Friday, April 28, 2017

The (Almost) Billion Dollar Administration Part II




The (Almost) Billion Dollar Administration Part II


There was some discussion about the January 26 St. Paul Pioneer Press commentary on costs of administration at the meeting of the Board of Regents on March 24, 2017.  The vice president for finance "emphasized that items in mission support are not the same as administration, referring to the cost of facilities as an example."  See p. 32 of the March 2017 BOR Docket.

The calculation of the costs of administration in the January 26 commentary does not include the cost of facilities.  See The Almost Billion Dollar Administration.    Either the vice president did not read the commentary carefully or he intentionally misled the Regents.  Neither action (or omission) is acceptable for a person in that position.

In a February 2 Pioneer Press commentary (written by the vice president) the university administration asserts that the costs of administration are less than 9% of the university budget.  See  U of M Real Administrative Costs Are Not Nearly That High.  This calculation is limited to the personnel and non-personnel expenses in the leadership and oversight category.  Even with this limitation the total amount is a staggering $289,878,000.  See line 24(f) of the Expense Summary in the Administrative Cost Benchmarking Report at p. 32 of the December 2016 FIN Docket.  (The administration did not include any dollar amounts in its February 2 commentary.)

So the administration does not include any expenses in the mission support category when counting spending on costs of administration.  But the administration does include those expenses when counting any reduction in costs of administration:

See pp.41-42 of the December 2016 FIN Docket. The administration uses words the same way as Humpty Dumpty, who said to Alice, "When I use a word, it means just what I choose it to mean--neither more nor less."

In its calculation of the costs of administration the administration omits all the expenses in the mission support category.  That category includes such items as the personnel expense of $186,944,000 for audit/finance/HR/IT/legal and the expense of $47,081,000 for administrative consulting and professional services (which is separate from the expense of $86,511,000 for consulting and professional services in the mission category).  

The rationale of the administration for omitting all the expenses in the mission support category is that these expenses assist in carrying out the direct mission activities of instruction, research, and public service.  The same may be said of the expenses in the leadership and oversight category.  But the administration acknowledges that those expenses are properly classified as costs of administration.  So the classification of an expense as a cost of administration does not depend on whether the expense assists the direct mission activities.

The issue is not whether the expenses in either the mission support category or in the leadership and oversight category assist the direct mission activities.  The issue is the amount of those expenses.

We need to start to imagine a different way to operate and to finance higher education.

The state legislature should establish a task force with members of the higher education committees, university administrators and faculty and staff members, Minnesota Office of Higher Education staff members, and informed students and parents.

The work of the task force should include an analysis of the rise in the costs of administration at the U of M over the past 40 years.  If there has been an increase in the number of administrators that is disproportionate to any increase in the number of students or research, we should ask why.  If there has been a substantial increase (in constant dollars) in the compensation of any administrator, we should ask why. 

We should also compare the compensation paid to University administrators to the compensation of senior administrators in state government who have similar qualifications and duties.  For example, the annual salary of the state commissioner of human rights is $145,000.  The annual salary of the vice president of the U of M Office for Equity & Diversity is more than 50% greater at $241,000.  

Each biennium the citizens of our state now invest more than $1 billion in the U of M in general appropriations.  With that much at stake the legislature should appoint a qualified person to monitor on a continuing basis the operations of the University and the use of state appropriations.  This legislative liaison (or watchdog) should have the responsibility to review information produced by senior administrators, to collect additional information through his or her own independent research, and to meet with all groups at the University so that the perspectives of other well-informed and thoughtful members of the University community are presented to the legislature. 

Michael W. McNabb 
University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member

Monday, August 15, 2016

University of Minnesota Athletic Accounting Part IV





Athletic Accounting Part IV


In December 2015 after the U of M internal auditor released her audit of the administration of the athletic department the president acknowledged that "this university failed to live up to the standards Minnesotans set for us and that we should demand for ourselves." See the December 10, 2015 Pioneer Press report on UMN President Kaler Promises Closer Watch on Gophers Sports Spending. The Star Tribune declared in its December 9, 2015 editorial that the audit revealed "a department whose spending excesses have undermined public trust." See Sense of Privilege at U of M Athletics Department.

