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.

  2016 Athletics Finance Operations Internal Audit Report - University of Minnesota 

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

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.”

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.”

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.

Excerpts from the Star-Tribune article:

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.”

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

For the Record: Signatories to “University of Minnesota research lapses show self-reform is failing," Minneapolis Star Tribune, February 18, 2016

Professor Carl Elliott has kindly provided me a copy of his article (with professor Matt Lamkin, U Tulsa Law School) which appeared in the Star-Tribune recently. 

Another year, another day, another damning indictment of the University of Minnesota’s Department of Psychiatry. If anyone was surprised by last week’s blistering assessment of psychiatric research at the university (“New lapses in U psych studies,” Feb. 12), they probably weren’t paying attention to the previous five. Those reviews found evidence of coerced study recruitment, troubling conflicts of interest, shoddy scientific review, deep mistrust of U leaders, and a climate of fear and intimidation in the Psychiatry Department. The difference with this latest review is that it comes nearly a year after U leaders solemnly promised the people of Minnesota that they were finally going to clean up the mess. 

For more than a decade, U leaders brushed aside revelations that their Psychiatry Department was mistreating vulnerable patients, including Dan Markingson, a mentally ill young man under a civil commitment order who killed himself while in a U drug study. Last year, the state’s legislative auditor released a scathing report that not only confirmed these research abuses, but laid bare the U’s strategy for avoiding responsibility for its misdeeds. U leaders “have made misleading statements about previous reviews and been consistently unwilling to discuss or even acknowledge that serious ethical issues and conflicts are involved,” the legislative auditor wrote. “This insular and inaccurate response has seriously harmed the University of Minnesota’s credibility and reputation.”

This latest debacle shows the administration falling back on the same old playbook. When Jan Dugas, the external consultant hired by the U, reported alarming problems in Psychiatry Department studies, the acting department chair responded, “This is nothing new; it happens all over the university.” On two occasions, Dugas said, she was intimidated and “verbally abused” by department faculty members. The director of the Human Research Protection Program refused to let Dugas see study records.

When Dugas uncovered more than 40 “critical or major” safety problems, legal violations and incidents of unethical conduct in just three weeks, officials abruptly pulled the plug on her investigation, saying it was no longer necessary. Leaders of the Clinical and Translational Science Institute told her “not to write a report” of her findings. When she was finally allowed to produce a report, she was told that no one else would be allowed to see it. U officials kept the report on ice for more than a month, stonewalling open-records requests while they prepared to spin its findings (now conveniently relabeled “allegations”). It is not clear when the report would have been released had it not been leaked to the news media last week. At that point, U President Eric Kaler explained: “We wanted to clarify the record before we released the report.”

It is understandable why U leaders did not want anyone to see the report. Research in the Psychiatry Department is portrayed as a dangerous, disorganized mess: unlicensed study personnel operating MRI and TMS machines; children approached for research studies without the permission of their parents; urine specimens collected from patients in fast-food restaurants and coffee shops.

Last summer, only two months after U leaders announced a reform plan they called “Markingson’s legacy,” a faculty member in the Psychiatry Department was found to have forged federal research documents. Now we learn that research personnel admitted to altering study documents when they prepared for audits. “We go behind the scenes and fix things up,” one interviewee said. “What people don’t know won’t hurt them.”

The response of U leaders has been utterly predictable. Just as before, they have disputed the consultant’s findings, minimized the significance of the report, and cloaked their response in a bureaucratic fog of euphemism and circumlocution. But no amount of double talk can hide the report’s main conclusion: “Practices in the Department of Psychiatry demonstrate a profound lack of knowledge about how to conduct clinical research and an intentional lack of adherence to requirements.”

This latest fiasco makes clear that the pathology at the University of Minnesota lies not just in the Department of Psychiatry, but in an administration whose overriding goal is to avoid accountability. The Board of Regents has responded to this latest scandal exactly as it has responded to all of the others — with a shrug. The U’s dysfunctional culture can’t be reformed by the same people who created and sustained it over so many years. The question now is: when will the Legislature bring the U’s leadership to heel?

