Mike Nowatzki, Published October 16 2009
DOCUMENTS DETAIL NDSU PRESIDENT'S HOUSE COSTSIt doesn’t explicitly say any laws were broken, but a report by the North Dakota University System’s attorney – dated the same day North Dakota State University President Joseph Chapman resigned – implies NDSU and University of North Dakota officials broke the rules when overspending on new presidents’ homes.
Also, in an eight-page explanation by the head of the NDSU Development Foundation, there’s plenty of blame to go around for the final cost of NDSU’s president’s house more than doubling the $900,000 limit approved by the state Board of Higher Education.
“In any event, the Foundation accepts responsibility for the size of the house and the cost overruns associated with the house,” wrote foundation Executive Director Jim Miller.
“No one individual can be pointed out as causing the cost overruns as a whole,” he added.
The two documents are in the agenda packet for today’s meetings of the board’s Budget, Audit and Finance Committee. Members will discuss whether to authorize the cost overruns and consider a more detailed policy for approving such projects.
Chapman plans to attend.
According to Miller’s explanation:
- Project architect Terry Stroh said the NDSU house would take at least 18 months to build, starting in July 2008.
But Chapman and his wife, Gale, pressured Stroh to finish it in 11 months, which Miller described as “an unrealistic goal.”
“This pressure then caused mechanisms typically designed to control costs to be ignored,” Miller wrote.
- Because the project was put on the “fast track,” Stroh was forced to start construction before a final budget was prepared and firm prices were secured for materials and services.
The subcommittee that was supposed to design the house and oversee its construction – which included Gale Chapman – often didn’t receive copies of contracts until after the work was done and billed.
“Change orders were handled by Mr. Stroh due to the time crunch,” Miller wrote, later adding, “Some of the larger changes were verbally approved by the subcommittee.”
The addition of a 1,210-square-foot “bonus room” above the garage also added $120,000 to the cost of the project.
- When the five-person subcommittee finally received a budget from Stroh in December 2008, they were “shocked” to learn it was nearly $1.3 million, wrote Miller, an ex-officio member of the group.
Members discussed ways to cut the budget, but the project was too far along to make substantial cuts, so the foundation’s board of trustees was contacted for additional fundraising, Miller wrote.
“The committee would acknowledge that it had as much responsibility for the cost of the project as anyone else,” Miller wrote.
At the request of Jon Backes, chairman of the board panel that meets today, University System attorney Pat Seaworth wrote a six-page review of whether policies were followed in construction of the homes.
On the first page, he laid responsibility for the projects squarely at the feet of the universities’ leaders.
“Institution presidents are responsible for all institution affairs, including management and expenditure of institution funds, within budgetary or other limitations imposed by law or by the (board),” he wrote.
The board and the Legislature’s Budget Section gave NDSU and UND permission to accept new houses built by their respective foundations, each at a cost of $900,000.
Referring to Miller’s explanation, Seaworth wrote: “The committee decided to proceed with a design they knew would cost more than $900,000.”
The actual cost for NDSU’s house, including furniture and appliances, was $2,039,522, not including $372,355 in donated services for architectural design, construction management, site preparation, construction and landscape architect services.
The total for UND’s home was nearly $1.2 million.
Both universities spent “institutional” funds on the projects, but they didn’t receive the required board approval to do so, or to change or expand the projects, Seaworth wrote.
More than $570,000 of NDSU funds went into the project. That includes about $60,000 in costs related to moving, storage and temporary housing.
The funds came from interest income, auxiliary revenues and Coke/Pepsi commissions, according to a document detailing the project.
The foundation, funded with private donations, was under the belief that all it had to pay for was the house itself, and that NDSU was going to pay for the outside work, Miller wrote. The foundation has since agreed to pay for up to $373,855 for the outside work, he wrote.
Neither Joseph Chapman nor Charles Kupchella, UND’s president at the time of construction, let the board or system Chancellor Bill Goetz know about the cost overruns or spending of institutional dollars, Seaworth noted.
He also cited a section of state law that says a state agency or institution “may not significantly change or expand a public improvement” beyond what’s been approved by the Legislature or its Budget Section.
“It is not clear why, or under whose direction or on what authority, officers at both NDSU and UND decided to spend institution funds on ‘exterior’ costs for these projects,” he wrote.
Chapman had not seen Seaworth’s report as of Thursday afternoon, said NDSU spokeswoman Najla Amundson.
In his resignation letter, Chapman urged the board to commission a comprehensive and independent audit of the house project.
“There’s been so many unsubstantiated rumors and innuendos and contrivances after the fact,” Chapman said in an interview Thursday. “It seemed to me that in order to get to the bottom of this for the sake of the institution and all associated with it, we need a thorough and fair review.”
Stroh did not return a message left on his cell phone Thursday.
NDSU president’s house committee
A group called the University Center Committee was charged with directing the process of creating the on-campus president’s house and making it “an intimate, warm and inviting guest entertainment venue.” A subcommittee of this group also was formed to work with the architect on a final floor plan and further oversee construction and design.
Members of the committee, according to an Oct. 9 memo from the NDSU Development Foundation to the state Board of Higher Education:
- Sherri Schmidt, associate executive director of the NDSU Alumni Association.*
- Gale Chapman, President Joseph Chapman’s wife.*
- Cathy Backer, Chapman’s assistant.*
- Bruce Frantz, NDSU Facilities Management director.*
- James Miller, executive director of the NDSU Development Foundation and Alumni Center.*
- Joanne Warner, alumni board member.
- Tom Dawson, community volunteer.*
- Susie Freeman, trustee of the NDSU Development Foundation.
- Ron Olson, vice president and trustee of the NDSU Development Foundation.
- Steve Swiontek, treasurer of the NDSU Development Foundation.
- Richard Kloubec, trustee of the NDSU Development Foundation.
- Keith Bjerke, ex officio, vice president, university relations.
- Frank Jennings, ex officio, foundation president, board of trustees.
* also a member of the subcommittee
Forum reporter Amy Dalrymple contributed to this report
Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528