In audit report, state reveals ‘excessive’ UM System spending

The report called into question over $2 million in executive compensation by the UM System.

The UM System spent more than $2 million on executive compensation over a period of two years, according to an audit of the system released Monday. Of these expenditures, portions “appear excessive,” lack transparency, were made without a clearly defined decision or approval process and possibly violate the Missouri Constitution.

Nearly $1.2 million went to incentive payments to top system administrators, including over $100,000 to former UM System President Tim Wolfe. The rest of the $2 million was spent on additional payments and allowances for vehicles, housing, relocation and retention.

The audit, conducted by Missouri State Auditor Nicole Galloway, was released in a time of financial limbo for MU. The university is already facing millions of dollars in budget cuts on top of decreasing enrollment numbers.

Galloway rated the UM System as “fair,” the second-lowest of four ratings. Here’s a breakdown of the issues found in the system’s spending and how it can start to make improvements.

Incentive payments

Incentive bonuses nearing $1.2 million were approved by either the Board of Curators or the system president. And while these payments were made in accordance with the system’s rules and regulations, the process by which payment amounts were decided and doled out is unclear.

The audit found that the ambiguous process for earning, determining and approving incentive payments is informal and not “clearly defined,” which makes these payments seem like year-end bonuses that could violate the Missouri Constitution.

According to the audit, the irregularity in how much various administrators make in incentive payments “gives the appearance the incentive payments are primarily a means to provide additional compensation rather than an incentive for high performance.”

In addition, the audit found the criteria for earning these bonuses to be subjective. There is currently no formal way to measure executives’ performance, and as a result, many of the awarded incentives were given out for meeting standard job requirements.

The audit cites one “goal” for the chief financial officer as an example of a high performance incentive intersecting with an average job expectation. The goal for the officer to receive an incentive payment was “to implement and support the effective use of a new budget system.” Brian Burnett, the current CFO, received over $56,000 in incentive payments through fiscal years 2016 and 2017.

The audit recommends setting more clear performance goals that extend beyond regular expectations, as well as incorporating data to measure administrators’ progress toward these goals.

“Ensuring the goals to be achieved represent performance that warrants incentive payments, and not just performance of standard job duties, can reduce the perception these payments are merely additional compensation, and would make the executive incentive program more likely to be allowable under the Missouri Constitution,” the audit states.

The audit also notes a lack of transparency with these payments. None of the $2 million in incentives and other forms of nonsalary compensation, including relocation and retention payments and allowances for housing and vehicles, are included in public compensation information, according to the audit.

Loftin’s transition

After former Chancellor R. Bowen Loftin resigned in November 2015, he was given “significant compensation not required by his original chancellor contract,” which the audit found amounted to approximately $200,000.

Loftin transitioned into a newly created role: director of national security research development. His compensation for the new position was set at 75 percent of his salary as chancellor, which is 31 percent more than the highest-paid campus research administrator, according to the audit.

In addition, Loftin went on “developmental leave” for six months in 2016 with no reporting requirements for his work during that period, the audit states.

The $200,000 includes approximately $50,000 in “unnecessary salary,” an additional $35,000 annual stipend and over $15,000 in vehicle allowance per year. The audit notes that no other director-level employee receives a vehicle allowance.

Loftin also received a $100,000 retention payment that was negotiated as part of his contract as chancellor. While the original conflict stated that he would not receive this payment if he “voluntary terminated employment,” which he did when he resigned from his position, the audit states that Loftin was allowed to keep the same retention payment if he stayed in his new role until January 2017.

Vehicle allowances

Vehicle allowances are specifically cited in the audit as appearing to be “excessive” and lacking transparency. Approximately $407,000 in vehicle allowance payments were made to administrators over the two years examined in the audit.

On average, 15 administrators received a monthly vehicle allowance of $1,240, including the system president and all four campus chancellors.

These allowances don’t estimate the actual amount owed to administrators based on mileage and fuel costs — rather, they are based on what it would cost if the system leased a “luxury vehicle” to executives instead.

The audit found that the “costs associated with the allowances are significantly higher than the potential costs of paying mileage reimbursements.” According to the audit, reimbursements for executives cost an average of more than three times as much as if they had been reimbursed for their actual milage with the system’s standard rate. This rate, for all other UM System employees, is a reimbursement of 51 cents per mile. The audit recommends basing vehicle allowances on “reasonable estimates of actual mileage.”

Edited by Katie Rosso | krosso@themaneater.com

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