Audit: CSN division failed to track revenue, expenses for years

By Charlotte Hsu

Saturday, Nov. 15, 2008 | 2 a.m.

Programs in CSN’s Division of Workforce and Economic Development are supposed to be self-supporting, with revenue matching or exceeding expenditures.

But for years, shoddy accounting made it difficult for its managers to know how each program was performing financially, the findings of an internal audit show. The audit, covering January 2000 through December 2006, also found numerous other problems with the way the division’s programs had been operating.

The report noted, for example, that some division employees had used College of Southern Nevada resources for their personal benefit.

Another potentially serious problem: Employees did not always complete the process used to verify that new hires are authorized to work in the United States. More than 100 employment files were out of compliance with federal regulations, putting the college at risk of being fined, the CSN report found. Twenty-one files contained no Form I-9, the paperwork that demonstrates a person’s work eligibility.

The audit was completed in September 2007, but Ron Knecht, who sits on the Board of Regents’ audit committee, hadn’t seen the document until this month. It prompted him to contact university system staff to discuss ways to improve oversight.

“I can’t recall a system audit that found such a high percentage of serious problems or raised such concerns,” Knecht wrote in an e-mail. “Considering the results, one must wonder whether such problems were/are endemic to CSN, or in the alternative, how they came to be tolerated or overlooked.”

“It appears that there was no effective DWED accountability or control across a broad (spectrum) of matters for at least half-a-dozen years, and that as a result, many folks systematically took advantage of that lack for their benefit (to) the detriment of CSN and the public interest.”

The Division of Workforce and Economic Development, established in early 2005 when several CSN operations were merged, offers noncredit courses that include continuing education for professionals in fields such as real estate and health care. Some companies pay the division to provide customized training for workers.

During the seven years covered by the audit, the division and its predecessors generated about $3.5 million in revenue and incurred similar expenses, according to the report.

But in the past, the division generally reported revenue by calculating numbers of students in class listings and multiplying those figures by tuition rates for classes.

Financial reports failed to credit programs for excess revenue generated in previous years; money might have been deposited into the wrong accounts; and more than $770,000 in costs for printing and other overhead expenses were distributed among accounts between July 2002 and June 2005 with few supporting calculations showing how each account was responsible for a given share of expenses.

“This practice,” the audit stated, “would have disguised the true financial performance.”

Debra Solt, who said she was in charge of the Division of Workforce and Economic Development from early 2005 to early 2006 before serving as a director under its new dean for another year, said before she became a manager, she became “livid” whenever the account she oversaw got hit with overhead expenses she didn’t think were her responsibility.

“After I took over,” she said, “we actually did it pro rata.”

Today, employees credit revenue to the proper accounts, CSN spokeswoman K.C. Brekken said. New financial reports include carry-over funds and figures representing documented revenue and expenditures.

The division’s fiscal year 2007-08 budget summary shows that of 12 fee-based programs within the division, only three were turning a profit. Together, the dozen programs lost more than $90,000, though they ended the year with more than $900,000 in their accounts, mostly money left over from previous years.

In a September memo, Rebecca Metty-Burns, who took over the division as interim director this summer, wrote that the division would end some unprofitable services and transfer promising offerings from some unsuccessful programs to other programs.

CSN has also made changes designed to prevent employees from using college resources inappropriately.

At one point, according to the audit, a customer was compensating the Division of Workforce and Economic Development for services by providing CSN use of the customer’s facilities “in trade” at a level equal to the amount owed.

That in itself is not unusual. But the “trade account,” while used for official purposes, was also used for “extensive unofficial purposes, at times for their own personal benefit,” according to the audit. The trade account no longer exists, and CSN does not anticipate reviving it.

CSN will not divulge the names of people who allegedly used the account for unofficial purposes. The auditor, Rick Bloyer, answered technical questions about the audit through Brekken but would not speak directly to the Sun.

The 14-page audit report CSN provided the Sun included no expense records or other documents to back up findings.

It said many past Division of Workforce and Economic Development purchases charged to CSN were “not adequately supported to show why they were incurred; lacked information to show how they were calculated; or resulted in questionable charges because the expense was not consistent with the stated purpose of the account to which they were charged.”

The report listed several examples of questionable expenses, including an unexplained $1,000 payment to a sanitation company along with a $75 hourly rate paid to an instructor for developing curriculum for a “general grooming and image” course.

With teachers in areas such as business writing billing at an hourly rate of $30, “the possibility exists of inconsistent pay for this instructor because of a spouse relationship,” the audit stated. The teacher was married to a division specialist.

Today, staffers must provide documentation explaining the need for unusual items they ask to buy.

Solt said though the audit unearthed other valid problems, the grooming and image instructor commanded high wages because CSN asked her to prepare and deliver the course in question on short notice. The pay was “market-driven,” said Solt, who was transferred out of the division in 2007 and whose appointment with CSN ended June 30 and was not renewed.

As for I-9 issues, employees are receiving annual refresher training on the I-9 process, according to CSN. They have attempted to reverify employment eligibility of instructors whose files contained problems and placed letters in files that could not be corrected explaining that I-9 processing has improved.

Brekken, the CSN spokeswoman, said employees had fixed or begun to address many problems the audit identified before it was conducted. The report, she noted, was a product of the college policing itself.

“No one requested we do this audit,” she said.

Steve Sisolak, chairman of the regents’ audit committee, said new Division of Workforce and Economic Development hires and managers in other college departments should be encouraged to read the audit so similar problems aren’t repeated.

He views auditing “not as a gotcha kind of a function but as kind of a learning experience.” Still, he finds it troubling that lax administration created a system “ripe for abuse.”

System officials do not routinely see colleges’ internal audits, and Knecht says that needs to change for reports with the most serious findings.

“If the process were fully effective or as effective as it ought to be, you wouldn’t expect something like this to go on this long and appear to be this extensive,” he said.

Regents Chairman Michael Wixom, however, said he has no problem with information from internal audits staying with institutions that conduct them as long as those institutions make changes to address problems.