Two University faculty members misspent and inaccurately documented more than $80,000 in federal and University grants from the U.S. Navy and the U.S. Army. The misconduct was recorded in the annual financial audit and compliance examination of the University released March 28.

Illinois Auditor General William Holland wrote in the report that the faculty members, who were related and working with three University departments, spent the $81,958 in questionable charges for hotels and travel. More than $35,000 of these expenses were paid with federal grant money.

Jim Dahlquist, administrative manager in the Office of the Auditor General, said the three departments involved were the Institute of Aviation, the Department of Psychology and the Beckman Institute for Advanced Science and Technology. The departments deferred all questions regarding the audit to University spokesperson, Thomas Hardy.

Hardy said University officials uncovered the fraudulent spending in October 2005 and informed the office of the State Auditor.

“We found the problem and we corrected it,” Hardy said. “The only reason they got away with it as long as they did is because they were related.”

Since the University performed an internal audit last year, the questionable charges have been repaid by the University to the federal agencies. One of the faculty members left the University in August and reimbursed it for $12,804. The other faculty member has since died.

Several University officials said the University cannot reveal the names of the former employees.

The University’s internal review found inappropriate expenses that included second hotel rooms for children, excessive per diems and unjustified transportation costs. The University audit, which examined charges from July 1999 through February 2005, also found duplicate billings totaling $24,948. One of the faculty members was paid $33,643 for housing without “adequate approval and support,” and both employees were paid more than what a sabbatical salary allows.

Hardy explained this was an “isolated incident,” and that the “vast majority” of spending through the University is done in full compliance. He also said this level of questionable spending and the variety of expenditures were “totally unallowable.”

Dahlquist said although it is against office policy to compare past audit findings, this situation has come up before for various universities and agencies. The Office of the Auditor will follow-up on their findings at the University.

“The cause of these inappropriate payments was an insufficient review and approval of vouchers and a lack of communication between three University departments,” Holland wrote in the report.

The report advised the University to emphasize the importance of the review and approval of vouchers to avoid inappropriate charges being paid and to improve communication between departments when faculty members are working on projects for more than one department.

“We are going to do a better job of organizing research contracts and expenditures,” Hardy said. “We are already in the process of implementing changes into our internal accounting and financial management systems.”

The University has accepted this advice and stated that the departments involved will implement procedures to identify and appropriately manage future conflicts of interest.