Tuesday, August 05, 2014

How 'bout Them Regents!!

August 5, 2014, 12:45 p.m.

Note: UPDATES are provided, below, as they occur.

Excessive Expenses vs. Petty Punctiliousness

Every once in awhile the Iowa Board of Regents comes up a whopper that, admittedly, can be viewed from a number of angles. It's just that it produces either laughter or tears anyway you look at it.

Now they've done it again with the global business consulting conglomerate they agreed to pay millions of dollars to suggest ways their already-penny-pinching universities might become more "efficient." See, "Delight Consultants: How to Increase UI's Iowans," June 14, 2014; "What Is It With the Iowa State Board of Regents?!" Iowa City Press-Citizen, May 16, 2014, p. A7, embedded in "Iowa's Economic Foundation? Graduate Education & Research," May 5, 2014; "April 1 Update: Early Deloitte Efficiency Proposals; Early Revelations Shock UI Faculty, Staff," April 1, 2014; and "UI Says, 'Deloitted to Meet You,'" March 29, 2014, with ongoing updates.

This morning's Gazette brings us the latest in this tragi-comic series. Vanessa Miller, "Consultant Expenses $220,000 Without Receipts; Regent Says Board 'Should Go Back and Review This,'" The Gazette, August 5, 2014, p. A1.

As the headline suggests, apparently this Regents' effort to uncover previously unknown possible "efficiencies" in higher education was itself somewhat lacking in minimal efficiency. The Regents simply agreed to pay the "expenses" of their new best friend's undertaking, with its ever-escalating price tag of millions, without any agreement regarding receipts, per diem, or other limits. Isn't that an "efficiency" taught in the first semester of business school?

At the outset, this raises the possibility that it is Iowa's state universities that ought to hire a consultant to look for possible "efficiencies" in the Regents' operations -- since the money the Regents unnecessarily spend is that much less available for educating Iowa's students.

Second, the universities are required to monitor employees' "expenses" with an army of bean counters of the most petty punctilious persuasion. Actual receipts must be filed, and may even be challenged. So here is an example of the Regents willingness to put more trust in a bunch of strangers from a global conglomerate than they are willing to accord their own faculty and staff members -- either that, or a lack of knowledge of their own standards and procedures, or a simple sloppiness in overlooking the need to come up with some way of addressing the issue of a contractor's expenses.

Third, while I would never advocate any institution operate, as the Regents did in this case, with no attention at all to "expenses," if one is truly interested in "efficiencies" I do think there is much to be said for the per diem approach. Can you imagine how many person hours are involved in a large institution that insists every item of an employee's reimbursable travel expense, no matter how small, be accompanied with the original receipt? The employee must gather, sort, and save each receipt, and then itemize each expense, and accompany the reimbursement form with each little scrap of paper. There must then be an institutional staff of individuals who receive, examine, and match to the form each receipt. When there are questions or ambiguity on either end, there will be phone calls and emails. If disputes arise there must be some procedure for their resolution. Future disparities will occasionally show up when the ultimate reimbursement does not match what was submitted on the form. If the employee is smart, he or she will make machine copies of everything. And all of this will have to be filed both by the employee and the bookkeeper/accountant.

With a per diem, by contrast, an estimate is made of what reasonable mileage, hotel and meals would be, per day, and that amount is given the employee. If he or she decides to walk instead of drive, sleep under bridges, and beg for bread in the streets, they can keep the per diem. On the other hand, if they'd like to stay in five-star resorts and eat at gourmet restaurants they can do that -- paying the increase over per diem out of their own pocket. Nobody needs to collect receipts. Nobody needs to confirm requests for reimbursement. You want efficiency? That's efficiency.

I don't know if I've ever billed the UI for expenses; certainly not for as far back as I can remember. But I'm told what the UI is forced to do is the worst of all possible worlds: a per diem is designated, but not paid; it is merely the maximum an employee can be reimbursed in exchange for the actual expenses supported by detailed original receipts.

So that's the possible win-win out of this late-night-talk-show-quality episode: the Regents learn that (a) they have to do something about controlling contractor's expenses, and (b) if they are truly looking for efficiencies, they might try putting faculty and staff on per diem allowances with no requirement for receipts.
_______________

UPDATES
August 6, 2014

(1) Yesterday (August 5), as noted and linked above, The Gazette provided the story that inspired yesterday's blog essay. Today (August 6) its editorial, reproduced below, took a similar approach to the issues. Editorial, "Regents Should Seek Receipts," The Gazette, August 6, 2014, p. A8.

