Archive for Thursday, November 11, 2010

Report shows KU business school spent most differential tuition funds appropriately

November 11, 2010, 10:57 a.m. Updated November 11, 2010, 5:10 p.m.


Kansas University’s School of Business mostly spent its differential tuition funds appropriately, but should take measures to fix cumbersome accounting practices, according to an audit released Thursday morning.

University leaders said the audit affirmed that the school’s funds had been appropriately spent, except in the case of $60,000 — or one-fifth of 1 percent — of the $31 million generated overall.

“It confirms the fact that we have used these funds consistently with the original proposal,” which was laid out in June 2004, said William Fuerst, KU’s outgoing dean of its School of Business.

Fuerst announced in September that he would step down from his position at the end of the academic year.

The report also notes that the original proposal was quite broad, and a number of different interpretations could be made as to whether the expenditures aligned with the intended purposes.

Differential tuition is an extra course fee paid by students enrolled in that school’s courses in addition to the normal tuition rates.

The audit was conducted after by a group of master’s degree students raised concerns that the school was not spending its share of differential tuition funds according to the original proposal that established the differential tuition fee for the school.

Months of back-and-forth dialogue between students and administrators followed.

KU Provost Jeff Vitter said the audit report should lay to rest any other concerns that the students may have.

“If anyone has further questions about it, I don’t think anything is going to change that person’s opinions,” Vitter said.

‘Cumbersome’ combination

According to the audit, the internal budget for the School of Business does not differentiate between general fund spending and differential tuition spending, making monitoring the funds “cumbersome.”

That’s a particularly noteworthy conclusion, considering that the business school “is probably the one school within the university that should have a premier accounting system,” said David Cantrell, an MBA student who has been critical of the school’s handling and spending of differential tuition funds. “Instead, it probably has the worst.”

Cantrell, who served on a committee that worked directly with the accounting team, was careful to describe the findings as a “report” and not an “audit,” because the numbers involved were not certified. He maintains that the accounting firm used a “very, very liberal” interpretation of the original agreement’s requirements, one that allowed KU to say its spending had been proper.

“This answers nothing nothing,” Cantrell said. “Nothing.”

KU officials said they sent copies of the report to members of the Kansas Board of Regents for their review. Gary Sherrer, chairman of the board, said Thursday afternoon that while he hadn’t yet had a chance to review the information, he would look into and beyond the documents to see that KU lives up to its end of the bargain.

“I want to look beyond their press release, and I guarantee I will read every word,” Sherrer said. “It’s a very important issue, on two grounds. One, it’s a great deal of money. And secondly, the students agreed to this with certain expectations of the value, and I think the students have to feel that the value’s being received, because they paid for it.”

Fuerst said the school would address the recommendations made in the report to make reporting of expenses easier.

The audit also mentioned that the original proposal called for differential tuition to increase according to a higher education inflation index, but that it had instead been increasing by a flat 6 percent rate.

That’s a higher rate than inflation, but KU officials said the change from the proposal was tied to university-wide tuition and fee increases aligned with the university’s tuition compact that guarantees four-year rates for students.

KU also released a report generated by the provost’s office detailing the rest of the $76 million in differential tuition collected since the 2003 fiscal year.

Vitter said that it showed that, university-wide, funds were spent appropriately and in accordance with the respective school’s proposals.

Restoring oversight

At the business school, students have complained that a student committee intended to monitor the funds had been disbanded. The audit was unable to reach a clear reason for why the committee dissolved in 2006.

“It was an oversight that’s been corrected now,” Vitter said.

Fuerst said a new oversight committee already had met once, and future meetings are planned.

“Could we have avoided the controversy by having a mechanism in place?” Vitter asked. “I think the answer is yes.”

The business school audit was completed by the accounting firm BKD, the same company that completed an audit into allegations of ticket mishandling at Kansas Athletics. The business school audit was completed at an estimated cost of $50,000, though final bills have not been received. The provost’s office used private donations to fund the audit.

For 2010-11 at KU, the differential tuition fees range in cost from a low of $16.50 per credit hour for the School of Journalism to a high of $211.50 per hour for the School of Law.

In the business school, undergraduates pay $102.40 per hour and master’s students pay an additional $84.30 per hour.

Journal-World reporter Mark Fagan contributed to this story.


areyousure 7 years, 5 months ago

Is the reporter trying to be as negative as possible? The first line reads that the funds were mostly spent appropriately and the second line says that the questionable amount was 1/5 of one percent. Isn't that nearly all of the money>

ahyland 7 years, 5 months ago

I used language from the original audit, which says "for the most part," funds were spent appropriately. But I was sure to get the exact percentage in there, to clear up any doubts.

