New Scrutiny on Expense Accounts

May 27, 2011

Two community college presidents have come under fire in recent weeks for their expense account spending, which some critics argue is too generous given the cutbacks their institutions are being forced to make in this rough economy.

Among the expenses — dinners at Ruth's Chris and booze for social gatherings — wouldn't raise many eyebrows if they were on the expense reports of many four-year college presidents, where boards and (sometimes grudgingly) politicians have come to expect donors to be entertained. For example, it was reported earlier this year that M.R.C. Greenwood, president of the University of Hawaii, has a compensation package featuring a $150,000-a-year expense account. It might take the president of a large community college four years or more to spend that much on his or her expense account.

Officials at the community colleges under scrutiny say that these expenses are simply the cost of doing business and attracting big-time donors, who are increasingly supplementing institutional coffers to make up for slumping state support. Recognizing that what may seem like a reasonable expense to a college board may appear different to district taxpayers, some community colleges are looking for ways to bring their presidents’ spending in line with what they call the “new normal” in this post-recession culture of austerity, while still maintaining influence with key donors.

Last week, The Record, a newspaper in northern New Jersey, ran a story outlining the expense account spending of G. Jeremiah “Jerry” Ryan, president of Bergen Community College. Ryan has spent nearly $100,000 in college money on “meals, travel, books, car expenses, golf outings and other items” since becoming president in July 2007. His expenditures average nearly $30,000 annually, but he could have spent much more: the college caps his yearly expense spending at $50,000.

Some of the expenses included a $1,145 “post-commencement luncheon for 22 college trustees and executives” at an Italian restaurant in Secaucus, N.J., an $85 breakfast with a former county executive at a Marriott hotel, and $58 for drinks with the chair of the college’s foundation at a local steakhouse.

Local politicians and a columnist for The Record lambasted Ryan for his "high end" tastes and spending for two main reasons: some of those on whom he spent college dollars for entertainment purposes were trustees or other administrators, and he also spent money on top-shelf alcohol. Ryan treated himself and the college's foundation chair, for example, to two Johnny Walker Blacks and two Dewer's.

“This is an instance where labels don’t equal outcomes,” wrote Ryan in an e-mail to Inside Higher Ed about the instances where he made purchases to entertain college officials. “Instead of focusing on the who of the meeting, it's what you get out of the meeting that matters most.”

Wednesday, a former managing editor of the local newspaper came to Ryan’s defense, writing in an op-ed that the college under Ryan’s leadership is “doing fine” and that, with regard to spending, he prefers “more of the same” if it means attracting the kind of prestige and donors that have come to the college so far.

For instance, Ryan raised a record $3.8 million for the college’s foundation last year and donated $40,000 of his own money in the campaign. Ryan also noted that grant funds received by the college are up 38 percent at the college, to nearly $9.9 million last year.

Referring to this recent boon in donations and grants, E. Carter Corriston, chair of the college’s Board of Trustees, told Inside Higher Ed he believes Ryan’s spending has a “pretty good return on investment.” Still, in the wake of all of the local criticism, Corriston confirmed local reports that he would like to revise board policy on presidential expense account spending.

“The $50,000 annual expense limit, we can reduce that to $30,000 because he hasn’t gone over $30,000,” Corriston said. “The other thing, when he meets for lunch with me or other trustees, those shouldn’t be expended for. We can meet in his office and have sandwiches or something so we can eliminate that. Then, in regard to the overall entertainment thing with the consumption of alcohol, we should limit that to certain settings.”

But Corriston is not entirely apologetic about Ryan’s prior spending, saying he “did not think there was any abuse taking place.” Still, he said criticism in the local press has convinced him of the need to take a “more conservative approach” with regard to expenses. Also, he said the college can improve in explaining to the public the need for this kind of spending — in part to ensure that the recent criticism will not scare off prospective donors.

Ryan echoed this sentiment.

“We need to do a better job about informing the public about the fiscal realities community colleges face and the economic impact of community colleges on local municipalities,” wrote Ryan. “There is a misconception that community colleges are driven solely by taxpayer funding, when the majority of funding at our institution — nearly 80 percent — comes from student tuition and other revenues. When community colleges were established in New Jersey, the state statute called for a third of the funding to come from the state, a third from county government. Today, the state contributes only about 8 percent, and the county provides 15 percent of funding.”

Earlier this week, The Daily Herald, a newspaper in suburban Chicago, ran a story similarly scrutinizing the expense account spending of Kenneth Ender, president of Harper College. Last year, Ender spent nearly $24,000 of college funds on “conference fees and travel, limousine rides, four-star restaurant meals, and food and liquor bills for events at his house.”

