An Audit Report on Financial Transactions Associated with Hurricane Katrina and Hurricane Rita at the Lamar Higher Education Institutions and the Texas State University System
April 2009
Report Number 09-035
Overall Conclusion
As of May 24, 2008, three of the four Lamar higher education institutions had received $10,384,310 more in state and federal emergency appropriations than they needed to cover their costs associated with Hurricane Katrina and Hurricane Rita (see Table 1 on page 3). Auditors subsequently identified additional hurricane-related expenditures for which the institutions have not yet requested reimbursement; when those expenditures are considered, the amount the three institutions received in excess of their costs is reduced to $8,476,321 as of March 2009 (see Appendix 3 on page 54).
This occurred, in part, because Lamar University received duplicate reimbursements for expenditures by transferring $2,112,660 in state emergency appropriations to its local account to pay invoices that it had already paid using state emergency appropriations. Lamar University also retained in its local accounts $3,275,995 in FEMA reimbursements for expenditures it had already paid for with state emergency appropriations. In Lamar University's management response, presented in Chapter 5 on page 21, management agrees that the double reimbursements occurred.
In addition, the Texas State University System (System) and the Lamar higher education institutions overestimated their revenue losses. Auditors estimate that revenue losses for fiscal years 2006 through 2008 were $11,885,883 (see Table 2 on page 6). Subsequent to receiving a draft of this report, the System and the Lamar higher education institutions revised revenue losses to be $23,679,173 (see Chapter 5, page 18). When the institutions calculated their revenue losses, they included prospective revenue for possible future student growth. They also included requested formula funding amounts that were submitted to and addressed during the 80th legislative session. However, the institutions' formula funding was not reduced as a result of a decline in enrollment after the hurricanes. Lamar University did not include its growing graduate program in its initial tuition revenue loss calculations.
The System was responsible for allocating state emergency appropriations to the Lamar higher education institutions based on initial estimates of hurricane-related expenditures, revenue losses, federally required insurance premiums, and federal reimbursements that the institutions had received prior to receiving state emergency appropriations. The System also reported financial activities related to the hurricanes to the Legislative Budget Board. However, the System did not provide sufficient guidance and direction to the Lamar higher education institutions regarding the use of the funds. For example, the System did not provide the higher education institutions with assumptions to use in calculating tuition revenue losses, and it did not review the higher education institutions' financial reports for accuracy.
Verification of Expenditures
Auditors tested 167 expenditures totaling $3,335,653 that the Lamar higher education institutions made between November 2005 and May 2008 and determined that all expenditures tested were for valid, hurricane-related costs.
The higher education institutions collectively applied 52.2 percent of their state emergency appropriations toward revenue losses.
Expected Additional Funding
The Lamar higher educations institutions expect to receive an additional $12,607,761. This comprises $8,040,002 for FEMA claims awaiting payment, a request for an additional $1,124,411 in FEMA funds to cover cost overruns, and $3,443,348 in insurance claims.
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