Matt Lamkin is a professor at the University of Tulsa College of Law. Carl Elliott is a professor at the Center for Bioethics at the University of Minnesota. The views expressed here are their own. This article was submitted on behalf of a group of 83 University of Minnesota alumni and scholars in health law, bioethics, psychiatry and medicine.

Signatories to “University of Minnesota research lapses show self-reform is failing,” Minneapolis Star Trib... by MarkingsonCase

For the Record: Chad Hartman talks with Former Gov Arne Carlson on WCCO. Carlson is critical of the U of M President & Regents.

The original posting - see above - contains about twice the material where Governor Carlson was interviewed.

The full link to the above page is here.  

The video below contains only the relevant discussion between Carlson and Hartman:

For the Record: Latest report documenting noncompliance in psychiatric clinical research at the University of Minnesota

Selected Examples:

See below for further examples.  Appendix B is missing but I am trying to locate it. 

  UMinnesotaAssesmentReport 12-31-2015

Tone Deaf at the U of M?

Rising Temperature

As a result of all this, we now have a reading of the American political temperature.  What we've learned is that it's burning a lot hotter at the grass roots than either party's leadership seems capable of understanding.

The Talk of the Town at p. 35 of the February 8, 2016 issue of The New Yorker magazine.

I'm not going to tell [my children] that college will eventually become affordable without a political revolution to change this ghastly situation. . . . I'm not because it's delusional to believe otherwise.

Letter to the Editor in the February 5, 2016 issue of the Star Tribune.

The high tuition high financial aid experiment has failed a vast  majority of students and their parents.  In 2014 65% of U of M graduates had student debt.  The median debt was $24,728.  Then there is the unconscionable economic burden placed on students in the professional schools.  In 2014 88% of the graduates from the U of M professional schools had student loan debt.  The median debt was $152,793.  See pp. 15, 21 of the October 2015 Minnesota Higher Education Report on Cumulative Student Loan Debt in Minnesota.

Tone deaf remarks about student loan debt ("less than a new car") by the U of M president and the 2014 chair of the Board of Regents demonstrate a failure to acknowledge the overall cost of a college education and a remarkable lack of empathy for the students and parents struggling to pay that cost. 

The senior administrators and the Regents responsible for a decade of skyrocketing tuition in 2002--2012 never had to deal with that financial burden when they were starting their careers and their families after graduation.  How much different would their lives have been if they had been shackled by student debt?

Just as the Wall Street bankers created a housing bubble using other people's money, the senior administrators and the Regents at the U of M have created a higher education bubble using both student loan debt and institutional debt.  When this budget balloon bursts, the senior administrators and the Regents 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 (or even decades for many students in the professional schools).  And the citizens of Minnesota will pick up the tab for the huge institutional debt.   


Michael W. McNabb

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

University of Minnesota Alumni Association life member

Another Fast Shuffle at the University of Minnesota? "Driven to M Health"

Driven to M Health?

On October 9, 2015 the Regents approved a non-binding letter of intent to explore combining University of Minnesota Physicians and Fairview Health Systems into an integrated health system to be called M Health.  The letter of intent provides for Definitive Agreements to be reached by March 2016.  See pp. 63-64 of the Dec 2015 AUD Docket. 

On November 3, 2015 President Kaler sent a letter to four Regents requesting emergency approval to retain Deloitte & Touche LLP to provide consulting services for the proposed integration.  The fees and expenses are estimated at $1,500,000.  The rate is apparently three times the normal rate charged by Deloitte for its separate services as the external auditor for the U of M. The contract with Deloitte will be executed by the U of M General Counsel in order to "preserve attorney client privilege for the work product."  See pp. 61, 63-64 of the Dec 2015 AUD Docket. 

On November 3, 2015 Kaler also sent a letter to three Regents requesting emergency approval to retain Clifton Larson Allen LLP to "facilitate" the process necessary to effectively reach the Definitive Agreements by March 2016.  The fees and expenses are estimated at $425,000.  See p. 67 of the Dec 2015 AUD Docket. 

