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Amy Dalrymple, Published October 24 2009

NDSU group refuses to pay

Two major players in the ongoing saga about the North Dakota State University president’s house have reached a stalemate over who should pay about $142,000 of cost overruns.

The state Board of Higher Education said Friday that the NDSU Development Foundation should pay for the entire house project, which totaled nearly $2.04 million.

That included $516,159 of NDSU funds that went into the project, primarily for landscaping, parking and other exterior costs.

The foundation refuses to pay.

NDSU officials and the foundation agreed early on that the university would pay for the exterior costs, and the foundation would take care of the house, said Jim Miller, the foundation’s executive director.

“The foundation did not have anything to do with the bids or the project itself as it relates to the outside,” Miller said Friday.

When board members reviewed the cost overruns in September, they were surprised to learn that university funds went into the house and expressed that the foundations should cover those costs.

On Oct. 1, the foundation committed to pay $373,855 of those costs. At that time, that was the total amount of NDSU dollars reported to be in the house project.

But the amount of NDSU money in the project continued to escalate as additional bills came in.

Foundation officials wrote in an Oct. 7 letter to President Joseph Chapman that they were “shocked” to learn that the cost had increased, at that time to $486,999.

“Under no circumstances will we pay this amount!” said the letter, signed by Ronald Olson, president of the foundation, and John Q. Paulsen, a foundation trustee.

During a meeting Friday morning, members of the higher education board voted unanimously that no university money be spent on houses at NDSU or at the University of North Dakota.

Chancellor Bill Goetz said the board has taken a strong stance that the homes should be funded with private dollars.

“They have in essence charged the foundation with the responsibility of paying that amount,” Goetz said.

The board, however, does not have oversight of the foundation, which is the private, nonprofit fundraising arm for NDSU.

Late Friday, the NDSU foundation sent a letter to Chapman and Goetz reiterating its stance that it will not pay more than the $373,855 previously committed.

The letter said those funds came from the liquidation of an account that was established by a donor for the operation of the foundation. But the foundation does not have additional funds to pay for the house.

“ … We will not utilize unrestricted gifts for a project which we believe does not directly benefit the students, faculty and staff of NDSU,” stated the letter, signed by Olson.

The remaining amount to be paid is $142,304.

NDSU officials do not know what happens next, said spokeswoman Najla Amundson.

“The state board has not given us authorization to pay for what we had originally said we would pay for,” Amundson said. “So it becomes a legal issue. We can’t go against what the board has decided.”

In addition, the final cost of the house project is expected to increase slightly. At least one bill for electrical work has not been submitted to NDSU, said John Adams, vice president for finance and administration. The final amount should be known next week, he said.

Also on Friday, higher ed board members ordered a full audit of the presidents’ house projects at NDSU and the University of North Dakota, and amended some policies to make building projects more transparent in the future.

The board also authorized the spending on the houses that exceeded $900,000. Both universities now need to seek approval from the Legislature’s Budget Section.

The institutional money in the NDSU house project did not come from tuition. It was from parking revenue, interest income, auxiliary revenue and Coke/Pepsi commissions.


Readers can reach Forum reporter Amy Dalrymple at (701) 241-5590