A new audit contends the University of Hawai'i system needs to improve its contract monitoring process to prevent cost overruns and to track the status of old contracts more carefully.

The report by State Auditor Marion Higa contends that while UH has been granted increasing autonomy from the rest of state government in recent years, the university "struggles to demonstrate accountability."

In one case cited in the audit, the university paid out or encumbered $18.8 million under a seven-year contract with SunGard Higher Education Systems that began in 2002 to launch and maintain the Banner Student Information System. According to the audit, that contract originally was expected to cost only about $13 million.

UH President David McClain countered in a rebuttal letter to Higa that the Banner contract is actually under budget.

McClain said the $13 million estimate cited by the auditor for the Banner contract was only for the software implementation, and that UH had budgeted an additional $6.2 million for maintenance, support and software upgrades.

Another example of contract problems cited by the audit was an exchange between the UH and the state Department of Accounting and General Services two years ago in which DAGS asked the university to check the status of about $383,000 in unspent money that had been set aside to pay out under contracts that were 5 years old or older.

UH replied that only about $129,000 was still needed for active contracts. In other words, the university had more than $253,000 encumbered to pay out for contracts that were no longer valid, which was money that could have been used for other purposes, according to the audit.

McClain countered that UH records suggest the audit overstated the amount of money that had been outstanding for more than five years.

Overall, McClain called the audit recommendations "unexceptional."

"They reflect and recount actions we have already taken to make improvements prior to the audit and the report," McClain said in his letter to Higa.

The report, which was prepared with consultants Nishihama & Kishida CPAs Inc., also faults the UH strategic plan for laying out vague goals and objectives.

It is difficult to measure whether the university is making progress toward achieving its goals because the objectives do not spell out specifics such as deadlines, responsibilities and costs for each goal to be met, according to the audit.

McClain replied that an effort called the Second Decade Project was launched to more specifically spell out the state's educational needs and to set specific goals.

According to the audit, tuition and fees collected from students in the University of Hawai'i system accounted for less than a quarter of the university's funding during the year ending June 30, 2007, while taxpayer contributions from the state general fund accounted for 64 percent of the system funding.

The report by the state auditor notes the general fund has "significantly increased" its support for the university during Gov. Linda Lingle's administration, with general fund appropriations increasing from about $436 million in the 2003 fiscal year to nearly $613 million in fiscal year 2007.

The portion of the university's budget accounted for through student tuition and fees increased more slowly, growing from about $93 million in fiscal 2003 to more than $116 million in fiscal 2006. The audit did not provide data on tuition collections for fiscal 2007.

The university's Board of Regents in 2005 approved the largest tuition increase in UH history, a controversial decision that will take effect over six years and will more than double in-state tuition at UH-Manoa by 2011, from $3,504 to $8,400 a year.

Those tuition increases are expected to generate an extra $400 million in tuition revenue for the university over the next six years.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.

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