The School and Institutional Trust Lands Administration brought forth a decade of unprecedented revenues, but $2 million in employee bonuses and loose controls on some land development processes must be reined in.

That's the gist of a legislative audit reported Thursday to the legislative management's audit subcommittee.

The audit, conducted by legislative auditor general and fiscal analyst employees, reviewed the efficiency of SITLA's operations and whether its bonus program is appropriate in relation to its salary structure.

But a key theme emerging in the back and forth between auditors and legislators and SITLA bosses is this: How to balance trust stewardship as a public process with its legislative mandate to operate like a business.

"We're struggling with this," said Senate President John Valentine, R-Orem. "It's the taxpayers' and the schoolchildren's assets of the state, so how private can that really be?"

The School and Institutional Trust Lands Administration was created in 1994 and told to reverse what some call a century of mismanagement.

SITLA now manages about 4 million acres, granted by the federal government at statehood to be held in trust primarily to benefit public schools. Revenues from mineral leases, land sales and development of the trust lands are invested by the state treasurer. The fund has grown from $95 million in FY94 to $569 million in FY05. The goal is to grow it to $1 billion, then let dividends pad the schools' budget.

The program has paid some $2 million in staff bonuses since 1997, ranging from from $2,000 to $40,000 per person, states the audit. SITLA administrators receive 26 percent more in compensation than state government employees, and it outpaces trust land management organizations in other states. The audit recommended bonuses, if they continue, be based on appropriate goals, and that the Legislature give SITLA salary and bonus guidelines.

SITLA's Development Group also needs controls appropriate for a group with authority over public property and funds, the audit states. Land sales don't always follow typical public processes, including bidding.

"We are not suggesting that fraud or abuse has occurred . . . simply that a lack of program controls allow for the possibility," the audit states.

"Decisions are made behind closed doors . . . that is not a public operation," Auditor General John Schaff told lawmakers.

The SITLA Board of Trustees will draft rules for the development program, has hired new expertise and is conducting more public bidding processes, SITLA director Kevin Carter said.

SITLA defends the bonus program by citing annual revenue increases and disagrees with auditors attributing increases to rising natural gas and oil prices — SITLA cites wise land management and swaps — and unrealistically low revenue goals. Compensation and bonuses also are in line with private sector practices.

"You gave us the mandate to break the mold of a government agency and instead act as a business," Carter said. "Additional controls are probably advisable, and we intended on looking into that."

"We do continue to support the quasi-independent status," Utah PTA trust lands commissioner Natalie Gordon said. "We're getting the biggest bang for our buck."

The audit also recommended lawmakers allow the state treasurer more investment flexibility to grow the trust.

---

E-mail: jtcook@desnews.com