UM System audit reveals millions spent on 'hidden bonuses' to administrators

1 month 3 weeks 2 days ago March 06, 2017 Mar 6, 2017 Monday, March 06 2017 Monday, March 06, 2017 7:15:00 PM CST in News
By: Nora Faris, KOMU 8 Reporter
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JEFFERSON CITY - Missouri State Auditor Nicole Galloway released an audit report of the University of Missouri System Monday that revealed millions in "mismanaged" funds. 

The investigation found the UM System distributed nearly $2.3 million in hidden incentive payments to top executives and administrators, including the chancellors of the four system campuses. These incentive payments, Galloway said, were awarded without a formalized process or clear performance metrics, and most of the individual expenditures were not formally approved by the Board of Curators.

The payments were not included in administrators' published salaries, Galloway said, reducing public transparency.

The audit also revealed what Galloway said were "excessive vehicle allowances." About $407,000 in vehicle allowances were made to 18 top administrators of the UM System in 2015 and 2016.

Some of the vehicle allowances amounted to more than $1,200 per month and were intended to provide for "a leased luxury vehicle, insurance and fuel."

Galloway said mileage reimbursement, rather than the UM System's luxury vehicle allowances, would have cost the state about three times less. 

The audit also shows former MU chancellor R. Bowen Loftin received nearly half a million dollars from the UM System in the year after his resignation as chancellor in November 2015. Galloway said the audit revealed Loftin was granted "developmental leave" to "spend the year traveling, with no clear objectives or deliverables required during that time."

According to the audit report, Loftin continued to receive his chancellor's salary, totaling $230,000 over a six-month period. He also received a $100,000 retention bonus; a $15,600 annual vehicle allowance; a $35,000 annual stipend and a $50,000 travel budget.

"These decisions demonstrate poor judgment and a lack of accountability in almost every aspect of the former chancellor's resignation and transition to a new position," Galloway said. "System leaders must be called on to explain how it makes sense to pay almost half a million dollars over the course of a year to an employee who was responsible for completing no actual work on behalf of the university or its students."

However, university officials said Loftin has been serving the university in the past year through his role as Director of National Security Research Development.

Christian Basi, MU spokesman, said in a statement, "Over the past year, Dr. Loftin has met with national research scientists, including those with the Office of Naval Research and the Army Research Laboratory. In those meetings, he helped to identify where UM researchers could compete for upcoming projects or programs related to improving national security."

Basi said the university will evaluate Loftin's performance this spring to "assess his effectiveness and success in locating funding opportunities and partnerships for MU investigators."

John Fougere, UM System spokesperson, said a strong executive compensation program is an essential tool for recruiting and retaining top university leadership in the competitive field of higher education.

"It is very telling that on the very day when the audit did focus on our executive compensation program, the news comes that a university is hiring away one of our top leaders," Fougere said.

Wright State University announced Monday it will hire Cheryl Schrader, chancellor of Missouri S & T in Rolla, as its president. Schrader was listed in the audit as having received more than $200,000 in executive compensation payments from the UM System.

The audit comes at a time when the UM System is navigating budget shortfalls and withholds from the state legislature. Earlier this year, Gov. Eric Greitens cut nearly $40 million from the UM System in his state budget proposal for fiscal year 2018.

A release from the UM System Monday said the audit "confirmed that the UM System follows sound business practices and accounting standards in its operation of the state's largest public university, while identifying no significant deficiencies in internal controls."

But the auditor gave the UM System a "fair" rating, which means "audit results indicate this entity needs to improve operations in several areas." The auditor's rating system includes excellent, the highest ranking; good; fair and poor.

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