On October 23rd, 2023, Newfoundland and Labrador’s Auditor General Denise Hanrahan participated in a segment on CBC’s show On The Go with Anthony Germain. The show’s description: “Memorial University has more vice presidents than other universities in Canada… they pay them more… and some execs are entitled to 95 days paid leave. The auditor general reveals a university where spending at the top – for the top – looks out of control.” See below a transcript of the episode:
Anthony Germain: Memorial University has some explaining to do about the way it spends money. Vice-President and Execs more numerous than at other comparable universities. They are paid top dollar even if they are relatively new. Some entitled to 95 days of leave, up to 95 days of leave, that’s one-third of the year off paid leave. On top of that, students who seen their tuition rise, there’s this finding per student Memorial University spends more on administrative costs than other universities, and those are just some of the findings in the Auditor General’s examination of how executive are paid. The government also asked Denise Hanrahan to examine the effectiveness of MUN’s oversight of its spending and operations and the Auditor General is in the studio with me. Denise Hanrahan, welcome to On The Go.
Denise Hanrahan: Hello.
AG: I don’t want to exaggerate, but parts of this report really left me speechless—ninety-five days of annual leave. Let’s start there. How does one qualify for 95 days?
DH: It’s the inclusion of an employer-paid short-term disability program, so they’re entitled to up to 60 days per incident in a year in addition to other leave and time off for Christmas and those types of things.
AG: So, that’s 19 weeks, I think.
DH: 37 percent, I think.
AG: 37 percent of the year?
DH: Well, that’s per incident, so if you have two incidents a year, of course, it could be more, but on average, we use up to potentially one incident a year and up to 95 days.
AG: So how does that compare?
DH: The province doesn’t pay for a short-term disability program for its employees, management and executive in the province are paid for a paid leave program, which is inclusive of all forms of leave, including sick leave, Christmas, family leave, those are all included in a rate that ranges from 25 to 35 days depending on service.
AG: 25 to 35 is the range, right? What do you make of 95?
DH: It was similar to the finding we had at Nalcor.
DH: Significant in comparison to the province for sure.
AG: Right, it just seems to me that in the private sector, that would be impossible to sustain.
DH: Most disability programs are employee-paid or employee-contributed. Certainly, if 1 in 3 days of a year, you could be off getting paid, you would think that would have a pretty significant impact. For us, its the combination of the compensation and the benefits that make comparability across the public service a challenge.
AG: Right, so if I called in sick, I could conceivably be off for 19 weeks before we had to have a discussion about short-term disability or other disability programs.
DH: Well, I’m sure you know they have their process for how you’re accessed and once you’re approved, but yes, the benefit exists, and staff can avail up to that amount.
AG: What concerns you about how much Vice-Presidents at Memorial University get paid?
DH: Well, the challenge is the quantity of Vice-Presidents is higher than the number at other universities we compared to, and the compensation certainly compared to the province when you’re looking at similar work, so that’s the accountability, the know-how, the aspects of the job when they are compared it’s the same work but upwards of double the pay.
AG: So, would you be comparing it to a Deputy Minister?
DH: Assistant Deputy Ministers in most cases.
AG: Okay, so an ADM. How many Vice-Presidents does MUN have?
AG: Seven, and I believe a number of them were named by the outgoing president. Would that be correct?
DH: So, the Board of Regents appoints permanently, but the president appoints interim or temporary.
AG: Okay, we’re going to come back to the Board of Regents cause when I read your report, I was kind of asking where was the Board in some of this? Now, when you take a look at the top-tier managers, your report says the base pay is about $130,000. Is that right?
DH: Yes, so we did a sample of positions across the executive and management, and so the sample are listed, the details are listed there, we compare them than against the equivalent jobs from a work output perspective with the province.
AG: Okay, and what was the comparison there?
DH: So, in most cases, there was significantly more compensation provided at Memorial University for the same work.
AG: Okay, so if you’re going to work for the government or MUN, it seems to me you’re going to make more at MUN whether you’re a VP or a manager.
DH: For the same level of accountability, yeah.
AG: So, we’ve been talking about the upper echelons. One thing that I think I mentioned in the introduction that is going to matter to a lot of students is your report says when it comes to administrative salaries, it costs per student, the figure is about $2,400, I think per student. $2369, something like that.
DH: Yeah, and the next closest to that is about 375 less. The key indicator for us, which was provided by an external third party, was the $893 per student that, on average, Memorial costs more administratively than all the universities we compared to.
AG: Okay, so one of the things I’m sure you appreciate, Ms. Hanrahan, in radio, sometimes numbers get lost, so I just want to make sure I understand this so if administrative costs are costing MUN students, so its more?
DH: Per student.
AG: Per student, okay, compared to other universities.
DH: Compared to the other universities that we compared to.
AG: Alright, so If I’m a student and let’s say I’m the kind of student who protested, my tuition has gone up, some of that increased tuition is going to pay a higher administrative cost than other universities.
DH: We certainly felt that the various findings we had in this audit certainly contributed to higher administrative costs.
AG: Any understanding as to why those costs would be higher than other universities?
