Audit: USTAR revenue, jobs reports were overstated and inaccurate

Published: Tuesday, Oct. 15 2013 4:06 p.m. MDT

Officials with the Utah Science Technology and Research Initiative failed to accurately report revenue, jobs and return on investment, according to a legislative audit.

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SALT LAKE CITY — Officials with the Utah Science Technology and Research Initiative failed to accurately report revenue, jobs and return on investment, according to a legislative audit released Tuesday.

The audit also found a number of lapses in oversight at USTAR, which was created in 2006 to enhance economic development in the state through research at the University of Utah and Utah State University and the commercialization of innovative technologies.

More than $250 million in engineering contracts, private investments and sponsored research was found to be over-reported by USTAR. Auditors also reported that USTAR was unable to independently validate 3,380 jobs reported by the initiative.

"USTAR's reported revenues were overstated and inaccurate because dollars presented were unrealized, invalid and over-reported," the audit states. "USTAR's reported jobs were inaccurate because they included jobs that no longer exist, were based on projections instead of actuals, and included duplicate counts."

Auditors listed 15 recommendations for USTAR, including that the initiative report actual outcomes when possible and better identify when estimates are being used, that USTAR establish lease agreements with the U. and USU for the use of facilities, that USTAR's governing board align outreach programs with legislative intent and that a conflict of interest policy be adopted for members of the Governing Authority.

Senate President Wayne Niederhauser said the audit suggests that USTAR is little more than a name given to state money that would otherwise be appropriated as typical funding for higher education research.

"It seems like this was just more funding for the research for those universities and we could have done that without the glitzy title," he said. "It just seems like we’ve dressed up a program that we could have funded without a special name and given research to University of Utah and Utah State University."

Audit supervisor Brian Dean said USTAR was designed to be more than just a title for higher education research but had suffered from a "failure of management." He also spoke of USTAR's violation of open meetings laws, saying that incomplete records were kept of the actions and deliberations of the initiative's Governing Authority.

"Their minutes were in such disarray that we often couldn’t find motions within the minutes," Dean said.

House Speaker Becky Lockhart described USTAR as being under a "complete lack of management" and asked whether the Governing Authority's non-compliance with open meetings policy was intentional or the result of ignorance.

"Where was the assistant attorney general when all of these things were happening?" she asked.

Dean said it appeared that legal counsel had not been invited to USTAR's governing meetings, but they would attend in the future.

"We’ve got a commitment from USTAR management that moving forward those attorneys will be at board meetings," he said.

During Tuesday's meeting of the Executive Appropriations Committee, several lawmakers expressed concerns with the audit's findings. Rep. Tim Cosgrove, D-Murray, said he understood that the process of generating jobs and commercial projects from research takes time, but the misrepresentation of revenue and return on taxpayer investment is unacceptable.

"It just flies in the face of what we’re asked to do here day in and day out on behalf of the good people of the state and the investments of their dollars," he said.

Sen. Lyle Hillyard, R-Logan, expressed that his confidence in USTAR was shaken by the audit. "It puts me in a position where I don’t know what to believe when I see a report from USTAR," he said.

Ted McAleer, executive director of USTAR, expressed his thanks to the Office of the Legislative Auditor General for identifying a number of issues that need to be taken seriously and addressed. He said USTAR had seen a revolving door of financial managers over the last several years, which contributed to the reporting errors, but a new manager had already been put in place.

"I think the most critical piece of my responsibility as the executive director is that I need to hold a finance manager, my assistant, accountable for working with me on these recommendations," he said.

McAller also assured lawmakers that he and his staff would work toward addressing the concerns raised by the audit.

"You have my commitment that we will manage each of these three areas on a monthly basis at the USTAR Governing Authority Board meetings," he said.

Audit findings

Return-on-investment claim of 219 percent is overstated

State-bonded construction costs were not listed as expenses

USTAR claims credit for projects that might have occurred anyway

Majority of jobs credited were construction jobs that no longer exist

Many research jobs are part-time positions primarily held by students

USTAR governing board meetings were not held in compliance with Utah open meetings laws

Email: benwood@deseretnews.com, Twitter: bjaminwood

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