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November 9, 2017

Academic Council Meeting
Library Community Room
3:00-5:00 pm  

MINUTES

Attendance:           
Business:
J. Herche(a), J. Miles(a)           
Conservatory:
P. Shands(a), A. Miller(p)
College: A. Lenzi(a), B. Sztaray(p), C. Dobbs(p), L. Fox(p), J. Hole(p), S. King(p), J. Becker(p), M. Meler(a), P. Meyer(a), S. Jensen(p), S. Giraldez(p)           
Dental:
S. Gupta(a), A. Gluskin(a), P. Subar(p)t, S. Sadowsky(a)           
Education:
L. Webster(p), M. Draheim(a)           
Emeriti:
Roland. di Franco(p)           
Engineering:
 S. Gulati(p), S. Merry (a)           
Law:
J. Sims(a), R. Salcido(p)           
Library:
M. Maloney(a)           
PHS:
 C Peterson(p), X. Guo(a), D. Vyas(a), R. Halliwell(p)J Livesey(p)           
SIS:
S. Mathis(p)           
ASUOP:
C. Styc(p)           
Graduate Student Assoc: C. Cannon(a)
Ex-Officio:  P. Eibeck(p), H. Escalante(Ombuds)(p), M. Pallavicini(p), D.Kelly(Athletics)(p), Joel Lohr(p)
Guests: Wes Yourth, Interim Athletic Director, Ken Mullen, VP Business & Finance           
Call to Order at 5:06 pm  

I.      Consent Agenda
A.    October 12, 2017 Minutes
1.     Academic Affairs on Undergraduate Studies
2.     November 7, 2017 Course Approvals
3.     November 7, 2017 Program Approvals Motion to approve and second, passed.  
II.     Reports
A.      ASuop Representative Report -  Caroline Styc
ASuop representative Caroline Styc addressed the Council. They are working on a "third space" initiative to utilize outdoor space to provide students with additional options.  Event planning for next semester is underway. Students are concerned with the Athletics over expenditure and some student athletes are being picked on by   their fellow students.             
B.      Provost's Report - Maria Pallavicini
The Provost shared a SIF proposal is being developed by the Graduate School for administrative support for graduate students at all three campuses, including orientation, registration, academic policies and wellness services.  She will make the proposal available to academic council for input.  The Provost announced that Berit Gundersen, Vice Provost of Faculty Affairs will be leaving the position.  The Provost will begin a search for the position internally and externally.
C.      President's Report - President Eibeck
President Eibeck thanked AC members and guests for their attendance and thanked AC for setting aside the meeting to discuss the Athletics over spending.  She introduced Vice President of Business and Finance, Ken Mullen and Interim Athletic Director, Wes Yourth. 

President Eibeck stated she shares in the anger of others regarding the Athletics overspending.  The Athletics over spend was 4.2 million, a significant amount of money, especially at a time when we are seeking to reduce expenditures and still serve our students.   She reminded those present that Athletics has a long history at the university, going back before the founding of the NCAA in 1912.  Pacific has great pride in our athletes and our teams and they provide great visibility for Pacific in the locally and nationwide. She hopes that as we express our frustration, it doesn't cast aspersions on student athletes and coaches that weren't aware of the spending situation.                        

The President identified three questions:

  • How does this impact our financial strength?        
  • How did it happen?       
  • What are we doing to prevent future recurrence?               


The President explained that Pacific's finances are strong and we can weather the overspending due to a large amount reserve endowment. Last year the endowment grew by over 50 million. Moody's review one year ago maintained our high credit rating.  This is important in borrowing money and reflects our financial resiliency to the outside world.  We must on a year to year basis spend less money than we bring in. Overspending put us in red by $2M, but we have tapped our savings (reserve) fund to cover this deficit.  Budget cuts to the University will not be required to handle it, even though the Athletics deficit cannot be reduced in one year.          
It will take two years (FY20) to achieve a balanced budget.              

How could this have happened?  The President likened the budgeting and finance  system at Pacific to a "mom & pop" store instead of an institution with a $330M budget.  Each department has to track spending on shadow spreadsheets and it takes a while to compare against official reports.  University accounts aren't versatile, which limits report generation. It may take several weeks to figure out how it takes to run a clinic at the dental school.  The President explain Ken Mullen is working on a three year process to redefine the finance system's "Chart of Accounts".            

