IRS to audit university system

Friday, June 26, 1998 | 9:49 a.m.

This summer's IRS audit marks the second time in the past two years that the tax-exempt university system's books have come under serious outside review.

In December 1996, state legislative auditors released a blistering 66-page report that criticized the university system for spending educational dollars on salaries for support staff members, allowing individual institutions to routinely shift money among accounts, and permitting universities and community colleges to use inconsistent reporting methods.

After the release of that report, the Board of Regents adopted greater accountability measures for the system, which has an annual operating budget of about $700 million.

Tom Anderes, vice chancellor for the state's public higher education system, said Thursday his staff is preparing for a July meeting with IRS auditors. Already, the IRS has asked for office space and copies of financial records from the system's foundations and revenue-generating operations.

He said he plans to give regular reports on the audit to regents at public meetings.

Anderes said he expects the IRS to take a narrower look at the system than did legislative auditors, focusing on such areas as UNLV's Thomas & Mack Center, which generates $15 million annually. The IRS will look at whether the university system is following rules that govern tax-exempt organizations, he said.

Rather than auditing the system because the IRS suspects specific abuses or problems, "they're telling us they use a point system to determine who is audited," Anderes said. "It's based on gross assets and gross receipts. I guess we've reached a point where it was our turn to be audited."

Mark Alden, chairman of the Board of Regents Audit Committee, added, "This is absolutely routine. We've never been audited by the IRS before. I welcome an inquiry."

Regent Nancy Price, a frequent critic of the university system's fiscal policies and financial management, suspects there's more to the audit than what is being described by Anderes and Alden as routine.

"This is very significant," Price said. "The IRS can't just walk in without a reason."

Price has been critical of what she calls the board's lack of oversight over university and community college foundations as well as revenue-generating ventures such as the University of Nevada School of Medicine's practice plan, where physicians are expected to earn enough money to pay their salaries.

Keith Kimball, an IRS spokesman in Los Angeles, said the service has a policy of not discussing why specific organizations or individuals are singled out for audits.

He declined to comment on the Nevada audit.