Strict scrutiny will be applied to the University of Wisconsin System after state lawmakers voted to execute a larger audit on the System because of about $33 million in overpayments that were discovered during a regular audit.

The Joint Legislative Audit Committee voted in favor of a more comprehensive audit from the Legislative Audit Bureau in their Tuesday meeting, in which legislators questioned UW System officials on the overpayments.

LAB discovered in its routine audit that the UW System overpaid $17.5 million to retirement funds and $15.4 million in health benefits.

The overpayments happened because the state failed to reconcile UW System payroll data with a state benefits agency’s data.

UW System President Kevin Reilly reported the System recovered the $17.5 million a month after it discovered the overpayments. But the System has so far only recovered $2.4 million of the $15.4 million, a task Reilly said could prove difficult because it requires the System to work through complex legal contracts.

Rep. Samantha Kerkman, R-Randall, the committee’s co-chairperson, called the recent findings a “pattern of behavior.” She cited a 2007 hearing with Reilly regarding his scrapping of a $28.4 million payroll system that his predecessor had begun in 2001.

The previous payroll system, Reilly said, was on the verge of breaking at any time, which could have led to UW System employees not getting their paychecks. That is why his predecessor had begun planning the new payroll system that Reilly stopped because it would still have problems. Reilly said at this hearing that was the “hardest decision” he has made, as the UW System had already paid for much of that system.

Reilly then directed the UW System to develop the current payroll system, which was implemented in April 2011. While the UW System implemented the new system, Reilly said the top priority was getting paychecks to people, so other tasks like reconciling the data were “deemed to be a lower priority.”

“I know we have to rebuild some confidence,” Reilly said at the hearing.

Although he said this was not an “excuse,” Reilly reminded lawmakers the UW System employs about half of the state’s employees and has a payroll of more than $2.26 billion.

Reilly said the UW System would fully cooperate with the LAB’s audit, but the System will do its own investigation that will go further, which Reilly expects to cost less than $50,000.

Many of the legislators expressed their concerns with the overpayments, including Rep. John Nygren, R-Marinette, who said the overpayments affect UW System students by not using the wasted dollars on educating the state’s “best and brightest.”

He said he agreed with Reilly that a comprehensive study of the UW System is needed.

“I think you’re exactly right in how you laid it out looking at the technology, the process and the people,” Nygren said. “A complete evaluation of all those needs to take place, including how you, as the guy with the buck stops with you, is made aware of the problems that exist within your system.”

The audit also found a severe problem in the system’s security that could lead to fraudulent payments to made-up employees, so LAB and the UW System will explore those weaknesses in their investigations.

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