KNOXVILLE - The state comptroller this morning released a state audit of the University of Tennessee showing the Advancement Services office and Athletic Department overstated pledges by $6.4 million and recommending tighter internal controls on handling of donors' checks.
Among unfulfilled pledges was a promised donation of $1 million pledge that officials recorded as an actual pledge. UT declined to identify the donor.
The audit states that the problems were caused by "the failure of Advancement Services and Athletic Development personnel to understand the importance of their role in accounting for pledges and in financial reporting and to properly communicate to ensure coordination of recording and reporting on pledges," according to the financial and compliance audit of UT for the year ended June 30, 2008.
"The staff members accounting for pledges apparently did not have adequate accounting knowledge to ensure accurate financial reporting, and supervisors did not provide adequate oversight by external accounting personnel to ensure accurate financial reporting."
UT uses two separate systems to process donor pledges:
-- Advancement Services uses the Alumni and Development Information System (ANDI) to maintain records of all university gifts and pledges.
-- The UT Knoxville Athletic Department uses the ADvantage system to account for gifts and pledges for the Athletic Department.
Athletic Department pledges and gifts are initially entered into the ADvantage system and then are subsequently added to the ANDI system through a "multi-step data transfer process," the audit states.
The audit lists several internal control weaknesses, including a lack of monthly reconciliations between the two systems. Auditors found 10 donors with pledges totaling $800,000 recorded in ADvantage that were missing in ANDI.
In addition, the audit said Athletic Development staff opens mail, and with the help of additional workers, process gift checks in the Athletic Department's system. The comptroller states that a "walkthrough" of UT's operation found student workers who assist in processing gift checks were working in a different area from where checks are processed in the ADvantage system, according to the audit.
"Therefore checks and receipts were transferred from one work area to another without adequate security safeguards," the audit states. "In addition, as checks were received in the mail, receipts for checks were not immediately written, nor were the checks immediately logged. The failure to establish immediate control over these unsecured checks could lead to their loss or misappropriation."
The audit recommends that UT use a single system to account for pledges, instead of the separate systems used by Advancement Services and the Athletic Department, and that policies are revisited to make sure doubtful pledges are properly written off.
UT concurred with the finding but said it continues using "two separate departments to enter pledge data into two separate systems."
To avoid problems, UT said Advancement Services' staff and Athletic Department personnel will reconcile their two systems monthly to make sure pledge information is accurate and any differences are reconciled.
UT will develop written control procedures for Advancement Services and the Athletic Development to ensure proper accountability for pledges and gift receipts.
Additionally, the Athletic Department "will establish immediate control over all donor checks by preparing a daily log of mail receipts. An employee not performing cash receipting duties will reconcile the mail log with cash receipts and check deposits," the audit states.
The audit did not identify sources of any unfulfilled pledges.
A UT spokeswoman said some of the pledges were tied to the $1 billion, seven-year Campaign for Tennessee, but some pledges pre-date the campaign. No bonuses were tied to the overstated pledges, she said.
More details as they develop online and in Tuesday's News Sentinel.