NTF Issue Paper: edmon II-6.  11-09.





BACKGROUND.  State Auditor Mike Foley has found systemic and pervasive waste and mismanagement in use of public dollars in University of NE finances, calling his 233-page auditing report of its $40 million annual credit card system shocking.  His audit lasted 18 months.  The cards look like VISA cards, the NU name imprinted on them with the cardholder name and account number. Over 2,600 NU employees use these cards.  Public funds through the U accounting system monthly pay the invoices.

CREDIT CARD MAYHEM.   UNMC paid over $15,000 for 1 1st class round-trip plane ticket from Omaha to Beijing, in violation of its own card policy.  Others on the same trip paid less than $1,500. The chancellor of the medical center used his credit card to buy 3 1st class tickets, the China trip costing $11,886, a Germany visit costing $4,751, and a Hawaii trip $2,111.  The UNO chancellor used his NU credit card to buy plane tickets to a meeting in Minneapolis for his wife and son, costing $302 each, purchases not legitimately approved. NU erroneously bought 1st class plane tickets worth over $283,000.  State policy regulations and university guidelines both forbid purchasing 1st class plane tickets.  A gaping problem with plane ticket purchases stems from the ability of employees to register with the NU travel agency website and pick flights regardless of class or cost.  The auditor discovered great deficiencies in NU control over its credit cards.  This $40 million annual program gives select employees Visa cards, drawing on U. funds, to make work purchases from approved vendors. Employees used credit cards to buy thousands in gift cards supposedly to recognize co-worker merit performance, though 3 NU campuses forbid using credit cards to buy merchandise gift cards.  The medical center, UN-O, and UN-K bought gift cards, and employees at the latter 2 institutions used cards to buy cash advances, all violations. University guidelines prohibit the use of cards for cash advances, yet auditors discovered many instances of employees using the cards to obtain cash.  In some instances, there existed little or no documentation regarding what the cash bought.  All NE campuses made multiple smaller transactions to avoid the card dollar limits. These pyramiding transactions cost over $330,000.  Two employees must approve all credit card purchases, but on many occasions, the only one approving the purchase was the one who made the buy. Flimsy U. accounting controls permitted a card primary user to enter the computer system and change his user name to avoid approval by a second employee.  One UN-L employee asked cardholders to buy things for her, totaling over $3,500, including unauthorized office furniture and decorations.  Other transactions included cell phone bills that included personal calls on nights and weekends.  Employees routinely bought things on weekends and holidays, in some instances with little or no documentation showing what they bought.  One UNO worker used a card for a $50 golf spree during a conference.  Other purchases included caramel flavoring at an ice cream shop and magazine subscriptions. Auditors also exposed NU workers using cards to buy things that qualified for promotional rewards from some vendors.  Purchases at Best Buy, Nebraska Furniture Mart, and Famous Footwear qualified the employees for personal customer rewards, such as merchandise credits or gift cards for use at those stores.  One way NU controls card transactions is to place restrictions on the kind of merchants with whom the cards can serve.   However, many cards checked had no restrictions, or the restrictions appeared lifted with little or no reason documented.  Numerous weaknesses auditors found in U. accounting controls established to regulate card use.  In some instances, they found active cards assigned to former employees who no longer work at the U. On the UN-O campus, auditors found a case in which an ex-employee card, never cancelled, saw current employees accrue over $20,000 in expenses over a period of 4 months after the original cardholder had terminated employment. Auditors noted that 1 ex-employee who left U employment 5 years previously still had access to the secure web site that controls restrictions on card transactions.  The worst problems were lack of understandable guidelines and employees ignoring clear policies.

PARTIAL LIST.  Below is a partial list of exposed transactions made by University employees:
Business purpose questioned = 30.
Purchase included sales tax paid but now owed = 20.
Wrongful purchase of food = 7.
Wrongful purchase of clothes = 7.
Wrongful purchase of gifts = 4.
Wrongful purchase of decorations = 3.
Wrongful purchase of 1st or business class plane tickets = 3.
Pyramiding purchases = 21.
Use of terminated employee card = 1.
Purchase not approved by or reconciled by assigned or approving official = 168.
Transaction not approved = 79.
Transaction with inadequate or no documentation = 43.
Card purchase exceeded its spending limit = 29.
Cardholder was not user who purchased = 17.
Purchase not made through a University-preferred vendor = 47.[1]

