Auditors will ‘get to the bottom’ of Mayville State University payroll issue, state Auditor Josh Gallion says
Some employees must pay back more than $10,000, and one owes the university more than $37,000.
MAYVILLE – Weeks after 15 employees at Mayville State University were told they must repay the university after they were mistakenly overpaid – some by more than $10,000 – a portrait is emerging of how it happened.
Audit documents, as well as commentary from state and university officials, show university bookkeeping hobbled by turnover and reorganization, leaving officials at risk of committing – or failing to catch – financial errors. Those range from the overpayment problem to a slew of issues detailed in a 2020 report from the state auditor’s office, including multiple “major” financial errors in Mayville State’s records.
The university’s top financial executive told the Grand Forks Herald that problems flagged by auditors have been fixed. And in an appearance on a university podcast, MSU president Brian Van Horn described new failsafe measures, among them further employee review and payroll system “queries” designed to catch similar errors.
But Van Horn also described a perfect storm of official shortcomings that led to the payroll mistakes.
“Multiple things contributed to this,” Van Horn said on the podcast, which was released on Tuesday. “We were changing vendors that do our payroll. We had different controllers at our university. That person changed. We moved from HR, which was doing payroll, to the business office. There’s a lot of different things.”
Interim President of Business Affairs Steve Bensen told the Herald through a spokesperson that the payroll issue was discovered in June. As the Herald previously reported , that led to an investigation that’s since uncovered 15 employees overpaid by a collective $152,000.
On the podcast, Van Horn also said overpayments happened between spring 2019 and fall 2020. He described the issue as a problem with the payroll system that added an unearned “ghost line” to employees’ pay.
Many overpaid employees say the money accumulated slowly, over the course of years, in ways that would be hard to notice. It has left them now facing repayments – some employees will have to pay back at least $10,000 and one owes the university more than $37,000.
“We’re running queries now, on a monthly basis, to try to catch these … and we’ve actually caught where this has happened and prevented this in just the last couple of months,” Van Horn said on the podcast. “So that’s a good action to put in place. We’ve also put other checks and balances in, in terms of the employees signing off on everything, the divisions looking at this, and other steps at the university to catch this.”
The overpayment issue comes after a notable 2020 report from the North Dakota State Auditor’s Office, reviewing the university’s financial practices during the 2017-2019 biennium and conducted as part of a regular audit schedule for the university.
Auditors found four “major financial errors” stemming from an incorrect journal entry, plus record-keeping that could have led to some students getting scholarships and waivers for which they weren’t eligible. That’s besides accounting practices that the auditor’s report advised against, including the university’s relatively lax approach to double-checking its account balances against its books.
“To safeguard cash and the reliability of the financial statements, monthly reconciliations of bank balances to the general ledger are essential,” the report states. “MSU goes several months before reviewing bank reconciliations.”
The report also found fault with how Mayville State leaders handled “doubtful accounts,” or money the university is owed that nonetheless might not be paid.
“During our last audit in 2017, we recommended the university evaluate the allowance for doubtful accounts to check if the estimate is accurate,” the report stated. “As of the audit period, this has not been done.”
The 2020 report speculates that employee turnover at Mayville State University could be a potential source of problems — both for the incorrect journal entry and for poor scholarship record-keeping.
Bensen, the university’s financial executive, said the issues flagged in the latest auditor report have since been fixed. Doubtful account write-offs have been made in the budget process and multiple financial statements. Bank reconciliations, he said, are done monthly. And the scholarship issue has been a special area of focus.
“In June of 2021, university personnel worked to completely review and revamp Mayville State University’s scholarship and waiver policies and procedures. These were reviewed with the university division chairs during the last couple of weeks,” he said, and the university is now looking into software that could help even more.
“We are not currently aware of widespread scholarship overpayments,” Bensen said. “If any students have questions about refunds they receive from MSU, they are encouraged to please contact the Business Office, where personnel will be happy to assist.”
Bensen did describe one other recent error: a batch of financial aid checks, funded with federal COVID relief money, were sent in duplicate to students in October.
“Students were informed of the unintentional error and were asked to shred or return only the duplicate check if it was received,” Bensen said. “The Bank of North Dakota was notified immediately after the unintentional duplicates were discovered and the stop payment procedure was put into place for duplicate checks. No instance of overpayment was involved.”
State Auditor Josh Gallion spoke to the Herald this week, saying he wouldn’t describe himself as “alarmed” about the overpayment issue at Mayville State.
“But there is definitely a reason to be concerned,” Gallion said. “And from an audit standpoint, things like this come up. It’s definitely something we need to look into and get to the bottom of. I refrain from passing judgment until I truly know what the circumstances are.”
The university’s next audit is expected to be conducted early next year, with a report released before June 30.
In a previous statement to the Herald, Van Horn referred to the s tate Office of Management and Budget’s policy handbook , which says the state “requires” that overpaid employees’ wages be garnished. He reiterated his position on this week’s podcast, where Van Horn said it’s the responsibility of “the university and personnel both” to watch for overpayments — and referred to the university as a family.
“Being part of a family means you work through those disagreements in a civil way and you try to help each other as best you can,” Van Horn said. “And I know that’s what our attempt is to do here at the university. The individuals that have been deeply affected, we feel terrible. But again, the law determines what we must do.”