The news of Ender’s spending has not stirred as much criticism as that of Ryan’s spending. Still, some faculty and former college officials have commented that Ender and the college must do a better job of explaining and further scrutinizing their expenses, especially in this economic climate. Others were particularly critical of one of Ender’s purchases: $450 worth of alcohol for a party at the president’s house after “The Twin Bowl,” a football game between Harper and Grand Rapids Community College, of which Ender’s twin brother Steven is president.

College officials noted to Inside Higher Ed that Ender’s contract does not stipulate a spending limit but instead states that the college’s board provides reimbursement for “reasonable out-of-pocket expenses for travel, entertainment, including in-home entertainment undertaken by the president.” Ender has a $20,000 annual housing allowance and a $1,000-a-month car allowance. Officials also added that he has a $15,000 annual “president’s grant” from the college’s foundation, which is spent courting donors and on other entertainment expenses.

Being Good Stewards

The scrutiny of Ryan and Ender’s spending comes as no surprise to some community college experts. And whether or not their boards find their expenses reasonable, these presidents and institutions must respond to general criticism from the public, some experts say, by being more transparent with their finances.

“These are difficult times, and our communities are scrutinizing expenses we’re all making,” said Narcisa A. Polonio, vice president for research, education and board leadership services at the Association of Community College Trustees. “It’s important for all to understand what’s going on here. You have to justify any expense you may be making. I don’t think there’s intent on either side to do anything wrong here, but simply to serve the public. But as presidents of public institutions, it’s important to review these guidelines.”

Polonio cautioned that presidents’ expense spending varies widely from institution to institution, depending on variables such as size, location and funding level. She noted that most of the presidential contracts she has advised in creating recently have spending limits around $10,000 to $12,000. Still, she noted that close to $30,000 would not be unreasonable for a place like Bergen County, which has several Fortune 500 companies and a relatively wealthy tax base.

Polonio also explained that guidelines on this type of spending vary from state to state, noting that some fold it into a standard salary while others have separate accounts for it. Though exclusion of liquor from expenses is “common practice” in the sector, Polonio noted that there are several states where this is permissible.

“Here’s the formula we recommend to colleges,” Polonio explained. “It’s at the board’s discretion whether to provide an expense account, but the board should be specific for what it is and is not to be used for — including things such as alcohol. It’s at the board’s discretion to set a maximum amount and to set up reporting procedures. Those should be based on what is reasonable and should define entertainment as business meetings and special events where it’s important for the president to attend on behalf of the college. Also, receipts should always be provided.

“When you’re trying to impress corporate leaders and business leaders, it’s very difficult to raise money in a college’s cafeteria,” Polonio said. “So the board has to make a judgment as to what’s reasonable spending. Transparency is extremely important here. Everyone should know what [policy] the board has set up so there’s no surprise. The public is upset when they’re caught by surprise.”

Making Constructive Changes

Community colleges that feel the heat regarding presidential expenses can come out of the experience with more safeguards in place.

Two years ago, Brian K. Johnson was removed as president of Montgomery College, in suburban Maryland, amid faculty complaints of his “excessive” expense spending — which included about $65,000 in two years on meals, hotels and transportation. Since Johnson’s ouster, the college has made significant changes to ensure this type of spending does not happen again.

Marshall Moore, senior vice president for administrative and fiscal services, said the institution has limited the number of corporate card holders, noting that “the more cards you have outstanding, the greater chance of people misusing them.” (The detailed user’s guide for the college’s new corporate card program and a table outlining the many before-and-after changes made to it are available via Inside Higher Ed.)

Also, he noted that all transactions, including those of the president, are now reviewed by him. Previously, all expenses were overseen by supervisors. In the case of the president, he noted that the president’s chief of staff handled expenses and simply reported them directly to the college’s accounts payble without any other institutional oversight.

“I can challenge [the president's] expenses and I will challenge expenses,” Moore said, even though the president is his boss. “She often asks me before she makes purchases…. I think we’ve strengthened the process. I think the guidelines are much stronger now.”

All corporate credit card expenses are reviewed on a monthly basis. Previously, the college just reviewed them annually, leading to what Moore called a “rushed” review process. In addition, an external auditor is now reviewing expense spending made by the president’s office. These “outside” and “neutral” eyes help with oversight, Moore said.

Moore would not speculate whether the college’s new guidelines would have prevented the perceived abuses under Johnson’s watch, but he said there are lessons for other institutions in the changes Montgomery has made since Johnson's ouster.

“You just need to constantly review the processes on an ongoing basis to ensure that your controls are strong,” Moore said.

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