Andy Hyland KU reporter

carrottop 7 years, 5 months ago

Andy- I believe your figures may be wrong on what students pay per hour. Graduate students pay more.

jayhawkgrad 7 years, 5 months ago

No, it's correct. Graduate students pay the two amounts added together.

ralphralph 7 years, 5 months ago

Considering that the appropriateness of expenditures was said to be subject to differing interpretations (there's your elbow room, Daniel Boone), I thought the story was somewhat kind ... at least inasmuch as it is devoid of any helpful details as to what sort of expenditures were subject to what sort of interpretations, and the absence of any explanation of how much the 1/5 of 1% amounted to over the years, and where the misspent part of it went. Al Capone's tax returns might have passed muster as "mostly appropriate" under such audit standards as were reported.

"The glass is mostly half-full."

bailoutnation 7 years, 5 months ago

Who cares where the funds came from. It's who wrote and signed the $50,000 check given to the auditors that counts here.

Thunderdome 7 years, 5 months ago

OK, so the school didn't spend any of the money illegally according to the accounting firm. The real questions reside in how the money was spent relative to the student body. Between 2004 and 2010, during which time DT has been collected, instructor full-time equivalents (FTEs) actually went down while at the same time enrollment went up. So, when you factor in the additional DT expenditures on faculty, what that means is that fewer faculty members have made substantially more some cases, a lot more, particularly the Dean and Associate Dean. While not illegal, the ethics are highly questionable.

What is also concerning is staff allocation. There are 9 staff members dedicated to serving approximately 690 undergraduate students (who pay $102 in DT per credit hour). There are 3 staff members dedicated to serving approximately 615 masters students (who pay $102 + $84.30 = $186.30 per credit hour). Masters students are getting hosed which is why we started asking questions in the first place. None of the DT wish list items have been fulfilled on behalf of masters students.

It was not "an oversight" that the DT Advisory Committee was was a blatant attempt to extract additional money from students with no oversight. Dr. Vitter, do you really think we are that ignorant?

Thunderdome 7 years, 5 months ago

You are suggesting that a student who was sold a bill of goods should leave after spending thousands of dollars in lieu of getting rid of the corrupt administration who sold that bill of goods? Nice! By the way, graduate credit hours don't transfer that easily.

pat1888 7 years, 5 months ago

KRichards has a great point. Why don't you transfer? Clearly no level of reason or logical explanation will convince you otherwise. Find something better to do with your time. You're part of the reason KU wasted $50k on this audit in the first place.

Thunderdome 7 years, 5 months ago

So the university shouldn't be held accountable? Did you read any of the points I made? This never was about illegal spending or audits. It was about adhering to the DT compact. It was proven before the audit that compliance with the compact was adrift. The students didn't care about the audit but more about recognition by the Provost and the Dean that compliance needs to happen. The Dean spent $50K on his own accord to do this audit...don't put that on students. And by the way, with attitudes like yours, many students may transfer or not come here at all.

pat1888 7 years, 5 months ago

The university should be held accountable and it was. You and the other 25 MBA students should be held accountable too. The audit showed us, from a third-party perspective, that the funds were used correctly.

Now you're trying to make this an ethical debate? This is getting hilarious.

If the students didn't care about the audit, why did they invest so much effort into telling local media how necessary an audit is and how it will show the community of the school's wrong-doings.

The dean just suddenly woke up one morning and decided a $50k audit was necessary?

Hold yourselves accountable for your actions. You and the other 25 MBA students are the reason why the administation found this audit necessary. And you are still bitching about its outcome. Grow up. There are plenty of people in this community that are proud to be assoicated with the School of Business. You aren't required to be one of them. You've damaged both the university and the school with your actions.

Thunderdome 7 years, 5 months ago

A few facts you need to understand:

1) The students did not request an audit or review...the Dean did that and the university then did everything it could to make sure that the questions asked yielded the answers they wanted to hear. No one ever suggested the money was spent illegally or on things that are not allowable by university or state guidelines.

2) However, violations of the terms of the DT agreement were well documented before review was even authorized. A short list includes:

a) No faculty or staff members that existed prior to collection of DT were to be funded, either in part or in whole, by DT funds. Faculty and staff hired using DT funds were to augment the curricula and provide additional and different educational opportunities. Many staff that existed prior to DT are currently in the DT line item, a clear problem.

b) As has been well discussed, within one year, the DT Advisory Committee was disbanded and the required bi-annual reports were not provided to students. Had the Committee been maintained, many of the expenditures made with $37 million of student money may not have been approved. At the very least, students would have had the opportunity to provide guidance on expenditures.

c) DT and general funds were co-mingled making it very difficult to track how DT funds were actually spent. About the time DT was implemented, an extensive fund accounting system which would have allowed accurate, detailed, and timely accounting of various pots of money was abandoned for...wait for it...Quicken! Yes, the Business School uses the same accounting system that my neighbor kid uses for his lawn mowing business. And this was no accident.

d) Since 2004, enrollment is up across the board and the actual number of instructors is down by 18. During the same period, salaries paid to that smaller group of instructors nearly doubled. Explain to me how using DT to teach more students with less faculty is increasing the quality of the education at the Business School.

