Lawmakers plan to audit the University of Wisconsin System after a state financial audit showed the system overpaid more than $30 million in retirement and health insurance premiums during the 2011-12 fiscal year.

According to a letter sent from State Auditor Joe Chrisman to a state committee Jan. 10, the UW System did not establish adequate procedures for reconciling health insurance premiums with coverage of the Wisconsin Department of Employee Trust Funds, which oversees insurance and retirement funds.

The letter said the UW System estimated it overpaid health insurance premiums by $15.4 million from May 2011 through September 2012 and $8 million went to health insurance premiums for 924 terminated employees.

According to the letter, provisions in the contracts between the state and its health insurance appear to limit the UW System’s ability to recover all overpayments and if the System cannot recover all overpayments, it would have to find an alternative funding source to cover them.

David Giroux, UW System spokesperson, said in an email to The Badger Herald the UW System has recovered $2.4 million. He said UW staff first identified the overpayments and reported them to the Legislative Audit Bureau.

According to the LAB letter, the UW System also overpaid $17.5 million to the Wisconsin Retirement System for the fiscal year. The Department of Employee Trust Funds identified the overpayment and credited the system.

In a Jan. 11 statement, UW System President Kevin Reilly said the system would pursue both internal and an external reviews by an independent auditor, focusing on assessing the risks of the Human Resources System where the errors occurred.

“We are taking this matter very seriously, and I am confident that our corrective actions will resolve its root causes,” Reilly said. “I am nonetheless highly embarrassed and very disappointed by these errors and the resulting overpayments. I pledge to our Wisconsin taxpayers, legislators, students and staff that we will fix this problem so that it does not happen again.”

Giroux said regardless of whether LAB pursues its own review, the System will continue with its own audit, adding the System will inform the UW System Board of Regents and Legislature about their findings.

Joint Legislative Audit Committee co-chairs Sen. Robert Cowles, R-Allouez, and Rep. Samantha Kerkman, R-Randall, scheduled a public hearing for Tuesday at the Capitol. They also directed LAB to prepare a memo outlining the parameters of a proposed independent LAB audit of the System’s payroll and benefits processing, including the new Human Resource System.

“I see the concerns regarding the HRS as major problems within the UW System,” Cowles said in the statement. “The need for a full independent audit by LAB to address the reoccurring theme of financial mismanagement by the university system is absolutely necessary.”

In a statement, Rep. Stephen Nass, R-Whitewater, the chair of the Assembly’s Committee on Universities and Colleges, called for a top UW System administrator to leave.

He said Senior Vice President for Administration and Fiscal Affairs Michael Morgan – who was appointed on a temporary basis in 2010 – should take himself out of consideration from the current search and screen for a permanent hire for the position, in which Nass said Morgan is the ‘favored’ applicant.”

Morgan did not respond for comment.