Southwestern Michigan College and the Office of the Auditor General have traded shots over one another’s bow this week following the Auditor General’s release of its findings in a months-long investigation into allegations that the college intentionally excluded part-time student employees from enrollment into the Michigan Public School Employees’ Retirement System and did not report the student employees’ wages or remit the associated retirement contributions to the Office of Retirement Services.
The Auditor General contends that the college’s failure to report the student wages or remit their retirement contributions amounts to “approximately $388,600,” but goes on to say that “if held to the full extent of existing statutory provisions, the estimated late fees and interest for the unreported wages and unremitted contributions could be as much as $10.4-million.” Those late fees and interest actually continue to accrue until they are paid.
The Auditor General also contends that SMC “falsely certified to the Office of Retirement Services on its calendar year 2011 through 2016 Reporting Authorization Certification forms that it was in full compliance,” and lays the blame at the feet of SMC President David Mathews who signed those forms.
Mathews and the SMC legal team immediately filed the second stage of its suit against the Michigan Auditor General in the Michigan Court of Appeals for its “unconstitutional conduct of a free-wheeling, unauthorized investigation of the College’s practice of not making retirement system payroll deductions and contributions for part-time student workers who will never vest in the system or collect benefits.”
The school argues that the College’s practice was “based on 2011 guidance from Michigan’s Office of Retirement Services (ORS) that non-contribution for part-time students was correct.” They further contend, “Regulations published by the public school employees’ retirement system state that retirement service credit will not be given to students in a reporting unit. Moreover, the College’s biweekly payroll reports released to the ORS since 2010 clearly disclosed to the ORS that SMC was not making retirement deductions or contributions for part-time student workers.”
Last August (2017), SMC says it was forced to sue the state in response to a mandate that required the Dowagiac-based College to enroll its part-time student workers in the state teacher’s retirement system. That mandate, says SMC President Dr. David Mathews, “is the most egregious over-reach of state government” that he has ever seen. SMC objected to the mandate because “not only does enrolling part-time student employees into a system designed for teachers not make sense, but doing so would violate federal laws prohibiting colleges from withholding taxes from federally-funded student employees’ pay.”
At the time of his original suit, Mathews said, “We try to provide students with a way to make money on campus that will help them afford to stay in school.” He also noted, “For us to take money out of their paychecks and place it into a system they will never see benefits from is wrong and not consistent with what other institutions are doing.” He also noted that full-time student employees are not required to participate in the teachers’ system, while employees in other job classifications have additional options for retirement savings.
In January, a Michigan Court of Claims judge dismissed SMC’s challenge to the OAG’s constitutional authority to conduct an open-ended investigation as Mathews characterized as being “under the guise of a so-called investigatory audit. In its arguments before the Court of Claims, the OAG stated it was not investigating SMC specifically, but examining an issue related to its audit of the Michigan Public School Employees Retirement System. However, the OAG’s recently published report focused solely on SMC and neglected to include all of the facts provided to the OAG during its investigation.”
In explaining the ongoing suit this week, Mathews says, “The Court of Appeals exists for this purpose – to reconcile differing opinions from separate state agencies as to jurisdiction and interpretations of state law.” He adds, “We certainly disagree with the OAG findings of violations, so we will continue litigation and look to the appellate courts to review the case and assess the issues.”
Mathews concluded, “This case is not about depriving students of benefits (for which they will never vest). This case is about helping part-time students to pay for their educations, not having them work to prop up a bankrupt, mismanaged retirement system at the cost of educational opportunity.”
Meanwhile, a former Dean at SMC for 11 years who is now retired but occasionally attends board meetings, isn’t buying Mathews explanation or the board’s stance. Tom Buszek of Dowagiac says the Auditor General’s report “shows that the president, Dr. David Mathews, was caught lying to the State of Michigan,” and argues, “His misconduct is costing me, and the taxpayers of Cass County, up to $10.4-million dollars.”
Buszek is concerned that the Board of Trustees will do nothing, and wants the community to be aware of the Auditor General’s findings.
You can see what the report concludes by clicking the link below for the full report filed earlier this week. Stay tuned.
https://audgen.michigan.gov/report-fraud/investigative-reports/
