To:  Board of Regents

From:  Richard A. Crofts, Commissioner

Date:  April 12, 2002

Subject:  Commissioners Report

MEA-MFT has put together a "Stand Up For Education" campaign - - major media and community organization endeavor. It is a nonprofit, non-partisan coalition of groups and individuals in Montana who support strong public schools and colleges. The goal of the campaign is to win adequate funding for K-12 public schools and higher education in Montana.

One facet of the campaign is a series of community meetings to be held around Montana this Spring. This effort should not be confused with the community hearings that are being held around the State dealing with the report of the school funding task force. I believe it will be important for the university system to be represented at these community meetings. I am, therefore, asking members of the Board of Regents to volunteer to represent the university system at one or more of these meetings. The current listing of dates for the meetings is included below. Please contact Sherry and let her know if you are able to attend any of these functions.

Dates for meetings:

Bozeman, April 9

Havre, April 11

Butte, April 11

Helena, April 16

Hamilton, April 17

Kalispell, April 23

Missoula, April 24

Glendive, April 30

Billings, May 9

Great Falls, early May

I am also asking our campus CEOs to arrange for campus representation at as many of these meetings as possible.

On Monday March 25th the Legislative Audit Committee will review three reports related to the Montana University System: (1) The Board of Regents and Office of the Commissioner is the result of a Financial-Compliance Audit for the two fiscal years that ended June 30, 2001; (2) Montana State University is also the result of a Financial-Compliance Audit for the same period of time; (3) The University of Montana report is strictly related to a financial audit for the one year that ended June 30, 2001.

Financial-Compliance Audit Reports

Board of Regents and Office of the Commissioner of Higher Education
For the Two Fiscal Years Ended June 30, 2001

Unqualified opinion; three recommendations
Two of the recommendations were partially implemented from the previous audit. During the prior biennium OCHE tried to implement the recommendation concerning the accounting for Talent Search indirect cost recoveries. The last executive budget request included a request from OCHE to increase spending authority in to be able to comply with State accounting policy in regard to indirect cost recoveries. Although this change would have no effect on State general fund (the increase in expenditure has an accompanying increase in general fund revenue) the Martz budget did not propose this change to the Legislature. Budget Director Swysgood recommends a supplemental to allow the accounting change for the current biennium. The other recommendation not fully implemented related to lender reviews by GSL. The one lender GSL did not review is located out of state. GSL is trying to change the audit requirements so that a single audit of large lenders will satisfy the audit requirements of many national guarantee agencies. Finally, the new recommendation is directed toward accounting and reporting errors in the Carl Perkins Federal Funds. The errors have been corrected where necessary. Further clarification at the national level is being sought for one issue.

Montana State University (All Campuses)
For the Two Fiscal Years Ended June 30, 2001

Unqualified opinion; 13 recommendations
Compliance and Financial Audit of the three separate financial statements of the MSU campuses. (MSU Great Falls COT is included with MSU Bozemans financial statements.)

MSU concurred with all of the recommendations. Not surprisingly, the first two recommendations in the MSU report relate to accounts receivable collections procedures and student accounts receivables reconciliation. The audit report notes that MSU has already implemented additional collection procedures. MSU is performing monthly reconciliations between the general ledger and detail student accounts. In summary, the remaining recommendations, directed to MSU Bozeman unless identified otherwise, are:

Recommendation #3: Improve timeliness of processing bills for grants and contracts;

Recommendation #4: Strengthen internal control over cash collections;

Montana State University (All Campuses)
For the Two Fiscal Years Ended June 30, 2001

Recommendation #5: Enforce deposit requirements;

Recommendation #6: Enforce travel advance policies and procedures;

Recommendation #7: More timely and accurate plant fund accounting;

Recommendation #8: Review and compliance with Perkins Loan Program regulations;

Recommendation #9: MSU Billings establish procedures to report suspected thefts in accordance with State law;

Recommendation #10: MSU Billings & MSU Northern establish procedures to ensure that social security is properly withheld from student employees wages;

Recommendation #11: MSU Northern strengthen internal control over payroll;

Recommendation #12: MSU Billings & MSU Northern improve procedures to account for and control assets;

Recommendation #13: Properly account for indirect cost recoveries.

Financial Audit Report

The University of Montana-Consolidated
For the Fiscal Year Ended June 30, 2001

Unqualified Opinion

This is the first report on financial only audit performed on the consolidated financial statements of The University of Montanas four campuses. There are no recommendations included in this report. Any audit recommendations will be included in the biennial compliance audit to be issued in May 2002.