(2) With a masterful sense of timing, Deloitte has responded to the embarrassing $220,000-plus unverified "expenses" story with the announcement that the savings its efforts are going to bring about -- from just one of its little ideas among many -- will save the universities $193 million. The idea? Stop favoring Iowa businesses and workers with the universities' purchases, and shop from the lowest cost (third world wages) global conglomerates instead. (a) That may be an idea, but it's not necessarily a good idea. (b) Even if it were, it might not be politically possible; it's an "academic," "theoretical" suggestion of the kind for which "ivory-tower professors" are often ridiculed. (c) In any event, it's the kind of thing that everybody knows, for which Deloitte should not be given credit as an excuse for its $3 million-plus contract and $220,000 expenses. The Iowa Legislature, Board of Regents, and universities' administrators may or may not know precisely how much more they are paying for in-state purchases, but I rather suspect they are all very much aware that their purchasing preferences sometimes produce higher prices. Vanessa Miller, "Deloitte Projects Savings at $193 Million; Regent Concerned About Disadvantaging Iowa Companies," The Gazette, August 6, 2014, p. A1.

(3) Although no one has commented about this, I want to concede that my blog essay's description of per diem expenses practices in general, and at the state's universities in particular -- while well within the "poetic license" of a blogger -- are not, and are not intended to be, precise explanations of the standards, practices and procedures employed. Anyone who wants to explore that level of detail might want to begin with this publication and the links it provides: University of Iowa Travel Department, Travel Manual: Guide for Travel Policy, Payment Options, and Travel Related Processes," October 29, 2013. For example, receipts are required on some occasions for some items, but are not literally required for all expenses within fixed per diem guidelines. However, the rules do limit employees' reimbursements to their actual expenses -- that is, they are not entitled to receive the entire per diem (as some institutions provide), only the portion they've actually spent. Because this "honor system" could lead to abuses and institutional challenges, any reasonably prudent employee will probably be collecting all receipts anyway in the event they are asked to produce them later.

August 7, 2014

The response was swift: Vanessa Miller, "Regents to Require Receipts from Consultant; Change Comes After News Report on $220,000 Expenses to Date," The Gazette, August 7, 2014, p. A1.

August 23, 2014

A most bizarre report showed up in the Des Moines Register online edition, MacKenzie Elmer, "Academic Review of Regents' Universities Delayed," Des Moines Register, August 21, 2014. Apparently Deloitte has had a sub-contractor since January, KH Consulting, to help with the "academic" portion of its multi-million-dollar efficiency study on behalf of the Regents. Now Deloitte's decision to cast KH Consulting adrift has thrown even more delay into this ever-more-pricy endeavor.

For starters, since the Regents say they are looking for "efficiencies" in what are, after all, academic institutions, if Deloitte is sufficiently unsure of the adequacy of its "core competency" (improving efficiency in commercial institutions) to deal with Iowa's universities, perhaps that should have been taken as a sign that the Regents just might have selected the wrong global conglomerate consultant for what Deloitte calls the "academic review" portion of the project. See "UI Says, 'Deloitted to Meet You,'" March 29, 2014.

Joe Gorton, a UNI professor and leader of the faculty union, is quoted as saying, "I started publicly and privately raising red flags almost immediately regarding KH. For one thing, their analytical methodology was completely suspect and it was a real concern. So far this efficiency study, for the academic portion, seems to be remarkably inefficient."

Why were the Regents unable to see this? Even if they couldn't, why would they ignore Gorton's warnings? Even if the Regents weren't initially troubled by this evidence of Deloitte's inadequacy when it signed on KH Consulting in January 2014, wouldn't you think they would at least take as much interest in the selection of their "academic" sub-contractor as their prime, corporate consultant? And yet the Register reports, "Regent Larry McKibben, efficiency review committee chairman, said the decision to replace KH Consulting was made about a week ago by Deloitte Consulting. . . . 'I don’t micromanage who Deloitte brings in,' McKibben said. 'It was at their recommendation.'” Really? For the Regents to participate in the selection (and now dismissal) of the consultant who actually does the "academic review" portion of the study would be "micro-managing"?

Apparently, KH Consulting has been working away on its June-December assignment -- 1100 hours for $350,055. This is nearly the end of August. So how much work product have they produced, and what have they been paid? The Register says "its unclear." Joe Gorton says, "Faculty have already put a lot of time and effort into gathering data for KH Consulting’s review."

The solution? The academy's Keystone Cops are sending in their star quarterback, currently UI President Sally Mason's Chief of Staff, Mark Braun (known to the Regents as a former Regents' staffer). The chant goes up, "Mark Braun, he's our man, if he can't do it nobody can." I think that's right. He knows the players and has the experience. But it just may be that "nobody can." At a minimum, it's a little unfair to send him into the game when the team's getting beat by a score of 56-6 and there's only five minutes left in the fourth quarter. There are at least some limits to what even a Mark Braun can do with this disaster. Vanessa Miller, "Mason's Chief of Staff to Lead Efficiency Review of Iowa Universities; Braun Taking Leave of Absence for Temporary Role," The Gazette, August 22, 2014, p. A1.