 
On November 12, 2015 Brian Steeves, the executive director of the Board of Regents, informed Kaler by letter that emergency approval had been granted.  See pp. 60, 66 of the Dec 2015 AUD Docket 

University policy authorizes emergency approval when delay in obtaining approval poses a significant health, safety or financial risk to the University.  See p. 61 of the Dec 2015 AUD Docket. 

This process raises several questions: 

(1)  Is there an emergency regarding the proposed integration?  If so, was the emergency created by the administration itself in setting March 2016 as the date to execute the Definitive Agreements?  Is this yet another example of the failure of the Regents to provide effective oversight of significant decisions of the administration? 

(2)  Has the process been engineered to produce the result desired by the administration?  If so, why spend $1.9 million on consulting services?  If not, why has the administration already launched an advertising blitz on local television stations and newspapers for M Health?  And how much is the administration spending on the advertising campaign? 

(3)  How can Deloitte maintain independence when it serves as both an external auditor and as a consultant for multi-million dollar University projects?  How effective will Deloitte be as a watchdog (external auditor) of the decisions of the administration when at the same time it seeks large fees from the administration for consulting services?  How many questions  will Deloitte raise as a consultant about the proposed integration when it wants to maintain a lucrative contract to serve as the external auditor and when the administration has already given clear signals that it wants the integration to be accomplished as soon as possible?           

(4)  Why is the administration apparently attempting to prevent disclosure of the terms of the contract with Deloitte by having the General Counsel execute the contract?  How does the administration think that the attorney client privilege prevents disclosure of the terms of the contract (as opposed to any advice it may receive from the General Counsel)?  How does the administration think that the work product doctrine prevents disclosure of the terms of the contract?  (The work product doctrine protects material that has been prepared by the attorney or the client in anticipation of litigation.) 

(5)  Is spending by the U of M administration on outside consultants out of control?  In fiscal year 2015 the administration spent $66,123,000 on administrative consulting and professional services.  Why is this necessary when the U of M has well qualified professors in virtually every field of endeavor and highly paid senior administrators? 

Michael W. McNabb

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

University of Minnesota Alumni Association life member

For the Record: State Legislator responds to Star-Tribune editorial about U of M non-resident Tuition

link

From today's Star-Tribune



Editorial counterpoint: Moving all U tuition to the Big Ten midpoint is best

Move would be fairer to Minnesotans, align with labor and enrollment trends. 

By Bob Barrett

While I appreciate the Star Tribune Editorial Board’s attention to the very important issue of nonresident college tuition (“Don’t weaken U’s role in drawing talent,” Dec. 22), readers would benefit from a closer examination of all the facts.
Foremost, tuition for Minnesota residents attending the University of Minnesota in the Twin Cities is too high. High school seniors from Chisago Lakes, North Branch or St. Paul Central have to pay 32 percent more to become a Gopher than a Wisconsin high schooler currently pays to become a Badger and 70 percent more than an Iowa student pays to become a Hawkeye.

With student debt by all Minnesota college students fifth-highest in the country, this problem cannot continue to be ignored by U leadership and needs to be fixed immediately. There is absolutely no reason to minimize the value of a University of Minnesota degree and penalize in-state students by charging nonresidents $8,000 less than the Big Ten average.

Second, tuition rates charged to nonresidents are at the absolute bottom of the Big Ten. I appreciate university President Eric Kaler responding to the feedback from me and from other legislators who believe this to be an opportunity for improvement. Each year, there’s a waiting list of qualified Minnesota students who are turned away — let’s help those kids instead of worrying about kids from other states.

By moving tuition to the middle of the Big Ten for out-of-state students, we can use these resources to ensure a better deal for Minnesota residents, lower their student debt and put a quality University of Minnesota education in reach for potentially thousands of middle- and lower-income Minnesota families.
Minnesotans support the U with their hard-earned tax dollars each year and should receive the best possible deal when they send their students to our flagship institution of higher learning.

Raising out-of-state tuition could reduce resident tuition by more than $3,000 per year. What a great thing this would be for the Minnesota students and families, and what a positive message it would send to other universities across the country about how U leadership is putting their students first.

Too many news articles from this year have portrayed the University of Minnesota in a bad light. Reducing resident tuition is not only right but would give the U the positivity it needs right now.