Now the internal auditor has quietly released a separate audit on the operations of the athletic department. The primary conclusion is that "Athletics needs to improve their control environment with an emphasis on oversight and procedures to address contract management and business processes." See p. 3 of the June 2016 Report on Athletics Finance & Operations.

This conclusion is a bureaucratic understatement. The report describes a total of 19 "control issues" and makes 23 recommendations with six of those recommendations classified as essential to minimizing operational and compliance risks.

Here is a sample of the issues:

(1) The auditor noted "continued deficiencies" in management over a broad range of contracts, including vendor, employment, equipment, trade, facility rental, and sponsorship contracts. The auditor specifically determined that procedures are not consistently performed to verify that contract terms are being fulfilled or to use competitive bidding for contracts with a value greater than $50,000 as required by university policy. For example, the department did not use competitive bidding to select Verizon for cell phone service that cost $230,00 for a 12 month period or to select an airline for a $270,000 contract. (Athletics could not even find the Verizon contract!)

(2) Athletics alcohol management is not reconciled to Aramark alcohol cost reimbursement. In fiscal year 2015 Athletics purchased $713,000 and in fiscal year 2016 over $1 million was purchased through April 15, 2016. The auditor noted the obvious risks (p. 9):


It is prudent business practice to perform necessary reconciliations to verify University funds and assets are being accounted for. If Athletics is not performing reconciliations it cannot be sure it is recovering its alcohol purchase costs, reimbursements from Aramark are accurate, and that there was no theft. In addition, Athletics' liquor license could be at risk if appropriate due diligence is not performed.

(3) Athletics payroll processes lack regular and effective monitoring. Among other things, the auditor found that Athletics does not determine if the number of overtime hours is reasonable. The cost of this overtime is substantial: $370,000 of overtime and an additional $56,000 of holiday or double overtime in fiscal year 2016 through April.

(4) Disbursement processes are absent necessary controls. For example, in a 12 month period Athletics executed 23 contracts in violation of its own policy by failing to have the sports administrator pre-approve transactions from $2,500 to $9,999 and to have its CFO pre-approve transactions between $10,000 and $50,000.

(5) Distribution of "extras" purchased from Nike is not consistently scrutinized. Athletics purchases non-competition items for its athletes, such as winter clothing. There was an increase in Nike purchases above and beyond the complimentary allotment during fiscal year 2015 by $781,099 and for the first half of fiscal year 2016 by $889,098.

It is clear that there has been a failure to exercise effective oversight of the athletic department from the U of M president on down the line. Substantial sums have been squandered as a consequence of this failure of leadership. The athletic department has now developed a "management action plan" in response to the issues identified by the auditor.

But the plan fails to address the fundamental problem. The major revenue sports programs in our colleges have become part of the sports entertainment industry with $850,000 athletic directors, million dollar coaches, a never-ending athletic arms race, and countless scandals. See Athletic Accounting Part III.

There is a solution that would enable the University to disentangle itself from the big business of the major revenue sports while allowing the games to continue. The football and basketball teams should be organized as separate corporations. The University would grant a license to those corporations to use the University name for the teams. The license fee would be a percentage of the revenues generated from ticket sales, broadcasting rights, advertising, etc. The license fee would be used to support the non-revenue sports the University decides to retain, such as track and swimming and gymnastics.

This is a solution that would enable the sports fans (including the U of M president and most of the Regents) to continue to enjoy the games. Of much greater significance, it would enable the University to focus on education, research, and public service--the reasons for its existence.




Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974

University of Minnesota Alumni Association life member





Editors note:

The auditors report noted by the author is apparently not yet available on the Univerity of Minnesota web-site. It has been uploaded to the document server, ScribD, as referenced above. For the convenience of readers it may also be found below. Fascinating reading.


Thursday, May 26, 2016

Crumbling Infrastructure at University of Minnesota



Falling (Far) Behind

"Now, here, you see, it takes all the running you can do to keep in the same place.  If you want to get somewhere else, you must run at least twice as fast as that!"
Lewis Carroll, Through The Looking Glass (1871)


Facing a crumbling academic infrastructure, the U of M administration submitted a $300 million capital request to the state legislature this year.  The failure of the legislature to pass a bonding bill means that the administration will no longer be able to avoid the consequences of its own decades long failure to allocate sufficient funds for the maintenance of academic facilities. 

