Earlier today, APSCUF announced the results of an independent audit of the PA State System of Higher Education (PASSHE) by the accounting firm Boyer and Ritter. The report focused on seven PASSHE universities that were targeted for retrenchment this year: Cheney, Clarion, East Stroudsburg, Edinboro, Kutztown, Mansfield, and Slippery Rock. Boyer and Ritter provided this summary of their report:
In general, there appears to be minimal accountability for budgeting at the University level with the PASSHE Board of Governors. Throughout this engagement, we were provided multiple “final” budgets generated at the University level. It is our understanding each University must submit a budget to the PASSHE Board of Governors for approval. In common practice, once an oversight board of an entity approves a budget, changes are not made without further oversight approval. Throughout this engagement, we noted various budget versions being utilized by each University. Additionally, for the years 2008/09 through 2012/13, we noted numerous discrepancies between budget and actual results. Without strict oversight of these budgets, University management should be extremely cautious when utilizing these budgets to project faculty and other personnel retrenchment in 2013/14 and forward.
The most scathing parts of the report show how PASSHE universities have been diverting money from their Education and General funds to pay off bonds for new luxury buildings through the very bond schemes Raging Chicken Press has been reporting on since early this fall. According to APSCUF’s press release the
State System of Higher Education (PASSHE) has been allowing the fourteen state-owned universities to mismanage their budgets by hiding debt in affiliated corporations, funding new construction based on questionable assumptions, and misleading the public about their financial difficulties.
APSCUF’s release of the Boyer and Ritter report follows an Inside Higher Ed article by Ry Rivard, “Wither Pennsylvania,” published yesterday on the unprecedented cuts being carried out across PA’s publicly owned universities. “Wither Pennsylvania,” brought the situation facing faculty, staff, and students to national attention, but tended to repeat a partial narrative about the the causes of PASSHE’s budget woes. Rivard correctly points out that PASSHE has experienced decades of decreased state appropriations and that recent demographic shifts have caused enrollments to drop in recent years. Missing from his story, however, is what has been missing from nearly all mainstream media accounts of PASSHE’s “budget crisis” – mismanagement and the lack of appropriate oversight of a building boon that has left universities with massive debt. As we have reported since this past summer, PASSHE universities are financing their debt on the backs of students through increasing fees and by diverting funds traditionally devoted to providing education to pay the interest on bonds used to build new luxury dorms and “beautiful buildings.” The Boyer and Ritter report shows the details in stark relief.
Raging Chicken Press has obtained a copy of the complete Boyer and Ritter report and we will be reporting more of its specific findings in the coming weeks. If you don’t want to wait, you can read the complete 164 page report right here.
Here is the full text of APSCUF’s press release on the Boyer and Ritter report:
INDEPENDENT REPORT SHOWS STATE SYSTEM
UNIVERSITIES MISMANAGE BUDGETS
HARRISBURG – Today the Association of Pennsylvania State College and University Faculties (APSCUF) released a report indicating that the State System of Higher Education (PASSHE) has been allowing the fourteen state-owned universities to mismanage their budgets by hiding debt in affiliated corporations, funding new construction based on questionable assumptions, and misleading the public about their financial difficulties.
APSCUF commissioned Boyer & Ritter, a Harrisburg-area accounting firm, to study the finances of the seven universities that claimed they needed to lay off faculty to balance their budgets: Cheyney, Clarion, East Stroudsburg, Edinboro, Kutztown, Mansfield, and Slippery Rock.
In every case, the accounting firm discovered that the university created affiliated entities or used foundations to take on debt for new construction.
“We are extremely troubled by the findings. The universities and the State System are mismanaging public dollars,” said Dr. Steve Hicks, president of APSCUF. “Every university is using a scheme to transfer debt to ‘component units,’ including the university foundations and student housing associations. Money that the public believes is dedicated to academics is instead going to these affiliates to pay for buildings.”
In many cases, the affiliated entities are taking on debt to pay for new dormitories and other lavish construction.
“Tuition, fees, and state support monies are regularly being transferred to these entities, both directly and indirectly,” Hicks stated. “The universities and the State System must be good stewards of the public dollar. Instead, their poor budgetary decisions are forcing students to double pay because universities are using both their tuition dollars and their fees to pay off debt on buildings. Our students, their families, and the public deserve to know how their money is actually being spent.”
The independent analysis of seven state-owned universities also concluded that there is a lack of oversight in State System budgeting practices.
“In terms of faculty layoffs,” Hicks pointed out, referring to the original impetus for commissioning the report, “Boyer & Ritter make it clear that the university budgets are just that – plural – and, therefore, it is hard to give credence to their budgetary claims. There are pages full of charts showing the wide divergence between the universities’ budgets and their actual collections and expenditures.”
The report states: “there appears to be minimal accountability for budgeting at the University level with the PASSHE Board of Governors.”
Hicks added, “There are no common statewide budgeting practices among the universities.”
The report also indicates that there is a demonstrable lack of quality budgeting: “in common practice once an oversight board…approves a budget, changes are not made without further oversight approval. Throughout…we noted various budget versions being utilized by each University.”
“Our universities continue to be in dire need of additional state funds, and it is clear that cuts to the system have led to some very bad decisions at universities,” Hicks commented. “We are concerned that PASSHE, the State System Board of Governors, and the individual universities’ Councils of Trustees have not exercised the fiduciary responsibility to oversee how the universities spend money.”
APSCUF has commissioned Boyer & Ritter to look at the financial statements for the other seven universities, as well.
The Association of Pennsylvania State College and University Faculties represents more than 6,000 faculty members and coaches at Pennsylvania’s 14 state-owned universities.