Now, to address specifically some of the points made by the Editorial Board:

The editorial stated that “the share of undergrads from Minnesota” has not diminished with the recent increase in nonresidents.

According to U documents, resident undergraduate enrollment has declined at the Twin Cities campus even though there is a waiting list of Minnesota high school seniors. In fact, even though taxpayers from every county in Minnesota contribute their tax dollars to the U, enrollment of students in well more than half of the counties has declined at the Twin Cities campus. The U should be an institution that focuses on being a destination school for Minnesota students first, rather than catering to students from out of state.

The Editorial Board also voiced concern about a future labor shortage in Minnesota, which it feels would be worsened by raising nonresident tuition to the midpoint of the Big Ten.

A closer look at the facts shows that labor studies are actually projecting a glut of college-educated workers (http://tinyurl.com/z8moohk). Minnesota’s projected labor shortage is in jobs requiring a high school degree or less. Instead of concentrating on nonresidents to fill a job void, our colleges should be doing more to graduate students in majors that are marketable, and working to keep them here in Minnesota after graduation.

It’s been my experience that some solutions proposed by government leaders are very elaborate and too complex. This one is very simple. The University of Minnesota should bring both resident and nonresident tuition to the midpoint of the Big Ten by lowering tuition for in-state residents and raising it for out-of-state residents. It’s the reasonable thing to do.

Bob Barrett, R-Taylors Falls, is a member of the Minnesota House.

For the Record: Regent Darrin Rosha on University of Minnesota Non-Resident Tuition

The almost completely irrational cut-rate price of a University of Minnesota education to non-residents has been commented on many times before in the Periodic Table and on the Star-Tribune.

For example:

DECEMBER 30, 2012

For years, Bill Gleason, an associate professor at the U, has been arguing that the strategy causes the university to miss out on tens of millions in revenue each year -- "and that's not chump change."

 "I think it's fair to say the University of Minnesota should be charging at least the average delta in the Big Ten," Gleason said. "Why are we giving this away?"

For further background:

University of Minnesota Has Lowest Out of State Tuition for BigTen Publics
Appeared in the Star-Tribune: October 30, 2010

State Rep Blows Whistle on Out of State Tuition Give Away

On Maximizing Tuition Revenue at the University of Minnesota

And if you are really curious about the reasoning that went into the original tuition giveaway plan, please see:

What's It Going To Be at the University of Minnesota, a Medallion or a Yugo?

"Out of state (non-reciprocity) tuition is to be set at $2000 per semester higher than in state tuition. This is a cut of about $8000 per year. It will be interesting to see how much traffic this generates from out of state students. Needless to say the new rate is significantly less than out of state tuition at so-called medallion schools that the U would like to emulate."

Finally, a University of Minnesota Regent wrote in the Star-Tribune on December 24, 2015:

UNIVERSITY OF MINNESOTA TUITION

When to make it affordable and when to leave it to the market

The recent editorial “Don’t weaken U’s role in drawing talent” (Dec. 22) calls for facts to illuminate the University of Minnesota nonresident tuition discussion. I agree.

The Minnesota Territorial Constitution established the U to educate “the inhabitants of this Territory.” Minnesota residents are roughly twice as likely as nonresidents to stay in Minnesota after graduation. Minnesota’s growing population produces graduates with the highest ACT scores in the nation. The Minnesota Legislature supports the university better than virtually all our peers, yet the U’s resident tuition is among the highest in the Big Ten. Nonresident tuition is the lowest.

Tuition for Minnesota residents should be based on affordable access for rural, urban and suburban residents. Tuition for nonresidents should be market-based. If our university is equal to or better than the University of Michigan, its nonresident tuition should be doubled to the Michigan rate. As Michigan and our other peers increased their nonresident tuition, their nonresident numbers and quality actually increased.

Both DFL and Republican legislators want their constituents to have affordable access to the university. Minnesota’s business community wants a quality workforce. We all want a world-class flagship university. Aligning the university’s nonresident tuition with its peers serves all three purposes.

Darrin Rosha, Independence

The writer is a member of the University of Minnesota Board of Regents.