One-third of the buildings on the Twin Cities campus are rated in poor or critical condition.  See section 2 in The Management of the University Part II .  In February a University vice president acknowledged that the University should be spending twice as much as it currently spends simply to maintain the facilities in their current condition!  See p. 8 of the February 23, 2016 report of the Senate Committee on Finance & Planning.  It would cost a staggering $1 billion to bring all facilities to at least fair condition.  See section 3 in The Management of the University. 

Yet the administration continues to erect new buildings (which generate additional maintenance costs).  In February the University opened a $165 million clinics and surgery center.  The clinics had been located in the huge Phillips Wagensteen Building which is now half empty.  No one knows at this time how that space will be used or where the funds will come after the next fiscal year for the maintenance of all that vacant space (in a building that is already rated in critical condition). 

Just as the maintenance of roads and bridges is an essential responsibility of state and local governments, the maintenance of academic facilities should be a priority for a university administration.  In 2015, as the deterioration of the academic infrastructure continued, the University administration spent $80.3 million on "leadership" and $143.6 million on consulting and professional services.  See line 4(f) and line 18(b) and (d) of the 2015 Administrative Cost Benchmarking Report at p. 46 of the October 2015 FIN Docket.  University administrators and consulting firms across the country have created a variation of the military-industrial complex in higher education. 

Students and their parents do not expect that their payments of ever increasing tuition will be used to support highly paid senior administrators and outside consultants.  Nor do legislators expect that state appropriations will be used for that purpose.  We need a University administration and a Board of Regents that will allocate the substantial resources of the University for the right priorities.  

Michael W. McNabb
University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member


Monday, May 9, 2016

For the Record: More on the University of Minnesota Bioethics Center and Retirement of Dr. Steven Miles






From City Pages:


When Steven Miles, an endowed chair and full professor at the University of Minnesota’s Center for Bioethics announced his retirement last week, he humbly reflected on his many accomplishments, which include designing MinnesotaCare and investigating the U.S. military’s use of torture during the war on terror.

After 35 years, he told the Minnesota Daily that he had Voltairian dreams of quietly cultivating his garden.

Miles also left a bittersweet admonition for the U’s administration.

 Over the last 15 years, the U “has experienced a series of damaging ethics scandals including: ALG, Anafranil, GHB, INFUSE, MCL, Caremark recent issues in psychiatry and others,” he wrote. “All of these have arisen at the nexus of powerful faculty, commercial funding and advances in research. These scandals have led to government hearings, criminal trials, huge university allocations of staff time and [National Institutes of Health] sanctions.”

Meanwhile, the U slashed the Center for Bioethics’ budget year after year. Faculty who retired or resigned from the center were not replaced. Now, there are only five bioethicists on staff at what was once regarded as one of the best programs for the study of ethics in biomedical research. Ten years ago, there were three times that many.

“The University needs much more robust programming in bioethics situated proximately but independently of its research enterprise,” Miles pleaded in the letter. “The attrition of the depth and breadth of Bioethics expertise … is counter to the University’s interests.”

Miles declined to say any more about the future of bioethics at the U. But his colleague, Prof. Carl Elliott, says that while researchers in the medical school dash toward the blinding lure of lucrative new drug studies funded by Big Pharma, the Center for Bioethics has become a nuisance for the University.

Elliott admits that he and fellow bioethicist Leigh Turner have been huge nuisances for the U ever since they put up a stink over the suicide of Dan Markingson. In need of intensive treatment for his schizophrenia, Markingson was instead drafted into an experimental drug study for AstraZeneca in 2003 by his treating psychiatrist, U researcher Stephen Olson. Markingson killed himself six months into the study. The U denied responsibility for more than 10 years until the Legislative Auditor forced President Eric Kaler to reckon last year.

In the heat of that fight, the U has been punishing the Center for Bioethics, Elliott says. “The University administration has decided to starve the Bioethics Center as punishment for the sins of Leigh and me,” he says.  and investigating the U.S. military’s use of torture during the war on terror.

Miles stayed neutral about the U’s failings in the Markingson case. While doctors from all over the country urged the U to acknowledge fault, he declined to sign any petitions callings for independent investigations into the young patient’s death. He said nothing critical of the U publicly. When Kaler appeared at a press conference last spring to announce patient protection reforms at the U, Miles flanked him in support.

