“… MRR funds are generally not made available for use for auxiliary or other facilities housing fee-generating services…”
In a recent audit engagement, we discovered Major Repair and Renovation (MRR) funds allocated for specific projects and purposes were reassigned to other capital projects not previously approved by the Board of Regents, including facilities for auxiliary services.
To mitigate the potential misallocation of MRR funds, we provided several recommendations, including the following:
Misuse or poor management of these funds creates a variety of risks:
Our audit consisted largely of a reconciliation of historical MRR expenses, with a focus on the physical asset upon which funds were spent. We also examined these transactions for compliance with several useful policy documents that clearly articulate the appropriate allocation and expense of MRR funds: OREF’s “Major Repair and Renovation (MRR) Guidelines,” the State Accounting Office’s “GSFIC Reimbursements for Bond Funded Construction Projects,” and USG’s Business Procedures Manual section 18.1. While MRR funds are generally not made available for use for auxiliary or fee-generating facilities, exceptions can be made for instances of health and life safety issues. The institution indicated the decision to expend these funds for what were otherwise ineligible facilities was based upon the identification of such critical needs, and a lack of alternative fund sources.
According to the OREF, USG owns and manages over 43.6 million square feet of instructional space, much of which was constructed prior to 1970. In combination with regularly appropriated maintenance and operation funds, MRR funding is allocated in an effort to provide for major repair, replacement, or renovation of critical building systems and other infrastructure. Its primary uses are for smaller scale projects (generally under $1 million) that are beyond the scope of regular annual maintenance costs, and should be spent only on instructional and administrative space. Facilities housing auxiliary functions such as food service and student residences are expected to provide for capital renewal needs through those respective funding streams.
Posted by Ted Beck
Published in: Audit Findings