Now, for those who would like to follow this ongoing saga in greater depth, here is a:

Chronological List of Newspaper Coverage, Feb. 11-Aug. 22, with Links to Full Text

Vanessa Miller, "Iowa Regents Choose Consultant for Efficiency Review, Spend $2.5 Million; Study Seeks to Identify Ways to Maximize Scarce Resources, Find New Efficiencies, Seek Out Collaboration," The Gazette, February 11, 2014

Vanessa Miller, "Protestors Interrupt Iowa Board of Regents Meeting; Protest Over Firm Hired to Audit Iowa's Public Universities," The Gazette, March 12, 2014

Vanessa Miller, "Iowa University Heads Pitch Performance-Based Funding Ideas; Performance-Funding Task Force to Make Recommendations in June," The Gazette, March 13, 2014

Vanessa Miller, "Iowa Universities Take Part in Efficiency Review; Deloitte Representatives Will Participate in UI-Centered Public Forum on Friday," The Gazette, March 24, 2014

Vanessa Miller, "UI Students, Faculty Express Concerns About Efficiency Review; Forum Is First of Three," The Gazette, March 29, 2014, p. A3

Vanessa Miller, "Efficiency Review Consultant Requested 230-Plus Items From Universities; Deloitte Consulting LLP Delivered Its 'Initial Data Request' March 13," The Gazette, April 2, 2014

Vanessa Miller, "Iowa Regents Have No Preconceived Notions About University Cuts, Efficiencies; Analysis Will Determine Core, Non-Core Elements to University's Mission," The Gazette, April 2, 2014

Vanessa Miller, "Regents to Pay More to Find, Implement University Efficiencies; One Board Member Says He's Been Impressed With Consultant's Work," The Gazette, June 4, 2014

Vanessa Miller, "Regent Efficiency Review Identifies Opportunities; Initial Report Provides Few Specifics," The Gazette, June 11, 2014

Vanessa Miller, "Iowa Regents Expect to Save $30 to $80 Million a Year in Efficiencies; 17 Opportunities Identified as Having the Most Potential," The Gazette, June 16, 2014

Vanessa Miller, "Iowa Regents' Longer Efficiency Report Lists 175 'Improvement Opportunities;' UI Hosts Public Forum Wednesday" The Gazette, June 17, 2014

Vanessa Miller, "Board of Regents Consultant: There Could Be Job Adjustments, Consolidations," The Gazette, June 18, 2014

Vanessa Miller, "Iowa Regnt Task Force to Discuss Longer List of 'Opportunities' for Universities; Implementation Will Be Monitored, Officials Said," The Gazette, June 24, 2014

Vanessa Miller, "Iowa Regents Could Approve Spending Money on Efficiency Review; Contractor Expected to Present 'Sourcing and Procurement' Strategies," The Gazette, July 29, 2014

Vanessa Miller, "Iowa's Public Universities Get $220K Bill Without Receipts from Consultant Firm; Iowa Regent Says Board 'Should Go Back and Review This,'" The Gazette, August 5, 2014, p. A1

Vanessa Miller, "Deloitte Projects Savings for Iowa's Three State Universities at $193 Million; Regent Concerned About Disadvantaging Iowa Companies," The Gazette, August 6, 2014, p. A1

Editorial, "Regents Should Seek Receipts," The Gazette, August 6, 2014, p. A8

Vanessa Miller, "Iowa Regents to Require Expense Receipts from Deloitte; Change Comes After Gazette Report on $220K Expenses to Date," The Gazette, August 7, 2014, p. A1

Vanessa Miller, "Regents' 'Transparent, Inclusive' Meetings Remain Closed; Open Meetings Proposal Could Cover More Advisory Groups," The Gazette, August 10, 2014, p. A1

MacKenzie Elmer, "Academic Review of Regents' Universities Delayed," Des Moines Register, August 21, 2014

Vanessa Miller, "Mason's Chief of Staff to Lead Efficiency Review of Iowa Universities; Braun Taking Leave of Absence for Temporary Role," The Gazette, August 22, 2014, p. A1

# # #

1 comment:

Nick said...

Notice Regarding Advertising: This blog runs an open comments section. All comments related to blog entries have (so far) remained posted, regardless of how critical. Although I would prefer that those posting comments identify themselves, anonymous comments are also accepted.

The only limitation is that advertising posing as comments will be removed. That is why one or more of the comments posted on this blog entry, containing links to businesses, have been deleted.
-- Nick