“I think a lot of this is not an issue that's uniquely problematic for the University of Minnesota,” Elliott says. “You can look at scandals that have happened in a lot of other places, and look at the way that the bioethics centers that are located in the institutions themselves, and generally they respond by doing very little. I think the reasons are obvious. Bioethicists realize this is not going to go well for me if I do the right thing, essentially.”

Wednesday, May 4, 2016

For the Record: Bioethicist Dr. Steven Miles to take Voltaire's advice: "We must cultivate our garden."






From the Minnesota Daily:


After almost 35 years at the University of Minnesota, Medicine Professor Dr. Steven Miles announced Sunday to medical school leaders that he plans to retire after the 2016-17 school year. 


While his peers have praised Miles’ work for human rights at the University’s Bioethics Center, some in the center say they worry they’ll continue to lose administration support following his departure.


In a letter to administrators and department heads, Miles highlighted his accomplishments at the University, including changes in patients’ end-of-life care and ending the use of restraints in nursing homes. 


He also noted his work involving short-course tuberculosis therapy in open refugee camps, writing the standard interpretation of the Hippocratic Oath and “accurately excavating United States military medicine’s complicity with torture during the war on terror,” among others. 


Miles served on the center for Victims of Torture board for several years, which CVT Executive Director Curt Goering said was an asset because of his international reputation and knowledge of medical ethics. 


“I would be hard-pressed to find someone who’s had more of an impact,” Goering said. 


In his letter, Miles pointed to the importance of the Bioethics Center in the wake of several ethical controversies at the University involving research practices. 


In the past 15 years, Miles said, these controversies have led to government hearings, criminal trials, huge University allocations of staff time and National Institutes of Health sanctions. 


“All of these have arisen at the nexus of powerful faculty, commercial funding and advances in research,” Miles wrote, adding that only one of the University’s scandals has been brought into the public light by faculty at the Bioethics Center.


The center’s long-term operations under interim and year-to-year directors, as well as the University’s denial to conduct a national search to replace faculty, has contributed to its difficulties, Miles said in the statement. 


The center’s plight has also drawn the attention of the legislative auditor’s office in the aftermath of the 2004 death of Dan Markingson, who committed suicide after being recruited into a University drug trial. 


In a report last year that raised questions about research practices at the University, auditors questioned why University officials did not include the Bioethics Center in research ethics discussions. 


“It leaves us wondering why the University of Minnesota has a Center for Bioethics when University officials will not meet with the center’s faculty to discuss the very real and important bioethical questions the Markingson case raised,” the report said.


Miles wrote that in the past decade other academic health centers “established and fortified their medical and bioethics centers,” but the University has moved in the opposite direction. 


When bioethics professor Carl Elliott came to the University in 1997, he said the Center for Bioethics was viewed as one of the best bioethics units in the world. But in the wake of multiple ethical concerns regarding the University’s research practices, faculty members now run thin. 


“Now, all that’s left is a skeleton crew.” Elliott said. “The administration has decided that the solution to 25 years of scandals in the medical school is to asphyxiate the center quietly and relentlessly, making the bioethicists so miserable that they leave. It has been a brilliant strategy.” 


Miles expressed a similar concern and wrote, “The attrition of the depth and breadth of Bioethics expertise at the AHC is counter to the University’s interests.”


Miles said he plans to spend his retirement traveling and gardening. 


“I love the University of Minnesota and am proud of, and have enjoyed, nearly 35 years on the faculty,” he said. “I just finished a chapter and am going out to garden now.”


Friday, April 8, 2016

For the Record: U of Minnesota Faculty Consultative Committee - member calls administration handling of psychiatry scandal "sickening"




From the  16 March Faculty Consultative Committee Minutes:

Members of the committee proceeded to have a very candid discussion about the issues surrounding the Department of Psychiatry, the consultant’s report and the management plan. Themes that came out of this discussion included:

• Disappointment in how the administration is handling this controversy with a member going so far as to characterize it as “sickening.”

• The alleged conduct in the Department of Psychiatry goes so far beyond the level of responsible conduct that it calls into question how the University could have recruited, trained and sustained people who would act this way. What kind of environment allowed this to happened? It would be naïve to believe this is the only place in the University where these kinds of things are occurring. How can the precursors be identified before something like this happens again?

