News 9 Investigates: University Of Oklahoma Overspending

<p>James Gallogly's first action as president of the University of Oklahoma this summer spoke volumes -- he fired several of his renowned predecessor David Boren's top executives, including all of the senior financial officers.&nbsp;</p>

Thursday, October 4th 2018, 11:20 pm

James Gallogly's first action as president of the University of Oklahoma this summer spoke volumes. He fired several of his renowned predecessor David Boren's top executives, including all of the senior financial officers.

In an interview last month with News 9, Gallogly said, neither they, nor apparently anyone else, had a grasp on the overspending that had been going on at OU for years.

A News 9 investigation, however, had uncovered quite a bit of evidence of overspending.

Accumulated in recent years through numerous Open Records requests, thousands of travel receipts, reimbursement forms, and other expense data painted a picture of the state's flagship university ignoring frequent financial red flags.

"I believe that the prior people responsible for the accounting," President James Gallogly told News 9, "did not have a good grasp of what was going on."

President Gallogly has made it his mission to have a complete grasp of what's going on. He undertook that mission by going 'back to school.'

"I lived in a dorm for three months," Gallogly noted, "[and] my wife was there with me."

From April through June, Gallogly says they lived in Headington Hall. He says he spent significant time visiting with students, faculty, and staff, but the rest of the time had his head in the books - OU's financial books.

Gallogly, who has a law degree from OU and worked for years as a senior executive at Conoco Phillips, says it was time well spent and very revealing.

"What I was finding was significant inefficiencies," Gallogly explained. "I came from the private sector, and things would get done in a much faster way, in a much cheaper way."

An example of those inefficiencies, he says, is the fact that OU is still using paper time sheets. Another example, and one that is more emblematic of the problem he's trying to solve, he says, is that the budget is replete with silos, making it difficult for anyone to get a complete picture of the university's financial standing.

"I discovered on July 2nd, my first day in office, that we had significant items of expense - rent - that we were paying to the Cross Apartments," Pres. Gallogly said, referring to the new, third-party upper-class housing at Asp Avenue and 4th Street.

Gallogly says both he and the OU Regents had been told that the school had no financial responsibility for any of that. "Today," he stated, "I know that we have 7-plus million dollars a year of expenses related to that, and prior management told me that was zero."

For someone whose family has invested millions of dollars in OU over the years, this was unacceptable. In the same vein, he says, the discovery that the school was staring at a $15 million operating deficit for FY 2019 and $1 billion in total debt was also unacceptable.

"The people that are responsible for that are the financial officers," Gallogly pointed out, "and you saw that, on day one, we said the CFO is gone, and auditor is gone, and the head of the administration is gone."

Weeks later, OU's chief diversity officer, former state Senator Jabar Shumate, resigned after an audit revealed "a significant misuse of university assets." Allegations against Shumate included filing false travel claims and using a university vehicle for personal travel.

Shumate has denied the allegations.

Examination of Expenses

"We've started a process of auditing expense accounts," Gallogly told us, "and looking for who the large spenders are."

News 9's Open Records requests have revealed big spending, and also questionable spending:

  • The "lab supplies" a faculty member purchased at Office Depot to ensure that his "researchers [were] properly equipped" included farm animal erasers, scented pencil pouches, colored pencils and a long list of other items that happened match up with items on his child's school supply list.
  • Another professor appeared to take frequent advantage of OU's 'working meals' policy, letting taxpayers foot the bill for dozens of meals with colleagues all over Norman "to discuss research." The policy allows faculty or staff to expense meals when they "enhance or extend the quantity or quality of work."

More than anything, though, the records focus on travel expenses, which have skyrocketed recently -  from $22 million in 2011 to $36 million last year, an increase of 62 percent.

Expenses like this have something to do with that:

  • Travel receipts show certain faculty flew first class, even though OU's travel policy clearly states that "Air travel accommodations should be limited to coach class airfare only."
  • Travel card expenses from 2016-2018 show various faculty and staff stayed in luxury hotels (e.g., Ritz Carlton, Four Seasons, St. Regis), despite the travel policy saying that is not acceptable.
  • Receipts show a professor, who was on sabbatical, requested reimbursement for the maximum per diem rate for meals, even though his lodging contract included breakfast daily and dinner Monday through Friday.

There are also documents suggesting certain professors planned summer research around family vacations faculty, with some personal travel costs born by taxpayers. Also, publications show that certain full-time OU faculty are also listed as full-time faculty at another university.

These are just some of numerous potential misuses of university funds and/or violations of school policy that News 9 and News 9 sources have brought to the attention of authorities at OU.

"There was inappropriate spending at OU," stated Jonathan Small, President of the Oklahoma Council of Public Affairs, a conservative think-tank in Oklahoma City.

What, or Who, is to Blame?

Small has been a frequent critic of OU, and of higher education, in general, for what he and other like-minded policy analysts see as wasteful and improper use of public funds.

Since the start of the decade, OU has seen its annual support from the state drop by about $30 million. Over that same period, in-state students saw their tuition and fees go up 24 percent, and total spending at OU continued to climb, up more than $100 million.

"What's clear," said Small, "is that there wasn't a culture at the university that was focused on how do we administer an education to our students in the most efficient way possible."

Small and other critics have not been shy in stating that the university's current financial issues can be blamed, at least in part, on what they claim was former President David Boren's lack of concern with spending efficiency.

Asked if he blames Boren for the 'mess' he says he's inherited, President Gallogly said, "I'm not here to pass blame to anybody, I'm here to help fix problems...what I'm going to do is focus on tomorrow, and to do that I have to understand a bit about what happened in the past.

"A lot has happened [at OU], in a very, very positive way," Gallogly went on, "and we can thank David and Molly Boren for those things; we need to build on that. There's always opportunities for improvement, we're going to make those improvements."

(Following a recent interview for a different story, News 9 asked David Boren if he had anything he wanted to say in response to Mr. Gallogly's statements about OU's financial problems; Boren politely declined, saying it would not be constructive or appropriate, and that this was 'his time', referring to his successor.)

Improving the situation begins, Mr. Gallogly says, with not spending more money than is coming in.

"I think the culture was broken," he allowed, "but we're in the process of fixing those things now."

President Gallogly has experience fixing financial messes. The 66-year-old native of Canada took his last employer, petrochemical giant LyondellBassell, from bankruptcy to boom in a few short years. Taking over as CEO in 2009, the company was $20 billion debt. He says, when he brought the company out of Chapter 11 status a year later, shares were trading around $17. Within a few years, LyonellBassell's stock had soared to $115/share.

Gallogly envisions similar success at his alma mater, and says he is excited at the prospect.

"I am," Gallogly said, "that's why I came. I'm doing the most important work of my life."

Attached are spreadsheets OU's travel expenses for OU-Norman from 2016 through April 2018: 

Attached are spreadsheets OU's travel expenses for the Health and Sciences Center: 

Here is a copy of the University's 'General Travel Policies': 

Here is a copy of the University's 'Food, Beverage and Gift Expense Policy': 



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