Report blames UMass system for fiscal woes at Dot campus

A new report from the Pioneer Institute, set to be released Thursday, places the blame for UMass Boston’s budget woes on University of Massachusetts leadership, asserting that irresponsible spending approvals triggered the crisis that led to J. Keith Motley’s ouster as chancellor in 2017. The report’s authors— including former state Inspector General Gregory W. Sullivan—call for a state audit of the university system.

University officials said they had not been given an adequate opportunity to review or respond to the report before its publication, but on initial review the university said “the report was inaccurate on many levels.”

In “Fiscal Crisis at UMass Boston: The True Story and the Scapegoating,” authors Sullivan and Rebekah Paxton criticize the handling on the Mt. Ida sale, insist that the university system has an obligation to support the urban UMass Boston campus rather than undertake strict austerity measures, and excoriate a November 2017 UMass Boston audit by firm KPMG LLP (KPMG) as deliberately ignoring the roles and oversight responsibilities of the UMass Board of Trustees and President Marty Meehan.

Central leadership “unfairly scapegoated former Chancellor Keith Motley and UMass Boston administrators for creating UMass Boston’s $30 million fiscal crisis in 2017– 2018 when the president and [trustees] themselves bore primary responsibility for creating the crisis as a result of their having approved a massive, accelerated capital expansion plan without assuring that capital reserves would be available to pay for it,” the report said.

The report asserts that the UMB crisis was kicked off by a miscalculation between April and September of 2016 by the board of trustees, the president, and central office as to the primary reserves for UMass Boston capital spending, approved capital spending that the campus would then be locked into despite the funds not actually being there, realized the error in the middle of Fiscal Year 2017, and directed the campus to replenish the reserves, which kicked off the budget crisis and created the $30 million shortfall.

“What happened here was a $65 million math error,” Sullivan said Tuesday. “UMass Boston had to pay the bill, there was no way they could get out of it, and they were sent down a course by the UMass board of trustees that committed them to needing so much money to pay for it.”

UMass initiated a review by KPMG focused on the UMass budget, producing a report that led Meehan to describe “a culture at UMass Boston that treated the budget as a “guideline” and not an ‘operational reality’.” The Pioneer Institute report criticizes the KPMG review as being deliberately so limited in scope that it did not evaluate whether the board or the president had any culpability in the financial crisis.

The report calls for some specific follow-up measures, including an audit by the state comptroller, a revamp of the board of trustees, express gubernatorial and legislative approval for $10 million-plus facilities not funded by fees and charges, and publicly available annual audited financial statements for each campus and the system.

In a statement issued on Wednesday, UMass spokesman Jeff Cournoyer defended the KPMG audit and said the Pioneer Institute's "bias is laid bare in this report."

"The Pioneer Institute appears to have concluded that the $30 million operating deficit at UMass Boston, defined by KPMG in their audit of the campus budget process, was created either by an administrative ‘error’ or by ‘directive,’ depending on which part of the report you read," said Cournoyer. "Neither are accurate, both defy logic, and the Pioneer Institute’s attempts at supporting evidence are poorly researched and vetted (one footnote is a link to the trailer for an Avengers film)."

Cournoyer continued: "When budget issues surfaced at UMass Boston in FY16, system administration went to work on addressing them with the campus and implementing new fiscal accountability and oversight measures to avoid a similar situation in the future. There was no error in the primary reserve calculation, no directive to replenish reserves, and depreciation expenses have long been reported in budgets, forecasts and financial statements. System office oversight did not ‘trigger’ the UMass Boston deficit any more than water from a fire hose triggers a fire."

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