FARGO -- The North Dakota State Board of Higher Education were publicly briefed on the Dickinson State University Foundation's problems Thursday, but they had nothing to say about the issue on the record in a meeting in Fargo..
This was after North Dakota University System interim Chancellor Larry Skogen presented the ongoing financial and accounting problems that the foundation is dealing with to the board.
When asked if they had any questions, board members were silent. DSU President DC Coston was then asked to address the board, but he also declined, and members quickly moved on to another issue.
Skogen said the reason the board did not have questions was because they were also already briefed on the subject prior to the board meeting.
The interim chancellor’s presentation to the board comes a week after Attorney General Wayne Stenehjem announced that he would be filing a legal motion to push the foundation into receivership.
Meanwhile, Skogen told the board in his presentation that the main point of concern is that the foundation's affiliation with the university has pulled DSU's Composite Financial Index, a type of credit rating, from 4.19 in June to below 1.0 currently. That will prompt the Higher Learning Commission, the university accrediting organization, to look into the issue.
Skogen said the review is not tied to concerns over the academic programs of an institution and in a worst-case scenario, the university will be subject to a financial review by the HLC.
"The bad news is the fact that DSU could be dragged back into a Higher Learning Commission process by no fault of its own," Skogen said, adding that the issue was not reflective of DSU.
However, in an email earlier in the week, John Hausaman, a spokesperson for the HLC, wrote, "Since the Foundation is a separate entity from the institution there would not be a direct impact on the institution's accreditation. If there were an affect on the institution's resources or financial health, there could possibly be concern for our standards regarding resources and structures, but as of now there are no accreditation issues regarding that area."
Skogen also reported that he has known about the foundation's troubles since he took over the interim chancellor's position in 2013. He said, since that time, the university system has heard concerns from Coston about the foundation's finances, the absence of an operating agreement between the foundation and the university, and the lack of communication between those two institutions.
Skogen's comments about the timeline of the foundation's problems show that the university system has known about this issue for some time. In previous interviews, Skogen said the university system had only become heavily involved in the problem in May of this year. However, during his statements at the board meeting, Skogen said Murray Sagsveen, the system's chief of staff and ethics director, has been focused on the foundation since his hiring in September 2013.
Skogen said the reason he and the system's staff did not inform the attorney general about the foundation's problem earlier was because they did not have enough evidence to present a solid case. He said the 2013 qualified audit from the Dickinson-based accounting firm Brady Martz and the August 2014 draft focused review performed by Fargo-based accounting firm Eide Bailly was not enough to warrant informing Stenehjem.
It wasn't until the foundation was scrambling to fill its top leadership positions and struggling to fix accounting problems that had been known since September 2013 that Skogen said he could bring the issue to Stenehjem's attention.
The announcement of the now serious state of the foundation's, and in turn, DSU's financial health provides insight into how these issues could affect the university.
In June, Skogen said that DSU's independent financial index rating was 4.19, but Skogen said with the foundation -- an affiliated organization -- calculated in, the financial index of the university was dropped to 1.18.
Based on the most recent foundation financial information, Skogen said the financial index may now be below 0.79.
He said that joint calculation is required by the HLC and that a financial index rating below 1.0 is a concern to that accrediting agency.
Skogen said the financial index of all universities are reported to the HLC each year. He said when an institution reports an unacceptable financial index score for two years in a row, the HLC's financial review panel is required to monitor the organization's financial health.
Skogen said he knows there are two main concerns for stakeholders involved.
"One, how does this affect DSU accreditation? And two, what is the future of the DSU Foundation and its current assets," Skogen said.
Skogen said people should not be worried about the university continuing to provide higher education to its current and future students.
"Students, prospective students and their parents may rest easy knowing that DSU continues to deliver a fully accredited excellent education," Skogen said.
Skogen said that donors, too, should be confident in the state's intent to restructure the foundation.
"While there is currently a rough patch through which the foundation is currently traversing, rest assured that in the end there will be once again confidence and good works," Skogen said.
He also emphasized the point that the controversy surrounding the DSU Foundation should not reflect upon university foundations in general.
"Millions of dollars are raised each year by our foundations and used for the benefit of your institutions and our students," Skogen said to those in attendance at the meeting. "But these are private organizations. Their funding is through the raising of private dollars. Their governance is by foundation boards, made up of good loyal individuals who dedicate their personal time to the betterment of the institutions they love."
Skogen said there are 25 affiliated organizations like the DSU Foundation in the state, and that as a whole, they fulfill the purposes that they were created for.
"Routinely, these foundations are operated extremely well and meet the purposes of serving the institutions to which they are affiliated" Skogen said. "However, there will be exceptions."