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Ryan Johnson, Published July 26 2012

Shirvani: Many concerns in recent university audit are ‘common practice’

BISMARCK – Many of the issues raised in a scathing audit of how North Dakota State University and the University of North Dakota have spent student fees are simply “common practice” in higher education and not a sign of problems, North Dakota University System Chancellor Hamid Shirvani told a group of legislators Thursday.

Still, he said not all of the performance audit’s red flags should be dismissed and pledged to bring a proposal to the Board of Higher Education within three months that would streamline the fee system at the state’s 11 public institutions, raising accountability and transparency over a growing part of the cost to attend college.

“There are areas and elements in the report that much better judgment should have been exercised,” Shirvani told members of the Legislative Audit and Fiscal Review Committee.

The 82-page report, released Tuesday by the state auditor’s of-fice, found several ex-amples of “inappropriate” spending by NDSU and UND of some of the millions of dollars they collect through student fees each year. The audit also noted a general lack of transparency and accountability in how this revenue is used.

For example, an NDSU graduate school application fee covered an $11,000 first-class ticket to India for the dean for a recruiting trip, while UND used a program fee for law school students to offer 12 Norwegian exchange program scholarships that added up to $16,200.

The audit made several recommendations to address these issues and restore accountability to the system. But Audit Manager Gordy Smith said university officials disputed many of the findings, with NDSU disagreeing with nine of 11 recommendations and UND disagreeing with half of its 10 suggested changes.

NDSU President Dean Bresciani, who has worked in higher education for 30 years, said Thursday that many of the issues raised in the audit were not signs of misspending, even if they may look unusual to people outside of the system.

“I can’t even imagine coming in and looking at some of the things without understanding the complexity and the depth below,” he said. “In an initial observation, you would see something that simply isn’t the case if you understood the complexity behind it.”

Smith said universities are required to follow only “very broad,” vague guidelines established by the Board of Higher Education when deciding how to use the money. Policy 805.2, for example, says institutions can charge a mandatory fee to all students “to support activities for the benefit of the student body, including, but not limited to, debt retirement, student union operations, athletics and placement services.”

The audit’s authors questioned NDSU’s use of $5,500 from mandatory fees for homecoming hankies, as well as UND’s spending of $1,500 on Greek Life T-shirts for students and Memorial Union staff.

The legislative committee’s chairman, Rep. Dan Ruby, R-Minot, said the “generalities” of the few rules guiding student fees mean the universities believe they are appropriately using the money.

“So, can we really expect to see a lot of changes or improvements if they already feel that everything’s fine?” he asked.

Smith said the report’s concerns could be seen by some administrators as auditors simply taking a “narrow interpretation” of the few rules now on the books. But he said any problems are not just the fault of the universities, and said the Board of Higher Education should enact better guidelines for each campus to follow.

UND took in $46.6 million from mandatory fees from July 1, 2007, to Dec. 31, 2010, while NDSU collected $38.8 million. Those totals don’t include program fees, which added up to $16.5 million at NDSU and $7 million at UND during the same time. They also don’t account for course fees, application fees and other charges.

“We’re putting it out there for all the stakeholders,” Smith said. “If the universities decide not to implement a single recommendation, that’s their responsibility and they have to answer to the stakeholders, such as the Legislature or the chancellor or the public that maybe is troubled.

“Students are going into debt, or mom and dad are going into debt to pay these fees,” he said, “and one of the principles we tried to use is if you pay the fee, you should get some benefit out of it.”

Sen. Judy Lee, R-West Fargo, agreed that it’s important for all public institutions to be “accountable and responsible.” But she worried the audit’s focus on small chunks of spending in the midst of a large, complicated budget was “micromanaging at a remarkable level.”

Rep. Bob Skarphol, R-Tioga, said the audit is a good reminder that the Legislature and Board of Higher Education need to repair their “deteriorated” relationship and revisit policies to ensure the money is being spent wisely.

“I think we have an opportunity today to make significant changes in that relationship, and I think it’s going to take a real concerted effort to try to step back from that confrontation and develop a more trusting relationship and move forward,” he said.

UND President Robert Kelley pledged to use the report’s recommendations to resolve these issues and clarify campus policies. He said the university will improve its process for documenting travel expenses, require departments to file annual reports on fee cash balances, review all course and program fees over the next year and upgrade administrative staff training about managing student fees.

“We invite and respect this performance audit feedback, and UND will use it as a guide to continuously improve the university’s financial operations to better serve students and the state of North Dakota,” he said.

Shirvani said the audit overlooked some larger issues about student fees, including the fact that it is a hidden cost in attending college that may take students or parents by surprise. In the fall 2010 semester, mandatory fees accounted for 15 percent of the total cost of attending NDSU for North Dakota residents and 18 percent at UND.

Another issue, he said, is the state’s universities have been forced to rely more and more on fees to cover costs because there’s not enough state funding and the Legislature has passed laws limiting tuition increases. He said his recent proposal to double the office staff at the North Dakota University System central office in Bismarck could provide greater oversight of these fees as reforms are made.

Bresciani said the bulk of the audit’s concerns about NDSU will be addressed as the university continues its work to streamline the cost of attendance, doing away with many of the program fees now being charged to students.

Readers can reach Forum reporter Ryan Johnson at (701) 241-5587