BILL REQ. #:  S-1377.1 

Read first time 02/14/13.   Referred to Committee on Higher Education.

     AN ACT Relating to the audit of the state universities; creating new sections; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature recognizes the historical financial hardship being placed on students and the chilling effect high tuition places on prospective students. The legislature finds that in order to evaluate and appropriate public resources in a manner that best supports and promotes equity of access to higher education, it needs complete information regarding the financial situation and circumstances of Washington state's public research universities, the University of Washington and Washington State University. Therefore, the legislature intends to direct a comprehensive audit of the public research universities to identify cost and profit centers within their broadly defined institutional and ecological systems.

NEW SECTION.  Sec. 2   (1) The state auditor shall conduct a comprehensive financial audit of Washington's state universities. The purpose of the audit is to identify cost and profit centers within, and in partnership with, the state universities. The audit must focus on public funds; student fees, in particular tuition; and auxiliary enterprises, which for the purposes of the audit at the University of Washington includes University of Washington medical center, the internal lending program, the W fund, and the center for commercialization. The audit at each university must achieve the following:
     (a) Identify the major sources of funding over the most recent five years, including public funding and funding from the federal government;
     (b) Review and evaluate the policies and practices that the university uses to track and allocate public funding;
     (c) Determine how the university spent its state appropriations, student fees, federal grant funding, and any inflationary increases in federal grant funding;
     (d) Review and evaluate the procedures and practices used by the university to track and adjust nonsalary expenditure categories such as travel, consultants, entertainment, and general supplies;
     (e) Identify how the university defines restricted funds and determine for each type of public funding the amount that is restricted to specific purposes by the funding source;
     (f) Assess the university's policies and practices for tracking per-student expenditures for instruction and identify the average amount per student that the university has spent on instruction for undergraduate students in each of the past five fiscal years;
     (g) Obtain the university's definition of auxiliary enterprises and determine the number of auxiliary enterprises, including the University of Washington medical center, the University of Washington internal lending program, the W fund, and the center for commercialization, that exist in the university system, the methods the university uses to track revenues and expenditures of auxiliary enterprises, and the policies and practices the university has in place to ensure that state funding is not used to supplement or guarantee projects or programs authorized by auxiliary enterprises;
     (h) Identify how much money is being spent on undergraduate education and to what extent undergraduate education is subsidizing graduate education; and
     (i) Determine how tuition funds are being used and to what extent they are being used to fund the University of Washington medical center, the University of Washington internal lending program, the W fund, and the center for commercialization and to back bonds authorized by the university.
     (2) Any work performed by the state auditor's office shall not duplicate existing audits, and where applicable, shall make maximum use of existing audit records, accreditation reviews, and performance measures required by the office of financial management and nationally or regionally recognized accreditation organizations including accreditation of hospitals licensed under chapter 70.41 RCW and ambulatory care facilities.
     (3) By January 1, 2014, the state auditor shall deliver the comprehensive financial audit of the state universities to the governor and relevant committees of the legislature. The state auditor shall recommend whether follow-up audits are necessary to ensure the effective use of public funds, student fees, and auxiliary enterprises.
     (4) This section expires July 1, 2014.