Uni High facing unexpected $1 million-plus deficit after accounting error

 

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URBANA — University Laboratory High School in Urbana is facing a $1 million-plus deficit, blamed on an accounting error that charged salaries to a defunct account for several years.

Coupled with a decline in state aid, the mistake means the high school run by the University of Illinois may also be $190,000 short in its budget this school year, according to Director Jeff Walkington. The $1 million deficit represents about a third of the high school's $3 million annual budget.

It's unclear how the accounting error happened, but the deficit apparently has been accumulating since 2012, officials said.

"It appears that instead of salaries being transferred from one year to another in the kind of complicated way we have to do with a state grant, some of the salaries were left on an old account that was no longer being monitored," said UI Associate Provost Keith Marshall. "Typically, you don't think that a closed-out account would be accumulating debt."

The office of University Audits is preparing to audit Uni High's financial records "as far back as we need to," to find out what went wrong and how, and recommend any safeguards that might be needed, Walkington said. The audit is scheduled to start this month, Marshall said.

The first hint of trouble was discovered last November by Uni's new business manager, Mike Adams, and his staff, officials said.

"They saw some anomalous balances. They looked and said things are not adding up here," Walkington said.

Adams worked with the university for several months to investigate, Marshall said. Over the summer, they determined the approximate size of the deficit and the mistake that led to it and notified school officials at the start of the school year, Marshall and Walkington said.

Walkington disclosed the "disconcerting news" in a Sept. 19 email to parents, faculty, students and alumni, which was obtained by The News-Gazette.

"While it's too early to provide you with a definitive plan on how we will address these budget challenges, I can assure you that we are working diligently to put the necessary safeguards in place to ensure this can never happen again, exploring possible sources of new income, and studying ways we can reduce our expenditures with minimal impact on the quality of education we provide to each and every student," he wrote.

Founded in 1921, Uni High currently has 320 students in eighth through 12th grade, 34 teachers and 11 other staff members.

Though it's considered a public high school, its students go through a competitive admissions process and parents are asked to make a suggested contribution — this year, $2,750. Walkington said some parents contribute more and some much less.

The school depends on four primary sources of funding — general state aid, money from the UI provost's office, gift funds (including parent contributions) and fees. It receives no local property tax revenue.

The UI is providing $377,000 to Uni High this school year, a number that's increased from $263,000 in 2010-11, according to campus figures.

State aid makes up about half of the school's $3 million annual budget, and its per-student aid has declined 11 percent in each of the past three years, Walkington said.

Total state aid, which depends on enrollment and other variables, dropped from almost $1.85 million in 2010-11 to about $1.66 million in 2013-14, he said.

The school thought it had planned carefully for those reductions, he said, but "our revenues were declining at the same time that some of our expenses were being charged to a dead account, and we weren't aware of that."

An analysis by Adams suggested this year's budget shortfall could range from $160,000 to $190,000, he said.

Walkington is creating a budget task force with "wide participation and transparency" to address the shortfall and identify how to pay down the million-dollar deficit. It will include parents, students, teachers, alumni, university officials and business people,.

They will also look at possible sources of new revenue, he said. Gifts and parent contributions now make up about a third of the budget.

The school has considered raising the suggested parent contribution but no decisions will be made until after auditors and the budget task force complete their work, he said.

"While we appreciate (parents') help, we're not necessarily looking for them to be the long-term solution," he said.

Steven Michael, president of Uni High's Parent Faculty Organization, said it was no secret the decline in state aid had put the school under some financial pressure.

"But the fact that there was an accounting discrepancy surprised all of us," said Michael, professor of business administration at the UI, who has two children at Uni and one who graduated from there.

It's a lot of money, he said, but as a unit of the university the high school has other resources.

"The forensic audit will tell a lot of the tale," he said. "I think a lot of people are taking the attitude of let's wait and see, let's let this shake out.

"On the whole, the school has learned to do well with less," Michael added. "I don't think this is an insurmountable hurdle."

Walkington pledged to continue to update the Uni High community as more is known. Both he and Marshall expressed confidence that the school will meet its financial obligations and continue to provide a "world-class education."

"In every crisis there's opportunity," Walkington said. "We think Uni is going to be a strong institution for the next 90 years."

Reporter/Columnist

Julie Wurth is a reporter covering the University of Illinois at The News-Gazette. Her email is jwurth@news-gazette.com, and you can follow her on Twitter (@jawurth).