Flagship campuses to get performance review

Independent audit of UT System also to be launched

By Ralph K.M. Haurwitz
Friday, February 13, 2004

Money's tight. Therefore, it's time to get tight with the money.

That seems to be part of the reasoning behind the Legislative Budget Board's decision to launch management and performance reviews of the state's two flagship college campuses, the University of Texas at Austin and Texas A&M University in College Station.

There is also a political quotient to the action this week by the board, which is an arm of the Legislature: Some lawmakers -- notably Lt. Gov. David Dewhurst, co-chairman of the board with House Speaker Tom Craddick -- have expressed concern about the size of tuition increases. Tuition and fees at UT-Austin are rising 35 percent this year, mostly as a result of the Legislature's decision last year to allow universities to set their own tuition rates.

Officials of the Austin and College Station campuses did not know the budget board was gearing up for a review but said it's not surprising.

"We're not put off by it or anything," said Kevin Hegarty, vice president and chief financial officer at UT-Austin. "We will work with them to the best of our abilities."

Other reviews of spending, management and strategy in Texas higher education are also under way. A House-Senate committee is studying the tuition increases.

The UT System announced last week that it would hire an outside consultant to conduct the first independent audit of the system's financial books in 15 years. The system includes UT-Austin and 14 other academic and medical campuses with a combined annual operating budget of $7.8 billion.

Last month, Gov. Rick Perry issued an executive order directing the governing boards of the state's university systems to work with the Texas Higher Education Coordinating Board on developing accountability standards by the end of the year. The goal: Ensure that tax dollars and student tuition dollars are buying high-quality education.

Tom Kale, vice chancellor for business services and chief financial officer for the A&M System, said he welcomes all the scrutiny, adding that the system adopted its own accountability program in 1997.

"The Legislature gave us, higher education, the authority to set tuition rates," Kale said. "I think we have a responsibility to taxpayers and students to let them know that what they're paying is being spent appropriately and efficiently. And if this initiative the governor has laid out does that, I hope we gain some credibility with the citizens of Texas."

The UT System's decision to commission an independent audit, which is expected to be completed in late 2005, reflects the regents' policy of voluntarily complying with many of the standards in the 2002 federal Sarbanes-Oxley Act. That law, prompted by a series of corporate scandals, seeks to improve the governance and transparency of publicly traded companies.

The UT regents are using the law as a template for ensuring the system's integrity. For instance, they established a stand-alone audit committee and assumed hiring and firing responsibility for the system's director of audits, who previously reported to the chancellor, the system's chief executive.

Independent audits of the investment portfolio overseen by the regents, currently worth about $15 billion, have long been an annual practice.

Making sure money is spent wisely isn't cheap.

The audit of the UT System could cost up to $2 million, said Charles Chaffin, the system's director of audits. Draft records obtained under the Texas Public Information Act from the budget board say its reviews of the Austin and College Station campuses will cost $500,000 per campus in consultant fees.

The state comptroller's office previously conducted performance reviews at colleges and school districts, but the Legislature reassigned that role to the budget board this year. The reports tend to carry considerable weight.

A 2002 comptroller's report on Austin Community College recommended 107 improve- ments, such as increasing class size and ending mass mailings of course catalogs, that were intended to save $14 million over five years. All of the recommendations have been implemented or addressed, and the cost savings is expected to be even greater than predicted, Cile Spelce, an ACC spokeswoman, said Thursday.

The budget board's paperwork doesn't specify details, but if the approach by the comptroller's office in the past is any guide, the reviews are likely to examine everything from class size to financial aid, from construction to campus administration.

Tuition and fees in Austin will total $3,013 a semester in the fall of this year, a 35 percent increase in 12 months, mainly because of increases adopted by regents. A semester at College Station would cost $2,575, a 20 percent increase in a year, assuming the A&M regents approve the second phase of a two-step increase when they meet next month. The figures for both campuses are based on a full-time student from Texas taking the minimum academic load of 12 credit hours.

Less than 20 percent of UT-Austin's $1.4 billion annual budget is appropriated by the Legislature. The balance comes from research grants, endowments, tuition and fees. But the Legislature has oversight authority for every penny.

rhaurwitz@statesman.com; 445-3604