The President further explained the complexity of the Athletics budget.  Athletics spends money on Financial Aid, Operations, and Facilities.  Operations is the area of most concern.  Within Operations, 80% is covered by the University and 20% by sources more or less reliable: WCC, sponsorships, ticket sales, summer camps, facility rentals, & donations.  Their budget is put together in an antiquated way complicated by Athletics having many different accounts.  If Athletics had for example 25 monitored accounts, there are 75 others that had income and expenditures that are episodic. 

Athletics relies on the Athletics Budget Manager to track funds through the shadow spreadsheets.  If they don't have a good spreadsheet system, unrealistic revenue projections, too many non-financial tasks, and NCAA investigation tasks then things could spin out of control.  Budget information hasn't been traditionally conveyed to coaches, who do most of the spending. They're unaware of how much money they have month to month to spend. Additionally, Athletics (and other units) operated on anticipated donor money based on pledges before they were actually received.  Spending was allowed before those receivables were in hand. 

The reason the Budget Office didn't see the issue is Athletics does most of its spending in the spring and expected donor money wasn't received.  The President stated there are no signs of fraud or intention to steal. 

The President shared corrections to prevent Athletics over expenditure from recurring:

  1. A new Athletics Budget Manager will report directly to Business and Finance VP Ken Mullen, possibly shifting later to Ron Ellison, Controller.  This will ensure best practices. Athletics will still be using shadow spreadsheets for a few more years and the Budget Manager will focus only on the budget (VP Mullen will ensure this).       
  2. The Budget Manager will work very closely with the Athletic Director.  Interim AD, Wes Yourth is making sure the spreadsheets are up to date and budget information is being given to the coaches. 
  3. Financial Aid overspending will be controlled with multiple checks along the way.  
  4. Pacific will no longer allowing donor money or anticipated revenue to be spent in the year donated.  
  5. Pacific will transition to "All-Funds" budget for Athletics which will examine all revenue and expense accounts. 
  6. A new Chart of Accounts will be in place one year from this summer.  Information will be available immediately on budgeted funds and available funds. 
  7. Athletics budget will distinct in the overall financials that go to IPC and the Board of Regents.        
  8. Athletics budget will be shared quarterly with Athletics Advisory Board and the Institutional Priorities Committee.  


President Eibeck, VP Ken Mullen and Interim Athletic Director Wes Yourth took questions from the meeting attendees.                        

Q: There's been a constant battle in athletics that programs may incur or commit to costs (like NCAA playoffs) that aren't budgeted; how will you handle this?
                       

Ken Mullen: The University's contract management policy needs updating
President Eibeck: The update will begin this spring
Wes Yourth: There will better planning on scheduling and the use of "sport administrators" to improve scheduling and anticipating costs and revenue.                        

Q: $4.2 last year; what overall (including all ongoing commitments)? And where is the money coming from?  Why can't the Athletics budget be shared (more transparency) and why wasn't this done several years ago?
                       

President Eibeck: I'm estimating a gap of $2.2M this year (FY18), $1M next year (FY19), then in budget balance in FY20; this money is coming from reserves.  We're not going to cut any budget except athletics. Why not earlier?  These changes have been in the works by Ted and Ken for the last 2 years; Ken had to be on board for the change to the Chart of Accounts to happen, it would not have happened with the prior VP of Business and Finance. Ken and I have been identify the highest priorities but the NCAA investigation stopped all forward progress for quite a while.                        

Q: The fiscal year ends 30-June; didn't we know at close of FY?  Why did it come out in October?
   

President Eibeck: We knew in May that something was amiss, but needed to wait for the year to close to determine the magnitude.  We spent our time figuring out how to solve it and the issue was announced when we had a plan developed.  We told the Regents' committees first, then announced to the University community.                        

Q: According to the WCC comparison numbers distributed the University budget is 300M; Athletics is 21.5M which is about 6-7% of total budget.  Is this in line with other comparison schools?
                       

