Regents question unexpected charges on audit bill

by Paul Sand

A University Board of Regents subcommittee raised concerns Thursday about $69,000 in extra charges in 2002 from one of the institution’s external auditors.

University Controller Mike Volna said the auditing firm Deloitte & Touche billed the institution more than it quoted in a fixed-price contract because of unplanned federal accounting changes.

The University’s original audit contract with the firm totaled $261,475.

“The time to negotiate the audit fees is not after the audit is done, but ahead and during the audit process,” Regent John Frobenius said. “It’s just a point of principle.”

He added that with the University facing financial challenges, the board needs to question the extra charges.

Volna said the firm’s original extra charges were $83,000, but the University was able to negotiate the billing cost.

“We were ultimately able to come to a price we were comfortable with,” he said.

The extra charges stem from the University’s switch to a private employee health insurance plan from the state’s plan. Also, new federal regulations imposed following recent, high-profile accounting missteps – such as the Enron scandal – added costs.

The new regulations drove the cost up even more, Volna said.

He said the University knew it would be charged extra for its insurance switch but could not figure in the new accounting regulations.

“We knew those were changes we were imposing, and (Deloitte & Touche) identified them ahead of time,” he said. “We knew we were going to be billed for that.”

In addition to the $69,000 in extra billing, Deloitte & Touche proposed a $61,000 increase, or 23 percent, to its University contract.

Volna said the University will negotiate another one-year contract with the firm because it cannot complete a new bidding process by the end of the fiscal year.

The University spent four to six months reviewing and approving its current auditor contract, Volna said.

Regents urged the institution to open bids from other auditing firms as soon as possible.

Regent Richard McNamara said he is surprised by the additional charges given the accounting industry’s recent scandals.

“We just want them aware that we’re not a pushover,” he said.

Audit committee chairman Dallas Bohnsack said the committee needs to meet with Deloitte & Touche before it passes judgment. Deloitte & Touche representatives were not at the meeting.

Regent Clyde Allen Jr. said because the University was prepared to pay $32,000 for two auditing projects, the extra costs are only $37,000.

“You can’t really sputter at them for charging extra for those two things,” Allen said.

Paul Sand covers University Board of Regents and administration. He welcomes comments at psand[email protected]