An internal audit found “insufficient” oversight of funds received by University of Houston departments from the University of Houston Foundation. It also found that the foundation failed to maintain documentation verifying that students who were provided scholarships met necessary criteria.
The University of Houston System Internal Auditing Department conducted the audit. Chief Audit Executive Phillip Hurd briskly mentioned it to system regents during their Thursday meeting. “While we did find a few issues, management is addressing them,” he said.
The audit itself provided more details. Auditors tested transfers from the foundation to the university in fiscal years 2023 and 2024. Of the more than $9 million transferred during this time, 75 percent was directly sent to university departments. Auditors wrote that upon receipt, these departments bear responsibility for ensuring money is spent according to donor-restricted criteria.
Auditors “found numerous instances where supporting documentation did not provide reasonable assurance” these payments were appropriate, adding that “some expenditures appeared questionable.” The audit also found that university departments did not manage foundation funds with the same diligence as their own.
Auditors identified issues such as a lack of details provided for travel-related expenses and “travel/resort related expenses with unclear business purposes.” They also found that university departments would not provide adequate post-spending documentation for funding received from the foundation in advance.
“[University of Houston System] policies and procedures do not clearly require the same level of fiduciary oversight for funds originating from the Foundation as funds managed directly within UH,” auditors wrote. They also noted that the foundation’s review of such requests from UH departments is limited to confirming the funds are available and verifying the request is authorized.
Regarding scholarships, auditors investigated roughly $163,000 (3 percent) of the more than $6 million in scholarships the foundation disbursed in fiscal years 2023 and 2024. They found that the foundation did not maintain “adequate documentation … to demonstrate that recipients met the established criteria” for 88 percent of that $163,000.
Source: University of Houston Internal Auditing Department Report to the Audit and Compliance Committee of the UHS Board of Regents
AR2026-07
Funds highlighted in orange had “inadequate documentation.”
The University of Houston Foundation is an independent nonprofit that supports the University of Houston System and its three campuses. Donations to the foundation often include restrictions specifying how the funds may be used. “Each foundation, as the legal recipient and steward of those gifts, is responsible for ensuring donor intent is honored and for maintaining appropriate records for donor reporting,” auditors wrote.
Auditors offered several recommendations, including changing UH System policy to require the same controls on donor-restricted funds as others, strengthening oversight, and training departments on proper handling of donor-restricted funds.
Auditors also recommended that the UH Foundation increase documentation standards.
Foundation management defended itself. “UHF has always required all requests to provide supporting documentation that demonstrates compliance with donor restrictions,” management stated in the audit. “Higher-level signature authority is required. If that is not provided, the payment request is denied.”
Auditors noted that if these problems are not resolved, it “could lead to a loss of future funding.” The estimated completion date for recommended changes is December 31, 2026.
“The UH System is reviewing its policies that pertain to foundations and will make changes where necessary,” UHS told Texas Scorecard. “We are working closely with our foundations to strengthen oversight and ensure all controls are both appropriate and effective.”
Even though it is an independent nonprofit, UH System regents can revoke UHF’s approved status as one of its “support organizations” if the system finds it is not in compliance. UHF regularly provides UHS with audited financial reports.
The University of Houston System, which oversees three institutions, is governed by a board of regents appointed by the governor and confirmed by the Texas Senate.
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