DH: Well, we did find that compensation was higher than market, higher than the province, benefits were certainly higher, all of that is cost, and then you have the decentralized nature of Memorial in how it monitors its expenses. We weren’t able in this audit to be able to confirm that expenses had appropriate oversight.
AG: Okay, so some of those salaries and benefits we’re talking about before is what actually contributes to the administrative cost difference?
AG: Okay. Much of the report refers to the former president’s activities, for lack of a better word. There’s attention paid to Vianne Timmons’s authority over non-operating funds, and if I understand your report and I think this has to do with how the government transfers funds to the university, the operating funds being part. $190 million, how much oversight was there of how the president used or uses any of that $190 million?
DH: So, our understanding in our audit is that the $190 million, which is the non-operating funds, are not reviewed routinely by the Board of Regents. They are delegated to the president, the president’s responsibility. We couldn’t find any reporting or analysis on it. As a matter of fact, when we ever asked the Vice-Presidents who was responsible, they couldn’t tell us who was responsible for oversight of that $190 million, which is about a third of their budget of the whole university.
AG: So, I just want to be clear so the president could make the decision about how to spend any of that $190 million, and there would be no accounting or being held accountable for those decisions?
DH: It is not part of the university’s budgeted process. It’s not part of any routine reporting to the Board of Regents. It was not anything we could find documentation on that showed any level of meaningful analysis or oversight.
AG: Okay, so here where I have a question now and I don’t know if you could answer this, but the Board of Regents has what 30?
DH: 30 members.
AG: They’re fully aware there’s $190 million in operational funding?
DH: That is the policy that it is delegated to the president.
AG: So, why wouldn’t anybody on that Board say, madame or mister president, in this case, madame, can we ask you some questions about that $190 million and what’s being done with it?
DH: They most certainly could.
AG: What would happen?
DH: We could not find anything to indicate that there were questions asked with regard to it. We were told that that’s the policy, that’s the decision that was made, and that’s where the responsibility lies. You know you mentioned earlier about the grant and the percentage of funding I think this is some of the nuances of a university, so the province contributes $370 is my guess right now is the number. It’s about 78 percent of their operating revenue comes direct from the province in an operating grant. There’s other funds that come. If you look at their consolidated statements, you’ll see a different percentage, but the Board of Regents, from a financial update perspective, tends to get information at a very highly summarized level, but they do get information on the operating funds, not the non-operating.
AG: When you say a highly summarized, what does that mean?
DH: One page, one line for hundreds of millions of dollars and unless there’s a change in the budget, that is all that is reported, and they talk about the change. Nowhere near the level of analysis or evaluation that you would see on such a large entity that I would have expected when I know from a provincial perspective, the estimate book literally lists hundreds of dollars very specifically by expense type, by program, by department, it is the only time for example that the Board of Regents knows what the salary and benefits cost is when they get the audited financial statement because that how that’s categorized. Their reports are more based on either a location or something like that.
AG: I just want to be when you say highly summarized, how often did the Board get these highly summarized reports?
DH: So, we’ve been told that the Board was expecting to get three a year in financial reports that come to the Board. Over 45 months, we found it happened five times, and of those five times, it was a one-page report that talked about those operating funds at a very high level and for their budget process, they only talked about money that they change or move in the organization because the expectation is that if you don’t spend your money this year, you get it next year it’s kind of how their operational model works so the Board would get very high level like you know $100 million level one line this is the amount of money that’s going to be spent in this location, and that would come a memo that would come to them from their sub committee, their finance and audit sub committee below the Board of Regents level and we found there were minimum analysis, there was minimum evaluation that was provided to the Board of Regents. We were aware that there was a former member on the Board of Regents who did ask once for additional financial information, and it was provided, but it wasn’t repeated.
AG: A former member?
DH: A former member of the Board, from what I understand.
AG: Now, just to be clear here, you said one would expect there to be three kinds of communication with the Board per year, and you found five?
DH: Five over 45 months.
DH: Was not three a year.
AG: So, it wasn’t three a year.
DH: We would have expected at least eleven, and one could argue is three a year the right number?
AG: These are like one pagers? Two pagers?
DH: One to two pagers depending on what they needed to be told and what was going on with respect to the issue, but you know, certainly our findings in this report speak to significant challenges with respect to appropriate financial oversight.
AG: The Board of Regents, some people describe as the watchdog, the Board that’s trying to seek accountability. I mean, what do you do if a president’s not appearing before you? Do you just sort of sit back and not ask any questions?
DH: The Board of Regents is charged with governance of the university. Of course, as you know, they have a Senate that’s fundamentally about academics, and that wasn’t part of our audit, but the Board certainly is, you know, responsible for that administrative and governance of the university and to find that a third of their expenses, for example, is not sitting at their table and that for the remaining amount, it is extremely highly summarized it is a challenge to know what governance is happening from that level and even from the president and vice-presidents down the autonomy that they have to spend and to hire resulted in redundancies in that decentralized organization.
AG: You also looked into some specifics in the report. I mean, I could talk to you for the next three hours, I suppose. You looked into the former president’s office renovation and decoration. Tell me about the cost and the furniture for both her office and her home.
