Central Michigan University’s accumulated bond debt has now reached $190,262,649 for campus projects, a near-$60 million increase within the last five years.

As of June 30, CMU was responsible to pay $6,585,000 in principle and $7,687,475 in interest of that debt for the current fiscal year, said Barrie Wilkes, associate vice president of financial services and reporting. It will be paid partially from the university’s general fund and tuition.

“We only issue bonds when we have some large project that we need to fund that we can’t from other sources of revenue the university might have,” he said. “We actually have more debt than we did.”

Bonds are typically issued to finance priority construction and renovation when state appropriations and donations are not enough. Wilkes said CMU will most likely always be in some sort of debt.

“Right now we don’t have any building plans that we’re committed to, that we’re looking to take more bonds out on,” he said. “It really depends on the university’s needs in the future. I think the university will routinely need to build new buildings or replace buildings.”

Vice President of Finance and Administrative Services David Burdette said bond payments take place much like homeowners make mortgage payments, similarly to how other institutions handle debt. It generally is handled through a bond broker, whose specificity is difficult to pinpoint, he said.

“That’s what we do. We take loans on capital, on buildings,” Burdette said. “Bonds have been sold, people are lending us money and we pay back every quarter or every month.”

With the time and money already invested into projects such as the Education and Human Services Building construction, the Bovee University Center renovations and the previous expansion of the Charles V. Park Library and Kelly/Shorts Stadium, he said the only possible future project funded through issued bonds would be CMU’s desired biotechnology building.

Director of Financial Planning and Budgets Carol Haas said she is responsible for budgeting the university’s auxiliary funds, aside from the Central Energy Facility, which correlates and pays its own debt.

“The current debt we have is in the general budget, and that’s under the administrative account,” she said. “We budget so much in the central administrative accounts; if we’re under, that will go into the reserve.”

Reserve Account

Untouched revenue for CMU also topples over into a reserve account every year, and since June 30, $22,833,950 has been allotted for priority campus projects.

Though the amount is not a typical year-end number, Wilkes said, the university is financially healthy.

“It’s slightly higher than the year before,” he said. “We just added some (year-end) funds that were available.”

The reserve account was identified as the financial source behind CMU’s Medical School project following the Board of Trustee’s approval Sept. 18.

Roughly $15 million had been the targeted amount for an addition on the Health Professions Building to accommodate a medical curriculum; however, Wilkes said only the $1.5 million will be the definite amount taken from the reserve to fund the project’s architectural work.

It will also be a separate set of revenue from the reserve designated to campus emergencies.

“The reserves that have been identified to be used for the medical school are not all of the emergency reserves that the university has,” he said. “It’s a matter of when we do budget, especially given the difficulties with the state. We’ve been trying to be very cautious in budget.”

The university also puts out loans to various auxiliary units on campus, Haas said, one specific example in athletics being the new scoreboard, which will be a pay-back project.

“That is a cost savings in the end for the university by buying it out right now instead of paying the vendor over time,” she said.

Aside from a five-year term pay-back in which Parking Services utilized university loans for parking lots, Haas said, CMU has received no recent requests from other departments for pay-back projects.

Dean’s Account

The university’s current operating budget leaves leeway for academic departments to utilize their own finances, offering individual CMU colleges the choice of how to manage their own reserve accounts.

Wilkes said each college can choose whether to keep the money it does not spend by the end of every year.

“Academics do have what they call a dean’s account,” Haas said. “So the dean has the power to do with that what they see fit.”

In an e-mail to Central Michigan Life, Sue Ann Martin, College of Communication and Fine Arts dean, said the account is a “discretionary fund,” which CCFA has used to provide support for faculty and staff development.

Some of the more specific items, she said, include equipment purchases or computer lab funds and support for speakers across campus.

Interim Dean to the College of Health Professions Thomas Masterson said his college has chosen to hold on to its funds from last year and is using them this year.

“It’s like a savings account … It’s money we use to put forward new initiatives,” he said.

Maintaining the Carls Center, which takes up one third of the Health Professions Building, is one of the instances in which their reserve is used. Masterson said the center acts as a functioning speech and hearing clinic for the community.

The primary problem with funding a variety of programs, Masterson said, has been state appropriations. Like other colleges, Health Professions hires and pays both full- and part-time temporary faculty with its reserve.

Checking their finances

Following the end of every academic year, the university undergoes an external audit of several factions, including check-ups on financial operations.

Jeff Fineis, a partner with Andrews Hooper and Pavlik P.L.C., said the firm conducts CMU’s audit in the summer months, though does perform audits on a year-round basis at other institutions.

“It might be fair to say that independent audits are focused on the financial statements of the entity,” he said. “In general when we perform independent audits, we also coordinate our audit procedures with internal auditors.”

External auditors report required communications that are dictated by certain standards, Fineis said. While no misstatements or disagreements of management with CMU were reported by the Board of Trustees’ Auditing Committee in September, he said he could not comment further on the progress of a customer.

Mike Roethlisberger, CMU director of Internal Audit, said Internal Audit oversees numerous financial processes in university departments, especially spending, expenditure polices and overall detected risks.

“Whenever you have a department that works with cash, the risk obviously goes up,” he said. “That’s why it’s important for departments to reconcile their accounts.”

During CMU’s periodic internal audits, Roethlisberger said, department spending is dissected in terms of which authorizers are making the decision to spend money and whether that amount is excessive.

“That can always change considering state appropriations and donations,” he said. “It’s an area you’d want to monitor.”

The reports of internal auditors have not included anything additional to basic operational recommendations, such as registrar control systems, Roethlisberger said.

Wilkes said Internal Audit does not concentrate strictly on university finances, as it mostly evaluates internal operations. The entire process, in which external and internal auditors cover similar areas, is not unique to CMU, he said.

External audit reports do rely, however, on the discoveries of CMU’s internal searches.

“All the public universities are required to have an external audit by the year’s end,” he said. “The external auditors look at the internal audit reports from throughout the year … They will also use some of the internal audit and their work.”

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E-mail the author: Jackie Smith