Audit reveals University of Iowa made 338 overpayments totaling $645,741 during 2010-11

Diane Heldt, CR Gazette –

The University of Iowa incorrectly made 338 payroll overpayments to employees totaling $645,741 during 2010-11, an increase of $73,441 in overpayments from the prior year, a state audit shows.

Overpayment to employees also was noted as an issue in the state audit of the UI for 2009-10, released in July last year. UI officials say they made changes after that audit report brought the issue to light, but the changes were made after the time period that was reviewed for the Fiscal Year 2011 audit, which was released Friday by State Auditor David Vaudt.

Of the $645,741 in overpayments in 2010-11, 93 percent of that had been collected as of June 12, UI officials said, and the rest is in the process of being collected.

Overpayments generally occur when electronic forms reflecting changes in employment status are not submitted by the employing department to human resources on a timely basis. The audit recommends the university work with the employing departments to ensure proper forms are submitted on time to help monitor the correct payment of salaries and wages and reduce overpayments.

UI officials say they took the similar recommendations from the FY 2010 audit released last year and implemented changes in July 2011. As a result, there was a 20 percent reduction in overpayments in Fiscal Year 2012, which ended June 30, compared to FY 2011, UI officials said.

The UI plan to address the problem includes pursuing immediate reimbursement of all salary overpayments, either through an employee’s next or last paycheck or through billing for overpayment to that employee. There is also more education and emphasis to human resources reps about the importance of submitting the paperwork on time to reflect the employee changes in payments, UI Spokesman Tom Moore said.

“Once they brought it to our attention, we did take additional steps and implemented new procedures,” Moore said. “It primarily has to do with the timely processing of paperwork.”

The state audit also pointed out that UI officials underestimated by about $1.6 million the cost to the university of early retirement incentive programs during Fiscal Year 2011. The university’s liability, or cost, for the early retirement programs was not reviewed by an independent person during the financial statement preparation process, resulting in more than $1.6 million understatement, the audit says.

UI officials realized that error while preparing the internal data and corrected the number when it was reported publicly, so it was just the initial estimate that was low, Moore said.

“Apparently there was one factor that was not included in that original calculation, but this was something that the internal control folks did catch before we reported publicly on the total amount,” he said.

The UI has taken corrective action, Moore said. The university will now take a sampling of employees to ensure the calculation is correct before they proceed with the rest of the report, he said.

The state audit of the UI also found the university received land valued at $3.7 million in Fiscal 2011, but did not record the donated land in the capital asset record and did not recognize gift revenue in the Statement of Revenues, Expenses and Changes in Net Assets. The audit recommends the university implement procedures to ensure the value of donated land is properly recorded in the financial statements.

University officials said they will develop a policy and document procedures to properly record the value of donated land in the Asset Management system and the annual financial statements.