More than a quarter of the so-called special funds and revolving funds maintained by the University of Hawaii — including the Manoa athletics special fund — do not meet legislative criteria and should be repealed or reclassified, a state audit released Tuesday concluded.
The state Auditor’s Office reviewed 65 special funds, revolving funds, trust funds and trust accounts, which collectively had year-end balances totaling at least $266 million in the past five fiscal years.
Seventeen of the funds and accounts, according to the report, do not meet the basic criteria for such funds, including funds that no longer serve their original purpose; have no clear nexus between benefits and charges; or are not financially self-sustaining. They range from a scholarship endowment trust and a special fund for discoveries and inventions to a revolving fund for career training projects.
Acting Auditor Jan Yamane said in the report that her office didn’t assess the effectiveness of programs and their management, but did look at each fund’s "necessity based on the purpose and scope of the program it supports, and whether the program can be implemented successfully under the general fund appropriation process."
One of the funds recommended for repeal is the UH-Manoa Intercollegiate Athletics Special Fund, which had a negative balance of $15.35 million at the end of fiscal 2014.
The fund is used to account for revenue and expenditures associated with the 21-team athletics program. This year, UH officials anticipate the athletics program will end with a $3.5 million deficit as football ticket sales and fundraising totals have come in below targets.
"This fund is not self-sustaining as it has reported deficit ending balances since (fiscal year) 2002. Therefore, the fund does not meet the criteria for a special fund and should be repealed," the audit said.
In the university’s formal response, UH President David Lassner said that while the financial sustainability of the athletics program is of "vital concern," the university considers the special fund essential for operating it.
"We believe the long term sustainability of the intercollegiate athletics program at the University of Hawaii at Manoa will require a collaborative effort of the entire community," Lassner wrote. "We welcome and invite the Legislature’s participation, insight and assistance in addressing the financial sustainability of this program and this fund rather than repealing the fund."
The audit, which reviewed transactions from fiscal years 2010 to 2014, also found:
» UH did not report all funds as required by law. Fifteen of the funds and trust accounts reviewed were not reported to the Legislature.
» UH is not reporting administratively created funds. "These informational gaps hinder the Legislature’s ability to monitor non-general funds," the report said.
» UH receives general fund appropriations for programs also supported by special and revolving funds.
For example, the university’s Student Health Center Revolving Fund — which collects a mandatory student health fee — reported ending balances ranging from $444,000 for fiscal 2010 to a high of $3.6 million for fiscal 2014. During the same time period, the audit found, the health center received state general funds ranging from $320,000 in fiscal 2010 to as much as $530,000 in fiscal 2013.
"We found the fund’s revenues exceeded expenditures, the ending fund balances have substantially increased, and that general funds were not used to support actual clinical services. Therefore, general fund appropriations are no longer needed and should not be used," the audit said. "We found 10 other UH funds that support programs or activities that also receive general fund appropriations."
Lassner said general funds are used to pay for the student health center’s permanent administrative staff, and that cutting off general funds would force UH to raise the student health fee (which is $78 this semester for Manoa students). He added that the center has intentionally built up its cash reserve, which is being used to renovate the aging Student Health Center building and expand medical services.
Of the 17 funds and accounts that the audit said do not meet criteria and should be repealed or reclassified, UH said it is willing to reclassify three funds and discontinue the use of two others if the Legislature agrees with the audit’s findings. UH also would comply and terminate six other funds as recommended, but disagreed with the recommendations to repeal six other funds.
"After reviewing UH’s response, we maintain our analyses are appropriate and stand by our conclusions," the audit said.