President Eibeck asked Wes Yourth to distribute NCAA figures for WCC schools, with median numbers (excluding BYU, which has Div-I football); highlighted comparisons. She stated that Pacific spent 17M in FY16 on Athletics just below the median. She confirmed there was a smaller overage that year.  Further, in FY16 Pacific provided more than the median. Total financial aid expenditures were 8.5M, median is 6.2.  Ted's philosophy (and coaches) is we should be offering more financial aid to our athletes and students. Operational expenses are less than median, compensation is right at the median.  Total expense are slightly below the median.  The President and VP Mullen confirmed Pacific is at the median in total expenditures compared to peer schools at 4.8.  The President indicated Wes Yourth had comparisons to aspirant peers too.                        

Q: But what % of total budget goes to expenses and scholarships? Is tuition remission included?
                       

President Eibeck: We tend to be very generous for our Student Athletes.                        

Q: How is it we're providing more than Universities in higher cost areas (bay area or Southern California institutions)? 10K more than Santa Clara and 8K more than Pepperdine per student athlete.
   

Wes Yourth: It's based on number sports per athletes; we have more teams and more teams that don't compete in WCC; swimming, diving and water polo teams and auxiliary conferences with more aid going to athletes who compete in non-WCC sports.                        

Q: Is student athlete aid both tuition and housing aid?  Especially Brubeck Commons?
  

President Eibeck: The University doesn't spend money on Brubeck Commons,  athletes are encouraged to live there and take their aid and use it to pay for housing.  It's their choice, they don't have to live there and we are not subsidizing. We don't have any ownership or leases with Brubeck Commons.                        

Q: We did have an agreement for student athletes with downtown University Plaza to put student athletes there, it was stated on the University website. I wondered if this was the same type of arrangement.
   

President Eibeck:  That hasn't been the case for a long time and will correct it on the website.

Q: Back to last year's expenses - there were enormous increases in game day and recruiting expenses especially in men's and women's basketball.  Wes has explained this reflects contracts that were signed way in advance but was also really a systems and management failure.  Isn't it a culture issue, NCAA was investigating Men's basketball when these overages were occurring.  Doesn't seem coincidental; eyes off the basketball.  Even if you didn't know how much money you spent... Reflects a culture of entitlement that connects to sexual harassment, grades manipulation....   

President Eibeck: Your observations are absolutely reasonable.  Your concerns are shared by the president and the board.  Technical fixes can go only so far; new Athletic Director needs to know what kind of university he/she is at and the athletics program at a level at which we can afford.                        

Q: I noted in one of your passing comments that the Athletics Budget in the year prior (FY16) had overspent...
     

President Eibeck: Yes, it was $2.2M.  That year things were supposed to change and then this year it was particularly shocking.                         

Q: That is scary and extremely disappointing, and the comment that we will support  Athletics at the level at which we can afford.  Does that mean hard choices be made?  Are cuts needed? Many academic programs are struggling to make good on  commitments to students.                        

President Eibeck: Yes, Athletics has been instructed that the University's contribution to the Athletics budget needs to be at the .45 median of the WCC. If Athletics can raise more money that's great but there is a limit to what the University is going to contribute. The President, Ken and Wes are identify the hard decisions on getting there by 2020. The challenge to getting there sooner is commitments have been made for multiple years (travel and financial aid).                        

Q: This situation looks like an embezzlement paradise with shadow spreadsheets, only tracking small number of accounts, mom and pop shenanigans. You said there is no evidence of fraud. Did a third party audit and can outcomes of be shared?
                       

Ken Mullen: Internal audit has been in Athletics for some time, looking at systems and testing transactions; no fraud has been found.   
President Eibeck: The Internal Auditor reports to the Board of Regents.   
Ken Mullen: Confirmed the Internal Auditor reports their audit results to the Board.  Chicago consulting firm members are working with Athletics staff now, looking at business processes, checks and balances, and what we can improve.  So we have two independent sets of eyes on this right now.                        

Q: Can you share the findings with faculty?                       

Ken Mullen: Probably the general findings but need to be careful about legal privilege.                        
PE: All audits are shared with the Board of Regents and we will be sharing the Athletics budget with the Athletics Advisory Board (and thus with the faculty).                        

Q: Overspending by a few million a year adds up, despite 10 million or more I've not heard of any "pink slips."  Now, I'm not advocating firings, but many faculty have asked for accountability.
                       

President Eibeck: I can't talk about personnel matters, but there are two key positions we're hiring into.                        

Q: University budgets going up faster than economy; athletics rising faster than the university budget.  A budget process that is byzantine.  "Div-I is important" and we have to have athletics that we can afford.
                       

