Audit: Ga. Perimeter College leaders ignored signs of severe financial trouble

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Audit: Ga. Perimeter College leaders ignored signs of severe financial trouble

Georgia Perimeter College’s $25 million shortfall was not caused by fraud, but by chronic overspending and senior leaders’ inattention to finances, auditors have concluded.

A review released Thursday found that the school’s senior fiscal leadership — former President Anthony Tricoli and three others — ignored or didn’t notice glaring warning signs the college was racing toward a financial cliff. The evidence was available in both school financial statements and publicly available state audits, which showed the college overspending its budget and using dwindling reserves to make ends meet.

The review conducted by the University System of Georgia said, however, that Tricoli didn’t read the financial statements.

“Management attention to GPC’s actual spending would have allowed the institution to curtail the growth in spending so as to ensure that spending remained within available resources,” the review said. “Unfortunately, key leaders at every level charged with actual responsibility for GPC’s fiscal management did not exercise all of their assigned duties.

“It appears that an emphasis on enrollment growth and program expansion took precedence over sound fiscal practice as management and leadership priorities.”

Most of the school’s top leadership has been replaced. Some of the financial and budget staffers left before the University System discovered there was a problem.

The review found that the school of nearly 27,000 students had been using reserves to pay for operational costs for years and that budget officials failed to keep the school’s president informed of the problems, which it said were preventable.

It was clear that former Executive Vice President of Financial and Administrative Affairs and Chief Business Officer Ron Carruth “did not provide GPC’s president with timely and reliable financial information for the president’s use in managing the institution,” the report said. “However, the president did not perform the necessary financial due diligence associated with his responsibilities as institution head.”

Carruth could not immediately be reached for comment.

System auditors said that while Tricoli alleged that members of his team defrauded the school, they could find not evidence of that.

“However, the audit did not constitute a detailed review of all financial transactions during the four fiscal years under consideration,” auditors said. “Therefore, it is possible that errors, irregularities and/or illegal acts, including fraud or malfeasance, went undetected.”

Several attempts to reach Tricoli for comment were unsuccessful.

University System Chancellor Hank Huckaby said in a statement that Georgia Perimeter’s “teaching mission has not been interrupted” and that he’s confident the system has addressed the school’s challenges.

Still, Huckaby announced a new plan for systemwide financial oversight, to include a requirement that school presidents and senior financial staff meet with the chancellor annually to discuss yearly finances.

Schools also must submit new quarterly financial reports signed by both the president and chief financial officer and schools must notify the University System if they plan to use reserves for reasons not previously announced.

Huckaby’s office also may conduct internal audits.

To absorb cuts of more than $25 million, the college has laid off faculty and staff.

State audits and a University System analysis show the school overspent its budget by millions of dollars for the past four years and whittled down its cash reserves to almost nothing.

In both fiscal 2009 and 2010, the school spent more than $7 million over what it took in from tuition, fees, grants and state and federal appropriations. In fiscal 2011, the shortfall fell to $5 million. This fiscal year, which will end June 30, the deficit could hit $16 million, the largest shortfall in memory — and possibly ever — at a state college.

Monthly cash balances at the school fell from $19.2 million in fiscal 2010 to $7.8 million last year.

The review said it could not be determined where the budget was overspent “because it was not allocated correctly and contained errors and omissions. The beginning budget was not allocated correctly among departments and amendments were not posted to the financial system.”

University System officials said earlier in the year that one of the problems was a large increase in the school’s payroll.

However, the review added, “Even though we can tell salaries increased, poor management of position control by the former budget director makes it impossible to know how many new positions were added.”

The review said budget officials also greatly understated the cost of employee fringe benefits.

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