A state audit criticizing the University of Hawai'i-Manoa's fiscal accountability and budget process drew strong reaction from UH officials yesterday.

The audit, which said the Manoa campus's budget impedes efficient and effective use of resources, was called for by state lawmakers who said they were unable to get timely financial information during the past legislative session.

The audit recommended restructuring the budget process, linking the budget to the strategic plan and monitoring the process to provide the Legislature with information needed for decision-making.

"The Manoa campus is working hard to improve budget transparency and fiscal accountability with a greater emphasis on performance measures," said interim Manoa Chancellor Denise Konan, who took the post in August, after the close of the last legislative session. "We appreciate those instances where our efforts and progress have been acknowledged in the auditor's report."

However, while agreeing there was room for improvement, interim UH President David McClain disagreed with many of the report's findings, including the conclusion that the Manoa campus cannot ensure fiscal accountability.

In a 16-page letter commenting on the draft report, McClain noted the university's financial statements are audited annually by external auditors, who have reflected that the university's financial statements are clearly stated and "no material weaknesses in internal controls have been reported as a result of those audits."

He also pointed out that some of the practices criticized in the audit have value for the purposes they were intended. "The auditor's report contains seemingly willful distortions of the university's intentions," he said in a release after the audit was made public.

Among the disputed practices was a "budget level summary" report that the audit said lacked the detail needed to evaluate unit and program performance. It also said the reliability of the reports was questionable because they were not reconciled quarterly with the budget and financial information system.

But McClain's letter said the system was not meant to be a department-level management tool and was sufficient to assess the overall expenditure of money appropriated to UH-Manoa at the central administrative level. He also disputed the claim that the reports were not regularly reconciled.

He agreed with the finding that the calculation of UH-Manoa's cost-per-student has limited value, but noted it is sufficient for its intended purposes, such as setting tuition costs.

"We're frankly puzzled as to how and why these distortions of our intentions remained in the final version of the report," McClain said.

The final report includes McClain's letter and a summary of his response, but the audit concludes, "We believe the audit report presents an accurate and balanced analysis of the Manoa campuses current finances."

Reach Treena Shapiro at tshapiro@honoluluadvertiser.com.