President Eibeck: This discussion is happening across the country; unless you're a big football school, the cost is high for most universities.  She wanted to be involved in NCAA at Div-I as it goes through major issues; engagement is important.  Let what is happening externally play out (maybe 5 years for court cases [CTE, Paying Student Athletes]); if that continues to develop... Distinctions between Div-I and Div-III may be reduced over the next 5 years.                         

Q: Love to hear what those distinctions are and how they may ameliorate cost
 (NCAA doesn't have much track record in reducing costs)... maybe another time.                        

President Eibeck: Court cases (CTE, money in sports) and cable delivery reductions.                         

Q: Has anyone attempted to quantify value of Div-I Athletics?                        

President Eibeck: Great to discuss that in the spring. 
[Comment from an attendee: Consider the work of Andrew Zimbalist].                        

Q: Culture... many of the most scandalous issues for the University lately have involved athletics - The time to consider this issue is not later... it's now.  Yes, we can continue our commitments already entered into but it is time to seriously reimagine the role of athletics.
                       

Q: If FY16 overspending was $2.1M, what were over-budget amounts for prior years?
                       

Ken Mullen: About $1M per year for last four years.                        

Q: Were there any years recently when Athletics was on budget?
                       

Ken Mullen: No                        

Q: Do members of IPC know this?  Athletics is a black box in the budgeting process.  This situation illustrates the diminishing role of shared governance in finance. We have a fiduciary role to finances and when there is a continuing Athletics overage, Enrollment Management 5M deficit, etc. something is seriously amiss.
                       

Q: President Eibeck came in under a Board of Regents that was very pro-athletics and were enamored of Ted Leland's role.  There have been faculty who were stonewalled during the IPC process.  A critical question is, "Why isn't there transparency in the whole budget."  I'm on IPC and see only parts of the budget.  We're bright people and we can be creative with solutions.  I worry about costs in other areas, including IT and Student Life...   The Provost is very stringent with her budget!  There should be more transparency.
                       

President Eibeck: The Budget is structured with functional categories, rather than being broken out by division.  Yes, we can definitely do a better job.                        

Q: Pacific has 6500 students with budget of $300M.  While they're apples and oranges to compare, SJ Delta College has 19,000 students with $85M budget.
 

President Eibeck: The dental clinic inflates the budget significantly.                        

Q: Aid includes athletic aid; some student athletes are also eligible for need based aid; what is overall discount rate?
                       

President Eibeck: We're in the process of gathering that information; Lynn Fox has often commented that a large amount of aid goes to athletes.                        

Q: Who did the Budget Manager in Athletics report to?
                       

President Eibeck:  Ted Leland                        

Q: He was accountable for oversight. And he reports to your office.  It sounds as if the Athletics Budget Manager took the fall for this situation (described as inadequate system) and you've said academic integrity issues distracted him/her from their primary job.  Accountability seemed to target this individual when the President is ultimately responsible. In other offices there would be accountability by the VP's in oversight.
                       

President Eibeck: Yes, absolutely.  I tried to make that point in my memo and that is the way the Regents see it.  They look at me and say, "You're accountable".  Absolutely, yes sir.  We have to change the culture as well as the system.                        

Q: Recounting the University's history from the early 1990s, there was a $17M deficit in Athletics.  It led to WASC probation; this situation is not new.  At that time, the Board of Regents leadership changed and the books were opened.  Within 3 weeks, the chair of the Board was deposed and books sealed again.  Regents have an affinity for athletics that is unconscionable. We'll have a grand athletics program and facilities with no one to fill it because the university will have no educational program. I want to appeal to Athletics about the immediate disparity between student athletes and non-athletes.  Student athletes have many perquisites (meditation coach) while non-athletes wait six weeks for a mental health appointment or academic assistance. Athletics has to spend less and the money needs to come back over to counseling, student success, the retention center.  All of our students have to succeed.
                       

Q: When I arrived in 1972, the athletics program had a $3M deficit because of football.  That was 45 years ago and it's been that way ever since.  I hope you can be the originator of a change to the way Athletics is handled.   

III.      Executive Session
AC Chair Jeff Becker accepted a motion and second, passed to adjourn to Executive Session for discussion on the following items with faculty only present:
A.    University Budget Oversight                                    
B.    What's on your mind?  

Adjournment