Union-backed report claims wasteful spending by East Stroudsburg University, other schools

The State System of Higher Education has been allowing the state-owned universities to mismanage their budgets by hiding debt in affiliated corporations, funding new construction based on questionable assumptions and misleading the public about their financial difficulties, says a 165-page report released by the State System of Higher Education's faculty union Tuesday afternoon.

The Association of Pennsylvania State College and University Faculties commissioned Boyer & Ritter, a Harrisburg-area accounting firm, to study the finances of the seven universities that recently announced faculty layoffs.

East Stroudsburg University is among those analyzed by the firm.

ESU announced the layoffs of eight faculty members, the elimination of three degree programs, three minors and one non-degree department in October, citing a projected $6.9 million deficit next year.

The other universities studied in the report are: Cheyney, Clarion, Edinboro, Kutztown, Mansfield and Slippery Rock.

Fiscal years 2009 through 2012 were analyzed.

The most recent fiscal year, which ended June 30, 2013, was analyzed to the extent information was available, says the report.

Data analyzed consisted of audited external financial statements, internally prepared financial reports, budget reports submitted to the Pennsylvania State System of Higher Education, full-time equivalent enrollment figures, annual enrollment per major and tuition rates.

In every case, the accounting firm discovered that the universities created affiliated entities or used foundations to take on debt for new construction, said a statement issued by the union on Tuesday.

"We are extremely troubled by the findings. The universities and the State System are mismanaging public dollars, said Steve Hicks, president of APSCUF. "Every university is using a scheme to transfer debt to component units, including the university foundations and student housing associations. Money that the public believes is dedicated to academics is instead going to these affiliates to pay for buildings."

In many cases, the affiliated entities are taking on debt to pay for new dormitories and other lavish construction.

"Tuition, fees and state support monies are regularly being transferred to these entities, both directly and indirectly," Hicks stated.

The independent analysis of the seven state-owned universities also concluded there is a lack of oversight in State System budgeting practices.

"There appears to be minimal accountability for budgeting at the University level with the PASSHE Board of Governors," the report says.

"There are no common statewide budgeting practices among universities," Hicks added.

"We are concerned that PASSHE, the State System Board of Governors, and the individual universities' Council of Trustees have not exercised the fiduciary responsibility to oversee how the universities spend money," he said.

APSCUF has also commissioned Boyer and Ritter to look at the financial statements of the other seven universities as well.

The Pennsylvania State System of Higher Education issued a statement Tuesday afternoon on the report.

"First and foremost, the report does not fully acknowledge the current year and future impact on the universities' operating budgets of the seven collective bargaining agreements reached last year. The release also fails to recognize the major pressures on our universities from rising healthcare and pension costs, all of which are funded primarily through a combination of student tuition and PASSHE's state appropriation," said PASSHE spokesman Kenn Marshall.

"Neither of those two sources of funds are used to support auxiliary operations, including student housing. Auxiliary operations are funded solely through user fees, including room and board.

"For more than a decade PASSHE universities have utilized a variety of public-private partnerships to help finance and construct student residence facilities, a well-accepted practice.

"The chancellor, the Board of Governors and the presidents of the PASSHE universities are committed to sound financial management practices as they seek to address challenges resulting from level state funding, minimal tuition increases and rising personnel costs."

Source: Pocono Record