to ensure accountability.

"I think that obviously, we'd like to catch every financial problem we can before it becomes a problem, and that's really what we're going to be trying to do."

Contact the State & National Editor at stntdesk@unc.edu.