You can get angry and blame students, suggest that we transfer, and question our accountability as you wish. It doesn't change the facts and neither does the BKD report.

pat1888 7 years, 5 months ago

This is cute. It's like the MBA program taught you just enough to be dangerous and now you're using your half-degree for evil. Whatever, Thunderdome. The issue is over. The report has been released. It's not like you have anymore influence to throw around. Why not focus on your classes? Even if the MBA program sucks as much as you say it does (which is hyperbole on your part).

mysterion 7 years, 5 months ago

Pat: Actually, the University spent $50K on this review (it was NOT an audit) because they could not account sufficiently for the tuition funds when asked. It took nearly two months for the University to provide sufficient data for the review to be completed. This doesn't exactly give me a high degree of comfort that all is well there. I do recall a similar review, also requested by the University, that cleared the athletics department of wrongdoing over the ticket scandal, only to have have a full audit reveal considerable wrongdoing. KU spent considerable resources and time trying to carefully control this review and to skew it in a direction favorable to the University. For example, the administration did not want to allow BKD to meet with students. It was only after BKD threatened to cancel the engagement that KU relented. In addition, KU tried to prevent BKD from talking to certain professors while providing unlimited access to "administration friendly" professors. Finally, this report appears to be very watered-down. With all reviews, there is always a draft document produced before the final report is issued. It would be interesting to compare the findings of the draft document with what came out in the final report. I can imagine that KU is not interested or willing to post the draft document online because this will show the degree to which the report was edited in a favorable manner to KU.

Transfer is not really an option for most students at this level, they can only transfer a very limited number of hours to another institution. Unless someone transfers right at the beginning of their academic career they essentially just lose out on all of the time and money already spent here.

Phillbert 7 years, 5 months ago

You recall incorrectly. There was no "similar review" that cleared athletics on the ticket scandal. The audit that KU had BKD do there was the one that showed the multimillion dollar extent of the ticket scandal. But apparently their reports are only good if you agree with the outcome.

Thunderdome 7 years, 5 months ago

Touchy, touchy there, Philbert. Actually, the review BKD did relative to the athletic department characterized the extent of the ticket problem, a problem that had already been identified internally. However, the ethics issue regarding former AD Perkins, still formally under reveiw by the Kansas Govnmental Ethics Commission, were not identified by the BKD review but through a police investigation. In the case of the business school, the violations of the DT agreement were identified by students well before this review even began. The whole point of the university-driven review was to give the appearance that eveyrthing is fine by doing a basic general ledger once-over. The real issue about masters students getting soaked wasn't even reviewed. I am sure BKD did a fine job of reviewing exactly what you...I mean the business school and Dr. Vitter...asked them to review. What they reviewed, however, isn't the problem.

Phillbert 7 years, 5 months ago

Ah that's right, I forgot: Anyone who questions or disagrees with you has to be on the payroll. No, if I worked there I would have told them not to bother spending their money on this because it is clear you made your mind up a long time ago and no report is going to change that.

pat1888 7 years, 5 months ago

Do you watch a lot of conspiracy theory movies or read similar literature? You seem pretty convinced that KU is willing to do a lot of unsavory activity in order to maintain its reputation. Last time I checked, KU isn't the mafia and none of you woke up with a horse's head in your bed. Focus your time, energy and resources on being productive, positive contributors to our community. Isn't that a better use of your time?

carrottop 7 years, 5 months ago

I am blown away at the level of disrespect shown towards students, in general, at KU and in this community. K and Pat, you suggest that they "transfer." Gee, that's a super idea. Maybe all these damned students should just go away. After all, they need to act like the open bank accounts that they are and just cheerfully hand over money to a bloated and mediocre institution, right? Ever think that maybe they DO care about KU and that their motivations are the ones that might just actually be the ones on target? Why would you not question what is happening at KU? Is there any reason to believe that upper administration is a paradigm of virtue? Sticking your head in the sand and never questioning authority certainly hasn't square away grand 'ol KU. Students are the reason that KU exists. Heck, they are the reason this town exists. Show a little respect and give them their due. the "review" before you make any more comments. Its loose as a goose.

