University of Missouri System payments to top officials questioned by state auditor

About $1.2 million in incentive payments made to top executives and administrators in the University of Missouri System appear to have violated the state constitution, according to results of a Missouri state audit released Monday.

The report, from Missouri State Auditor Nicole Galloway, said those payments were made in 2015, 2016 and 2017 and approved by either the board of curators or Missouri’s system president.

“Incentive payments were made without a formalized and clearly defined process of how the additional compensation was to be earned, giving the appearance of year-end bonuses, which are a violation of the Missouri Constitution,” the audit report said.

Most of the payments, plus roughly $60,000 in retention bonuses, were paid to administrators “without formal Board of Curators’ approval of the individual amounts,” the audit report said.

“Administrators appear to have forgotten that the system is a public institution, and that they are accountable to taxpayers, students and families,” Galloway said in a statement following the audit’s release.

Gov. Eric Greitens also scolded the university system in a statement he posted on Facebook Monday afternoon. “We can’t and won’t ask students and families to pay more so that university administrators can get raises and bonuses that they haven’t earned,” his statement said.

“Here’s the deal: Top University of Missouri leaders (anyone with dean, president, chancellor, provost, director, chief, and chair in their job titles) already get more than $62 million in combined annual salary,” Greitens’ post read.

“Salaries of those upper-level leaders jumped $4 million between 2015 and 2016. So when they say that students should have to pay more, I don’t buy it.”

Greitens, who said he’s meeting Tuesday with leaders of several major universities across Missouri, added he believes that “when budgets are tight, leaders make sacrifices, not students and families.”

University officials had a different take on what the state’s audit revealed.

A university news release said the findings “confirmed that the UM System follows sound business practices and accounting standards in its operation.” The statement also said the audit identified “no significant deficiencies in internal controls.”

John Fougere, system spokesman said, “You have to look at the big picture. The university’s four-campus system is vast, a $3.2 billion enterprise,” yet concerns targeted in the audit report were confined primarily to the executive compensation area.

In a statement, system President Mun Choi said, “Our executive compensation program is critical to our capacity to attract and retain top leaders in what is an extremely competitive national higher education market.”

Fougere noted that on the very day the audit was released, the system lost yet another top executive to a more competitive offer from another institution. Missouri University of Science and Technology in Rolla announced Monday that Chancellor Cheryl Schrader was leaving to be president of Wright State University in Dayton, Ohio.

Earlier this academic year, the CEO of MU Health Care, Mitch Wasden, announced he was leaving MU to become CEO and executive vice president of Oregon Health & Science University. “The UM System also similarly lost three other vice presidents who left for more competitive offers elsewhere,” Fougere said.

The audit report comes at a time when the university system is facing a proposed $40.4 million cut from its state appropriation for this fiscal year, which ends June 30. That proposed cut recommended by Greitens adds to financial woes the university has been experiencing.

The state review covered the board of curators and the UM System administration but did not include operations of the individual campuses.

Overall, the university system was given a grade of “fair” in the audit report, which was the result of an eight-month review of various areas of operations. A fair grade — one step above poor on the four-point grading scale — means system operations need improvement in some areas and that certain areas require immediate attention.

“The UM System strives to be more accountable and transparent in its stewardship of public resources,” Choi said. “We will use the audit report to continue improving our business processes and our operations.” The audit occurred before Choi officially assumed his job at the start of March.

Choi replaced interim system President Mike Middleton, who took over after former President Tim Wolfe was forced to resign in November 2015. The Wolfe resignation followed a series of racially charged student protests on the Columbia campus. The protests and the resignations soiled the university’s reputation and prompted some state lawmakers to call for its state funding to be cut.

Among other problems pointed out in the audit are what appear to be excessive vehicle allowances paid to UM System executives, and the position and salary given to former University of Missouri Chancellor R. Bowen Loftin. He resigned from the Columbia campus in November 2015 following the campus unrest that led to Wolfe’s resignation.

“A total of approximately $407,000 in vehicle allowance payments were made to an average of 15 top executive and administrative positions during the 2015 and 2016 fiscal years,” the audit said.

After resigning as chancellor, Loftin “continued to receive his chancellor salary over the following six months, though he had no job title and no official responsibilities,” the audit says

In May 2016, Loftin became the director of national security research development at MU, a position created by Wolfe. In that position, Loftin’s $344,250 pay — representing 75 percent of his chancellor’s salary — was “significantly higher than other research administrators,” according to the report.

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Moreover, the audit reveals that Loftin was allowed to keep additional compensation not required by his original contract, and was granted developmental leave to spend the remainder of the year traveling “with no clear objectives or deliverables required during this time,” all while receiving his salary, an additional $50,000 travel budget, a $15,560 vehicle allowance and $35,000 annual stipend.

The audit report says that because the university’s incentive program and other nonsalary compensations are not included in publicly available records, transparency is eroded.

“Whatever we decide to pay our administrators, we should be as transparent about their compensation as we are for faculty and staff,” said Ben Trachtenberg, an associate law professor and chairman of the MU Faculty Council on University Policy.

University officials maintain that the system followed provisions outlined in Loftin’s original contract when he was appointed chancellor.

As director of national security research development, a position Loftin still holds, he has been connecting with researchers across the system’s four campuses in Kansas City, St. Louis, Rolla and Columbia in an effort to bolster the university’s research programs in defense, intelligence and homeland security, a system statement outlined.

This story was originally published March 6, 2017 at 11:46 AM with the headline "University of Missouri System payments to top officials questioned by state auditor."