• The administration is taking a very defensive posture/position by categorically denying allegations in the report rather than taking responsibility and being accountable. If the University is going to spend the money to hire an outside consultant, it needs to accept the findings, even when they are findings the administration does not want to hear. This speaks to the credibility of the institution, and minimizes the trust employees and students have in the institution. What can faculty do to hold the administration accountable? A number of faculty are not necessarily behind the administration. What should the faculty response be given there is so much distrust.

• The administration continues to operate in crisis and damage control mode, and fails to see the underlying issues that caused the problems in the first place, which are often structural and systemic, e.g., the environment and culture. A culture change needs to happen; it is difficult to overcome administrative practices and procedures that are in place that do not foster a culture where people feel they can speak up without being retaliated against.

• There exists a lack of consultation on the part of the administration. It is not uncommon for the administration to make important decisions without proper consultation.

• Serious misconduct can lead to federal consequences. Should certain lines of work be discontinued in order to restore the University’s reputation? There is a serious accountability problem for those on the front line and up the hierarchy as well. Violators should be subject to greater scrutiny going forward.

• The institution as a whole has a culture of non-compliance, which, at least in part, is due to a lack of institutional commitment to ensuring compliance occurs and because there are so many rules it makes it hard to get anything done. The University makes it hard to do the right thing, and easy to not do the right thing. Studies should be systematically or randomly audited. More auditors need to be hired. Taking a course on research ethics does not make a person ethical unless the person really works on ethical reasoning. 

• The administration is not forthcoming with information and gives it too late, e.g., timing of distribution of the report.

• The institution should function as one university and not the AHC and everyone else. Breaking down the boundaries will be critical if the University going to do well. 

[I thank my colleague, Carl Elliott, for calling this link to my attention.]

For the Record: University of Minnesota's new psychiatry head seeks to heal wounds with families



Dr. Sophia Vinogradov will become head of the psychiatry department in August.


In her first visit since being picked to lead the University of Minnesota’s embattled Psychiatry Department, Dr. Sophia Vinogradov spent an hour this week with a relative of Dan Markingson, who died by suicide in 2004 amid complaints that he had been coerced into a U schizophrenia drug study.

“I intend to have a full and open dialogue with every single person that I possibly can,” Vinogradov said in a phone interview Thursday after returning to the University of California-San Francisco, where she teaches in the medical school.

“I see a place [in the U] that has just incredible potential, both for me as an individual researcher who is interested in serious mental illnesses and in nonpharmacological approaches,” she said, “but also as someone who has been developing ideas and visions about where the future of psychiatry needs to go.”
On Tuesday, Vinogradov met with Mike Howard, a close friend of the Markingson family, and offered him a spot on a consumer advisory counsel intended to keep researchers honest regarding the needs and concerns of patients and their families. A similar council at the VA hospital in San Francisco has been meaningful in her work, she added.
They also discussed the possibility of an annual research ethics lecture in Markingson’s memory, according to Howard, who said he was impressed by Vinogradov’s commitment to “learn from this and never repeat the same mistakes.”

Friday, April 1, 2016

For the Record: Costs in coaching contracts are hardly where the troubles end at University of Minnesota





[The following letter appeared in the Star-Tribune today. Regular readers will recognize that the author, Mr. Michael McNabb, is a regular and valued contributor to this blog.]


UNIVERSITY OF MINNESOTA

Costs in coaching contracts are hardly where the troubles end. 
In questioning the $7 million buyout provision for the University of Minnesota basketball coach, the two newest regents refer to “a university bubble where logic doesn’t quite look the same as it does for the rest of us.” (“Change is urged on big U coaching deals,” March 31). 
This should be just the beginning of such questions. The 2015 administrative cost report includes some astounding total amounts in several general categories, such as $80.3 million for “leadership,” $77.5 million for consulting and professional services for “mission,” and $66.1 million for consulting and professional services for “mission support.” 
The March 31 issue of the Star Tribune also includes a report on student loan debt (“Tales of student debt aired at Capitol,” March 31). There is a connection here. 
Just as Wall Street bankers created a housing bubble using other people’s money, the senior administrators and the older regents have created a higher-education bubble using student loan debt. When this budget balloon bursts, they will walk away unscathed, just as the investment bankers did. The students (and their parents) will suffer harm from the student loan debt that inflated the balloon. They will be shackled with that debt for many years. 
Michael W. McNabb, Lakeville