The IRS will conduct an audit on $130 million in bonds issued by UH for construction and renovations.
In a letter dated Dec. 6, IRS officials informed UH administration of the routine audit, which will focus on the series 2002A consolidated revenue bonds used for construction and renewal services at the University.
The audit is to ensure that the issuance of the bonds is in compliance with federal tax laws.
“The series 2002A bonds financed the construction of UH’s Science and Engineering Research Center Building and renovations to the MD Anderson Memorial Library,” Richard Bonnin, UH spokesperson said.
Bond revenue was spread across multiple projects within the UH system.
The construction of UH Clear Lake’s Student Services Building, UH Downtown’s Commerce Street Building and UH Victoria’s University West Building were also financed by the bonds.
“The majority of the bonds are Tuition Revenue Bonds,” Bonnin said.
The post issuance of the tax-exempt bonds is being investigated for compliance purposes.
The IRS is conducting an audit, not an investigation, Bonnin said.
He also stated that the audit did not come as a surprise to University administration.
In 2009, many non-profit and government bond issuers were audited in order to verify that they were compliant with laws concerning bond usage.
In 2003, annual reporting requirements on 501(c)(3) organizations were imposed in order to ensure compliance with federal laws.
“The issue is private-use activity on all bond-financed property,” Bonnin said. “We are required to accurately calculate the amount of private-use activity for each bond issue.”
Universities across the nation have been forced to use these types of bonds in order to finance projects because of budget cuts and the greater financial responsibilities the cuts force institutions to bear.
The last audit for the University occurred about 10 years ago, which had no material findings.
The bonds being audited this year were issued in September 2002.
Financial Security Inc., now Assured Guaranty Municipal Corp., insured the series 2002A bonds and the Texas Attorney General approved the transaction.
First Southwest Co. advised the deal, and it was co-counseled by Andrews & Kurth LLP, now Andrews Kurth LLP and Epstein Becker Green Wickliff & Hall PC.