DH: So, the renovation was, I think, in excess of $50,000. I believe that was probably publicly known before, and of that, over $16,000 was for furniture. There was $2,700 spent to purchase a chair and a desk for her home, and we found that when she left the organization, they did ask for the desk back, but the chair remains outstanding.
AG: Okay, so missing chair. Your audit also points out that the president received a monthly chair allowance of $1,000, and yet she submitted a bill for a mechanic, I guess or some kind of car maintenance. Why is that an issue?
DH: So that was part of this multiday trip that happened across the province. We would have expected that the $1,000 car allowance would have covered all car costs related to that trip, but as it turns out, in addition to the car allowance, there was a claim made related to car maintenance with respect to that 24-day trip.
AG: But generally, a monthly allowance of $12,000 a year wouldn’t it be considered it’s part of what that allowance pays for?
DH: It would cover all costs of a vehicle normally.
AG: I guess the one that’s jumping out at everybody, how much do the president and MUN spend on what you describe as custom-made chocolates?
DH: So, over the scope of our audit, it was almost $2,300.
AG: And that’s over how many years?
DH: 3.75 years, and it was purchased by, I think, 17 different executive and non-executive entities across the university, so it was a very common practice it appears to buy these chocolates.
AG: But you know, every Christmas, companies give out stuff. Is that unreasonable? Is this one of those ones that sound worse than it is?
DH: In my opinion, it’s the public sector, and I don’t think anybody anticipates their tax dollars are getting spent to buy Christmas presents.
AG: There’s one that really angered me when I read it. MUN paid $2 million in a license software package, and the university itself determined that it wasn’t working out, that it wasn’t efficient and yet they renewed it. What are the details there?
DH: So, in the process of testing actually membership fees, we came across this $2 million contract that seemed unusual. It was actually miscoded into the wrong account. When we looked at the contract, we were able to see that it was for this software. There had been an assessment done by the internal audit group in Memorial who said that it was underutilized and inefficient and recommended not renewing the contract. That was in September of 2021. In December, Memorial renewed it for five years with a two-year opt-out clause. This was a finding that we found as we went through the audit, and this is one of my great examples of the power of the audit because subsequence to the end of our scope period when we go through validate our findings, we’re happy to report that the university triggered termination of that contract now.
AG: Well, can they get the $350,000 back?
DH: I wouldn’t know if they can, but we can stop paying it in the future.
AG: So, they paid two million dollars, they realize it’s not working out, they get a recommendation not to continue with it, but yet they renewed it anyway.
AG: So why did that happen? Who wasn’t listened to?
DH: Good question for the university, certainly.
AG: I had a feeling you were going to say that. I want to wind this down, but there’s one more dubious thing the university you said paid $65,000 to a consultant who was a member of the Board of the Harlow campus, but this consultant never provided a report that was part of that person’s contract and what’s the problem with this?
DH: So, part of our assessment was looking at, you know, the Harlow campus and their expenses. This particular contract, when we looked at it, hasn’t been satisfied because there hasn’t been a final report that was filed. Normally, that would have been our finding the contract wasn’t fulfilled, but as we looked at it, we realized that the person was a member of the Board, and they didn’t declare any kind of conflict and certainly led us to the finding with respect to MUN’s policy with respect to perceived or real conflict.
AG: Is it possible that this person was terminated before they had a chance to finish the contract?
DH: Not that we’re aware of, and as a matter of fact, we know in the subsequence, after our December 22 period, the person is no longer on the Board.
AG: Okay. The term scathing doesn’t really seem to do this audit justice, and I know you do this work to ensure better use of how public monies are spent, but this really sounds as though MUN is, to some degree, you know, off the rails. How does MUN fix this because they have accepted recommendations before and internal audits? How does MUN address what you have outlined and what I think is a devastating audit?
DH: Our purpose is impactful audits, its positive change, that’s our goal as accountability, these as fixable things. So, we were very particular in the wording we used for our eight recommendations to the institution because we really believe there are concrete actions that can be done and can be done pretty quickly to deal with some of these issues. My office always follows up on our recommendations, and can rest assured we’ll certainly be looking to see if they’ve satisfied some of the issues that we’ve drawn out, and certainly that’s why we had those recommendations.
AG: Alright, Denise Hanrahan, as I said, I could speak to you for, I think, the entire show today, but I can’t do that because some people will say, “Okay, we got the point, Anthony.” I appreciate you coming in. Thank you very much.
DH: Thank you.
AG: That’s Denise Hanrahan, this province’s Auditor General with quite the report, which is available now. Cabinet released it, and it’s there online if you want to check it out…. I guess journalistically, a question is, the vice presidents and the upper leadership identified in the audit are the ones who will also be in charge of managing whatever strategy they’re going to come up with. It’s going to be very interesting to be a fly on the wall whenever the next meeting is among the executives and the president at Memorial University, I suspect.
Matt Barter is a fourth-year student in the Humanities and Social Sciences Faculty at Memorial University of Newfoundland, majoring in Political Science with a minor in Sociology. He enjoys reading thought-provoking articles, walks in nature, and volunteering in the community.