The Treasury Investment Process Review Committee has provided its report to the Board of Regents and CU President Todd Saliman on findings and recommendations regarding a gap in funding for planned acceleration of elements of the system strategic plan.
The Board of Regents and President Saliman established the committee in January to detail lessons learned and to determine what policies and controls need to be restored, refined, or added to guard against the situation reoccurring. The committee included three members of the Board of Regents, the system chief financial officer (CFO), two campus CFOs, the university treasurer, the internal auditor, and the president/principal of Innovest Portfolio Solutions, an external firm.
In a communication to faculty and staff on April 5, Board of Regents Chair Lesley Smith and Saliman noted, “The report provides a comprehensive assessment of what happened and sound recommendations to improve our operations. It also notes areas of best practice occurring in the University Treasury that should continue.”
They continued, “We understand the disruption and challenges the campuses faced when funding that was committed was no longer available. We are confident that what we have learned and the recommendations we will implement will serve us well going forward.”
The funding gap was discovered in late fall. A steep decline in the stock market during 2022, combined with incomplete and inaccurate information the former university treasurer provided to university leadership, meant the FY 2022-23 gap was $69 million. The figure was arrived at after three months of intensive accounting by the interim treasurer and system/campus CFOs. As a result, some elements of accelerating the strategic plan were halted, delayed, or scaled back. The Accelerating the Strategic Plan funds are different from the regular campus operating budgets. Each campus has evaluated the impact of the ASP funding gap and has made adjustments to their planned investments tied to these efforts.
Initial plans to accelerate elements of the strategic plan were made based on using Treasury pool unrealized gains from the close of FY 2020-21. Despite assurances from the treasurer as to the availability of these funds, university leadership insisted that around 50% of the unrealized gains were left in the portfolio as a buffer to protect against market volatility.
The committee’s work was carried out by CU Internal Auditor Agnessa Vartanova and Wendy Dominguez of Innovest Portfolio Solutions, who combined provided an internal and external perspective. The committee examined:
– The CU Treasury Office’s operating reserve investment processes and associated controls.
– How Treasury communicates, including communicating reliable, accurate, and timely information to leadership on investment issues.
– The sufficiency of training in the Treasury Office and with related investment committees/resources.
The committee’s recommendations include:
– Provide university leadership with more timely, insightful, relevant, and accurate information to facilitate decision-making and advice related to assigning planned spending against unrealized gains, reporting on cash availability for commitments requiring large cash outflows, and overall portfolio design.
– Strengthen internal processes and controls as they relate to maintaining policies and procedures, segregation of duties, performing reconciliations, reviewing transactions, and reporting.
– Leverage the advisory capacity of Treasury’s Investment Advisory Committee by providing them with timely, accurate, and sufficient information to review the upcoming expected cash flow needs and the balances of the operating reserves Strengthening the collaboration between the Treasury Office and the Office of Budget & Finance, specifically to include proforma cash flow projections.
– Increase Treasury’s awareness of the timing and priorities of university initiatives that require large cash outflows, and non-capital reserve spending projections above historical levels through leveraging meetings and campus and system administration CFOs collaboration.
– Enhance Training and Understanding of Accounting Procedures and Claim on Cash.
A more comprehensive assessment of what led to the situation and of the recommendations is in the report.
Additionally, the Board of Regents has initiated a search for a new treasurer (the treasurer is one of four positions at CU that report to the board). The person hired will play an important role in implementing the recommendations, leading the Treasury team, and working with external investment advisers. Retired University Treasurer Dan Wilson has been serving in the interim position since November, when the previous treasurer left the university.