Daily mulls reforms after audit report

Amy Hackbarth and

The Minnesota Daily – which touts itself as the world’s largest student-run, student-managed college newspaper – is considering hiring a professional to oversee its finances after an annual audit raised questions about the accuracy of the paper’s advertising revenue.

As required of all nonprofits, the Daily last week filed the annual audit report with the state attorney general. The report detailed incomplete accounting records for the fiscal year beginning September 2000 and ending August 2001. Filed documents also stated auditors “encountered numerous delays and inaccuracies when receiving information from management.”

During that fiscal year, the auditor’s report estimated the Daily’s annual advertising revenue fell nearly a half million dollars from $1.9 million to $1.4 million.

Members of the Daily’s board of directors blamed the problems on a software failure and lax accounting practices. Business staff members attributed the delays to miscommunication between the Daily and its auditors. The business managers in charge at the time said that the revenue drop was caused by an economic downturn.

“We had a dip in the overall advertising market,” said Justin Erickson, the Daily’s business manager during the 2001-02 school year. “It was the worst one-year drop since the Great Depression.”

Daily auditor Don Loberg, a principal at Larson, Allen, Weishair and Co., said the audit did not find any evidence of misconduct or fraud.

“We did not discover anything that would make us think anything like that occurred,” Loberg said.

Once the Daily decided to file a qualified opinion, which acknowledged some numbers might be incomplete, Loberg said, the firm stopped looking into the matter.

At a recent meeting, Daily board members put off a vote to create the professional position until they could draft any necessary bylaw changes. The board has not yet come to agreement on the scope of the position’s responsibilities.

The Daily’s accounting problems began in 1997 shortly after the purchase of a prototype computer system to keep billing and advertising records.

“As soon as we turned it on, it started corrupting data,” said Geoff Benson, the Daily’s information systems manager, who worked with the software.

The software damaged approximately 300 of the Daily’s advertising accounts for that fiscal year.

At the time, staff members didn’t realize the problem’s severity, said Shanna Orr, the Daily’s president, who then worked in the sales department.

“They knew there were problems with the system, but they didn’t know the numbers were wrong,” she said.

However, the business staff did not keep printed, backup copies of the invoices.

“I’m all for backups, but the whole idea of having computers, in a general sense, is to avoid all that,” said Sam Rosen, who served as business manager during the 2000-01 school year.

The board asked Erickson, who succeeded Rosen as business manager in spring 2001, to keep printed copies of the invoices.

“I told them I didn’t have the time and I didn’t have the staff,” Erickson said.

With corrupted computer data and no paper copies, Loberg said, there is not enough information to accurately confirm the Daily’s advertising revenue for that fiscal year.

Despite efforts to recover some of the data, the board chose to file the qualified opinion. Loberg said qualified opinions are rare and that Larson Allen, one of the largest auditors of non-profits in Minnesota, gives approximately 15 qualified opinions for every 600 audits it completes.

In a letter to the Daily board, the auditors recommended that the newspaper consider hiring a mentor or professional. The letter also said the organization should update its accounting policy and procedures manual and establish a written fraud policy.

The Daily has purchased new accounting and advertising software, and the business staff has established some ties with mentors, said Joe McKenzie, the Daily’s current business manager, who succeeded Erickson in May.

McKenzie said controls are now in place to prevent future problems, and said he is concerned that hiring a professional would take responsibility out of student hands. The Daily should only consider hiring a professional if problems persist, he said.

Rosen was more sympathetic to the idea. He said that a professional would bring long-term stability to a student staff with high turnover rates.

“When I took over as business manager, I became the longest tenured employee at the time. Anything that I couldn’t remember or contact someone about had been lost,” he said.

Board member Tom Bartel, a proponent of hiring a professional, said that since he joined the board a little more than a year ago, student managers haven’t provided timely and accurate financial information. He said that a professional could help better explain Daily finances to a board that doesn’t have much financial expertise.

It’s unclear whether the audit will affect the Daily’s standing as a nonprofit organization or the amount of money it receives through Student Services Fees. The attorney general’s office hasn’t contacted the paper. If the state finds evidence of financial mismanagement, it could try to revoke the Daily’s nonprofit status as a.

The Daily will apply for student fees funding early next year.

Mary Amundson, last year’s interim fees committee adviser, said the accounting problems could harm the Daily’s case.

“One criteria is that groups demonstrate fiscal responsibility,” she said.

Amy Hackbarth welcomes comments at [email protected]
Dylan Thomas welcomes comments at [email protected].