Thunderdome 7 years, 5 months ago

Here's an interesting factoid from the BKD report:

AY 2004 Total Instructors: 126 Total Salaries $8,262,881 Average: $65,578 AY 2010 Total Instructors: 108 Total Salaries $13,656,746 Average: $126,451

That's an average annual salary increase of 13.26% for 6 straight years! Ever heard of six straight years of double digit increases? Yea, me either.

Result: Fewer faculty making more money and more students crammed into fewer classes.

Reid Hollander 7 years, 5 months ago

I like how it adresses the Edwards Campus bias when it comes to course offering in all of 1 paragraph. It is interesting that when I met with the administration to accept my MBA enrollment nothing was ever mentioned about driving to Edwards Campus several nights a week.

Also, the MBA entrepreneurship emphasis was not even mentioned in the report. Perhaps because they sold students on it being available and then dropped several classes making it impossible to achieve. I am glad I backed the joke of an MBA program up with a JD.

abusername 7 years, 5 months ago


The correct CAGR is 11.56%, not 13.26%. Perhaps your time would be better spent studying the MBA curriculum and how to properly compute a growth rate instead of spreading conspiracy theory in newspaper comment sections.

I grow tired of students talking trash on the MBA program, as if getting a diploma entitles you to a high-paying job. The program provides you with the tools needed to become successful. What it does not provide, unfortunately, is the maturity to understand that you are responsible for your own success. I know many students who received high-paying job offers before graduation. I also know students that have completed and are currently completing the entrepreneurship emphasis without taking courses at Edwards Campus. Regrettably, I know even more students who seem to think that time spent antagonizing the program is in some way productive or meaningful.

Thunderdome 7 years, 5 months ago

I already have a well paying job and pay taxes. You are under the ill-conceived impression that the students who have asked questions about DT just finished their undergraduate degrees. The group is actually very diverse and many have been in the work force for several years. You are under an even bigger ill-conceived impression that customers shouldn't question their service providers when they aren't getting what they were promised for their money.

This isn't about students getting high paying jobs. It's about holding service providers accountable. KU is also still a public university and not only accountable to students, but also to the taxpayers. Do you think the average taxpayer would be happy to know that faculty salaries nearly doubled over a seven year period? Yea, me either.

While I thank you for the time-value-of-money lesson, I still don't know any business or university that provides their entire workforce with an 11.56% increase for seven consectuive years.

commenterX 7 years, 5 months ago

Even the 11.56% is skewed. Academics are hired on at higher salaries because subsequent increases are typically smaller cost of living type increases. The only way to get a big salary increase is to gain a title bump (they get 2 or 3 over a 30 year career), move to another school, or take your job offer to the Dean in hopes that the school determines you are worth matching the other school's offer.

There are less instructors and a higher average salary, but this is because the outgoing instructors had a considerably lower salary than new staff that has been brought in. This is standard at all academic institutions, particularly when there is an effort to increase the school's ranking. To improve the school's ranking even more we need to further increase the quality of professors at the school (which will require higher salaries).

Reid Hollander 7 years, 5 months ago

Do the students you know that are getting the entrepreneurial emphasis mention that the school cut two classes out of the curriculum that were promised to me when I signed up? Do they mention that you can no longer complete the emphasis unless you take BLAW 701 which is kind of pointless when you are a JD/MBA? So why is the school able to sell this program to students and then alter it after the fact?

You asked what we were promised. We were promised class availability and it is not there.

BillyGoat 7 years, 5 months ago

Methinks that salaries did not increase in double-digits across those years. First, there has been a salary freeze in place at KU for at least two years now, including the business school -- no increases whatsoever. Second, just as in the private sector, when academic units have their operating budgets reduced they need to cut expenses. What is the single biggest expense item in labor-intensive organizations (no, this isn't a trick question)? Yes, it's labor costs. So, how do you cut operating expenses in significant fashion? You reduce headcount. How do you reduce headcount among in an academic unit? Well, you can't reduce the number of tenured faculty, so instead you reduce the number of adjunct (non-tenured) faculty, who typically earn much less than tenure track faculty. So the change in the "average salary numbers" across the years make it appear that large increases were allocated to faculty, but the truth is most likely that the "average" went up mostly as a result of the attrition of a significant number of lower paid faculty.

abusername 7 years, 5 months ago

This site needs a "like" button. It also needs needs more astute, grammatically correct posts like yours.

BillyGoat 7 years, 5 months ago

Thanks, but I noticed that my post does contain a typo and I'm too technologically challenged to know how to edit it after-the-fact.

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