Wednesday, October 31, 2007

For Halloween, Reports of Spooky Finances at UMDNJ and Other Academic Institutions

We have done a long series of posts about the troubles at the University of Medicine and Dentistry of New Jersey (UMDNJ), the largest US health care university. The university now is operating under a federal deferred prosecution agreement under the supervision of a federal monitor (see most recent posts here, here, here, here and here.)

We had previously discussed allegations that UMDNJ had offered no-bid contracts, at times requiring no work, to the politically connected; had paid for lobbyists and made political contributions, even though UMDNJ is a state institution; and seemed to be run by political bosses rather than health care professionals. (See posts here, and here, with links to previous posts.) A recent development (see post here with links to previous posts) was that UMDNJ apparently gave paid part-time faculty positions to some community cardiologists in exchange for their referrals to the University's cardiac surgery program, but not in exchange for any major academic responsibilities. Another was some amazingly wasteful decisions by UMDNJ managers leading to spending millions of dollars for real-estate that now stands vacant (see post here). Another was the indictment of a powerful NJ politician for getting a no-work job in the system, and the indictment of the former dean of the university's osteopathic medicine school for giving him the job (see post here). Most recently, we found out that UMDNJ had named one of its teaching hospitals for a pharmaceutical company in 2001 (see post here), and that the federal monitor accused the dean of one of the UMDNJ campuses of fixing students' grades (see post here).

In response to this debacle, the New Jersey State Commission of Investigation (SCI) investigated financial practices at multiple state institutions of higher education, including UMDNJ. As compiled from articles in the (central New Jersey) Home News Tribune, and the (North Jersey) Record, the main points were

  • Even after all the scrutiny given to UMDNJ, the SCI found new problems there, for example, its report alleged "a contract for janitorial and housekeeping supplies wasted $1 million over six years at UMDNJ because of overbilling. The vendor also gave liquor, meals and Yankees tickets to key UMDNJ staff." [Home News Tribune] "The company even sprang for $800 in food costs for a 60th birthday party for ... [the head of ] UMDNJ's office of supplier diversity and vendor development." [Record] Also, a construction company founded by a former UMDNJ plumber billed more than $2.8 million over seven years. The work was overseen at UMDNJ by the former plumbing partner of the construction company boss. The company built the UMDNJ official "a 400-square-foot wooden deck on his Oxford, N.J. home, free of charge. Three years later, when [he] ... decided to convert the deck into a sunroom, [the company owner] ... paid the bill."

  • There were "questionable payouts to employees, including $3 million in bonuses in 2004 to UMDNJ administrators and lump-sum payments to departing officials." [Home News-Tribune]

  • However, similar problems were found at other institutions. For instance, the report alleged Rutgers University paid for expensive trips, meals, and alcoholic beverages. Also, "vast amounts of money were moved through 'emergency accounts' including a $5,000 liquor bill for an anniversary celebration at the Camden campus." [Record]

  • The report found instances of excessive political influence on the academic institutions, even though they had been freed from centralized state supervision in 1994. For example, "One former trustee at The College of New Jersey said he was told then-Gov. James E. McGreevey wouldn't reappoint him because 'he criticized the administration's approach to the New Jersey business community concerning taxes.' A Ramapo trustee said he resigned after state officials tried to make then-Sen. Joseph Doria Jr., D-Hudson, president of the college. [Home News-Tribune]

Although some may argue that New Jersey has uniquely bad problems, this report raises the possibility that sleazy accounting and budgeting practices may be widespread at US academic institutions, particularly but not exclusively those involved in health care. The finances of US private not-for-profit academic health care institutions are generally completely opaque. Almost never do such institutions publish detailed budget, or subject themselves to outside audits. This opacity may make it easy for such practices to flourish.

(For those who don't believe that statement, try to find a clear, detailed budget for any local health care not-for-profit. Further, try to find the results of any outside audit of any such institutions. You may need to dig much deeper than the usual glossy institutional publications and their state-of-the-art web-sites. Let me know of any success.)

Given that tuition for higher education, including health care professional education, and the costs of health care have been rising much faster than inflation for a long time now, there is reason for concern that a good chunk of the cost increases are due to questionable payments and financial practices. But until the organizations involved make their finances public and allow detailed audit, that is all conjecture.


Insist that your local hospitals, academic medical centers, medical schools, and universities make public detailed budgets, and subject their budgets to periodic audits. "Sunlight is the best disinfectant." But expect lots of resistance...

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