GREAT DEALS & WHEELS.  Top U. administrators, other officials, and sports coaches receive luxury vehicles as perks.  The UNMC chancellor drives a 2009 Porsche, the NU vp for business and finance a 2008 Lexus GS 350, and the NU vp and general counsel a 2009 Acura RL.   20 UN-O coaches and athletic directors among themselves drive a 2009 Chrysler 3000, 2009 Chevy Tahoe, and 2009 Volkswagen Jetta.  59 UN-L coaches and athletic directors have swank vehicles, including a 2010 Ford F-150 and 2009 Chevy Suburban. The wife of the head football coach drives a 2008 Nissan Quest.  The NU president, the UN-L, UN-K, and UNMC chancellors, a UNMC vice-chancellor, and UNMC dean all have country club memberships.  8 UN-O coaches and athletic directors and 1 UN-K coach also enjoy these memberships.  36 UN-L coaches and other sports administrators have country club, other club, or fitness center memberships. 

NU RESPONSE.  David Lechner, the NU VP for Business & Finance, retorted that NU leaders have “high confidence” in the credit card program, that NU “people are doing their best out there.”[2]  Don Leuenberger, chancellor for business and finance at UNMC, declared that he viewed very little in the audit that seemed to him an inappropriate transaction.

TAKE ACTION NOW.  End the free maid service, country club membership, lawn care, snow shoveling, and $5,000 yearly expense account given the UN-K Chancellor.  Stop paying for vehicles, club memberships, and golf outings for university officials.  A 10% cut in university staff travel expenses would save the system about $500,000 annually.  Forbid state agencies and departments, like the university system, from hiring and paying lobbyists to lobby the legislature for more funding against taxpayer interests.  An educational aristocracy is running rampant on our college campuses.  Demand that the NU Board of Regents work with the state auditor to assign someone to strengthen monitoring of this program, particularly its documentation requirements, reexamine policies and guidelines, and review proper procedures with employees, including warnings of stiff new penalties.  Force employees to reimburse the U. system for unauthorized expenditures. Reprimand and suspend, and fire the worst offenders.  NU money saved could offer more scholarships to deserving NE students.  Contact your regents below:


Board Members                                               Addresses                                                                   

District 1: Tim Clare                            1201 Lincoln Mall #102                         Lincoln, NE. 68508    
District 2: Howard Hawks                    1044 North 115 Str. #400                    Omaha, NE. 68154     

District 3: Chuck Hassebrook              250 North 3 Street                               Lyons, NE. 68038      
District 4: Bob Whitehouse                  1103 Mackensey Dr.                           Papillion, NE. 68046  

District 5: Jim McClurg                        2030 Surfside Dr.                                Lincoln, NE. 68528    

District 6: Kent Schroeder                    3003 Country Club Ln.                        Kearney, NE. 68845               

District 7: Bob Phares                          P.O. Box 986                                      North Platte, NE. 69103

District 8: Randy Ferlic, M.D               2254 South 86 Avenue                           Omaha, NE. 68124


Agenda & Meeting Information:  (402) 472-3906.

Their office fax number:
Office email address: corpsec@nebraska.edu


Board email addresses: Chuck Hassebrook                    chassebrook@nebraska.edu.

                                    Bob Phares                              bphares@nebraska.edu

                                    Bob Whitehouse                      bwhitehouse@nebraska.edu

                                    Jim McClurg                            jmcclurg@nebraska.edu.

                                    Kent Schroeder                         kschroeder@nebraska.edu

                                    Randy Ferlic                            rferlic@nebraska.edu

                                    Howard Hawks                       hhawks@nebraska.edu
                                    Tim Clare                                 tclare@nebraska.edu


Their office address:    UN Board of Regents

                                    Attn: (your regent)

                                    University of NE

                                    Varner Hall

                                    3835 Holdrege Str.

                                    Lincoln, NE. 68583-0745


Research and analysis for this issue paper done by Nebraska Taxpayers for Freedom.  This material copyrighted by Nebraska Taxpayers for Freedom with express prior permission granted for its use by Cherry County Taxpayers, Dawes County Taxpayers, Citizens for Local Control, and other groups in the Tax Freedom Network.   11-09.    C


[1] Auditor of Public Accounts Review of U. Purchasing Card Program, 10-09.

[2] Lincoln Journal online, 10-29-09.