The $70 million endowment transfer UA's foundation told donors would boost the university's cash position was left out of the discussion of cash projections UA gave its governing board, a state audit found.

Auditor General Lindsey Perry released the finding as part of a broader sunset review of the Arizona Board of Regents on Aug. 26. The audit found ABOR did not fully carry out its own financial oversight policies for Arizona State University, Northern Arizona University and UA.

Sunset reviews are a routine process required by Arizona law; this is ABOR's first since June 2021, not a response to any specific complaint.

ABOR governs all three universities, which together enrolled more than 216,000 students and employed more than 31,000 faculty and staff in fiscal year 2025. The board itself is a 12-member body, including the governor and the superintendent of public instruction, supported by a staff of 39.

The audit found ABOR met several of its core duties, including how it appointed UA President Suresh Garimella in 2024. But it also failed to give board members complete financial information on the universities, and lacked an escalation process for collecting more than $2.7 million in defaulted teacher scholarship repayments. Auditors made 15 recommendations in all.

"The endowment transfer was factored into the University of Arizona’s budget presentation to ABOR," said UA spokesman Nick Prevenas. "In addition to the transfer, our increase in projected days of cash on hand is driven by a combination of reduced spending and revenue enhancement."

In its written response, ABOR agreed with the "spirit" of all 15 recommendations and said it would implement each one, in some cases through what it called alternative approaches.

“ABOR and our universities help shape Arizona's future through our students and workforce. We take that responsibility seriously and welcome oversight that helps us do better,” ABOR spokeswoman Megan Gilbertson said in a separate statement. “The Arizona Auditor General identified eight areas for improvement, and we are already putting those recommendations into action. Continuous improvement is part of how we operate and the board’s focus remains on making sure Arizona's public universities are managed effectively and continue to meet the needs of our state."

The $70 million question

Tucson Spotlight reported in June that UA's foundation told donors the $70 million transfer would help the university meet cash-on-hand targets set by the Board.

The audit confirms the while transfer was included in the projections presented to the board, it was not part of the discussion that same month. Neither the May nor June board meetings included any public discussion of it.

ABOR said the transfer was included in UA's budget submission to board staff but wasn't discussed out in the public board presentation.

"This information was detailed in the university's budget submission to the board office, but was not specifically highlighted in the board meeting presentation," Gilbertson told Tucson Spotlight, adding the board will require quarterly reports to include explicit summaries going forward.

The audit also flagged the cash projection the UA gave the Board in June as unexplained. The university projected its days cash on hand would rise six days by the end of fiscal year 2027, after rising just one day total over the two previous fiscal years combined. ABOR's own policy requires an explanation for fluctuations like that. Auditors said they didn't get one.

Tucson Spotlight previously reported that UA's Board-reported days cash on hand stood at approximately 78, roughly half of ABOR's 140-day minimum, and that S&P Global Ratings has warned a weakening cash position could jeopardize UA's credit outlook.

How UA got here

The gaps auditors found trace back to UA's approximately $177 million fiscal year 2024 budget shortfall. UA told the Board in June 2023 it expected to end the year with 152 days of cash on hand, nine more than required.

Five months later, the university reported it was facing financial challenges, and by February 2024, ABOR put the shortfall at roughly $177 million. UA hired a new chief financial officer, froze hiring and compensation for the rest of the year, and President Robert C. Robbins resigned later in 2024.

That shortfall led ABOR to revise its financial oversight policy in April 2024, requiring universities to report actual cash on hand, not just projections, within 40 days of each quarter's end, and to undergo a rotating annual review of business practices.

Auditors found ABOR didn't follow through at all. Zero of the six quarterly reports reviewed included actual days cash on hand or historical cash balances, despite the policy requiring both.

ABOR staff said they stopped enforcing that requirement, reasoning that point-in-time balances can mislead without context, and switched to reporting only projected year-end figures, without getting the Board's sign-off on the change. A fiscal year 2025 fourth-quarter report didn’t arrive on schedule either; the data was folded into the next quarter's report and came in more than three months late.

ABOR's first annual business process review, of UA in May 2026, also fell short. Auditors found no evidence the review team interviewed UA staff or requested documentation to validate the university's self-reported practices, and the Board never got a final summary identifying specific improvements UA should make.

ABOR agreed in its response that its financial reporting practices "did not strictly align" with its own policy and said the Board plans final approval of revised policy language in October. Starting with the first quarter of fiscal year 2027, ABOR said it will require universities to document the methodology behind their cash projections, though it cautioned that projections "cannot be fully validated against a fixed external standard."

On the business process review, ABOR agreed its first review "did not generate sufficient written artifacts" to confirm compliance, but defended the review's substance and said it intends to continue running it as a collaborative "practitioner workshop" rather than adopt the more formal interviews and validation steps auditors recommended.

"In the Board's view, this policy is designed to foster collaboration among university financial leaders and facilitate the exchange of best practices and operational improvements," Gilbertson said. "Auditing functions and data oversight are addressed through other Board and university processes."

Other findings

The audit also noted ABOR did not have a process for escalating defaulted Arizona Teachers Academy scholarship repayments. More than $1.4 million of $2.7 million in defaults dating back to 2020, owed by 290 of 1,253 flagged recipients, was sent to outside collections but not escalated the Arizona Attorney General's Office.

ABOR built a formal escalation process in May 2026, during the audit.

Separately, ABOR's fiscal year 2025 annual report on the Teachers Academy program omitted five of 11 statutorily required metrics, including how many recipients had defaulted, and its Technology and Research Initiative Fund report left out required details on roughly $65 million in awards.

ABOR's 2022 university cost study, required every five years, also skipped required breakdowns of administrative and marginal costs, which ABOR said would be too costly to calculate under its current systems.

The Auditor General’s office plans to follow up in six months to check on the Board's progress.

Tucson Spotlight has several records requests pending with the UA seeking communications about the endowment transfer, the bond financing behind UA's Phoenix research building and the dollar amounts transferred from the foundation to the university in July and August.

Caitlin Schmidt is editor and publisher of Tucson Spotlight.

Tucson Spotlight is a community-based newsroom that provides paid opportunities for students and rising journalists in Southern Arizona. Please consider supporting our work with a tax-deductible donation.