Texas Southern University Performance Review February 1999

LETTER OF TRANSMITTAL February 26, 1999 The Honorable George W. Bush The Honorable Rick Perry The Honorable James E. "Pete" Laney Members of the Texas Legislature State Auditor Lawrence Alwin Commissioner Don Brown, Ph.D. Ladies and Gentlemen: I am pleased to present a final report on the Comptroller's performance review of Texas Southern University (TSU). The Comptroller's office began its review of TSU in February 1998, at the request of a university regent. Months of work ensued, interrupted by periods of considerable political and administrative turmoil at the university. The information presented in this report has been reviewed by TSU administrators and the timelines and strategies have been designed to reflect dates that the individuals assigned to each task believe are reasonable. It also should be noted that work on implementing some of these recommendations already has begun, and some implementation strategies reflect tasks that are complete or in progress. The 124 recommendations in this report constitute a management plan for comprehensively reengineering TSU, a program that could help TSU remain vital and independent. Our recommendations could save TSU more than $14.8 million over the next five years, while reinvesting $10.6 million to improve educational services and other operations. We are grateful for the cooperation of TSU's administrators and employees and stand ready to assist the university as it continues work on implementing these recommendations. Sincerely, Billy Hamilton Deputy Comptroller Executive Summary PART 1 At the request of a Board of Regent member, the Comptroller's office began its performance review of Texas Southern University (TSU) in February 1998. After months of work interrupted by considerable turmoil surrounding TSU, MGT of America, Inc., the consulting firm contracted to assist in the review, gave oral presentations of the review's findings and recommendations to interested parties. In January 1999, MGT briefed the university's then-president, administrators, and regents, as well as the state auditor and key state leaders and legislators. At the request of several legislators, the Comptroller's review team returned to TSU in early February to update its draft report and issue a final document that reflects, to the extent possible, TSU's current condition and contains detailed recommendations, implementation strategies, and fiscal impact estimates that could be useful to the university. The information presented in this report has been reviewed by TSU administrators, and the timelines and strategies have been reworked to reflect implementation dates that the individuals assigned to each task believe are reasonable. In some cases, implementation of these recommendations already has begun. For more than two decades, TSU has experienced serious financial and management difficulties. Most recently, these difficulties include declining student enrollment, critical financial audits, potential losses of federal funding, and contingency appropriations by the Texas Legislature to cover anticipated cash-flow shortages. Warnings by the Texas State Auditor's Office and the Texas Legislature went substantially unresolved until, in frustration, the 1997 Legislature required TSU to take action or face being absorbed by one of the state's university systems: The Board of Regents of Texas Southern University shall establish a team of outside experts no later than September 1, 1997. The team shall work with the institution's administration to assist in establishing and implementing management and financial procedures and comprehensive internal oversight systems and controls at Texas Southern University, including finance and accounting, human resources, management information systems, planning and communications, and student financial aid. The team may include outside consultants, staff from the Comptroller of Public Accounts, or other appropriate agencies. The team shall establish a timeline and benchmarks for implementing policies, procedures, and control systems for each of the areas listed above. If the State Auditor determines that substantial demonstrable progress has not been made by Texas Southern University by June 1, 1998, in establishing, implementing, and maintaining necessary systems and controls, the State Auditor's findings and the reasons therefore shall be reported to the Legislative Audit Committee, after consultation with the Higher Education Coordinating Board, shall make a recommendation to the Seventy-sixth Legislature on placing Texas Southern University under the organization, control, and management of a university system. The Comptroller's office, in concert with the State Auditor's Office and Governor's Office, assembled several teams of experts to assist the university, including a team familiar with student financial aid and another team of consultants from KPMG Peat Marwick to assist the university in preparing and reconciling its financial statements. In December 1997, a TSU regent contacted the Comptroller's office and requested a performance review of the university to supplement the work of the expert teams called for by the Legislature. Understanding that past performance reviews by the Comptroller's office had improved the effectiveness and efficiency of various agencies and school districts, the university hoped that similar management improvements could be identified at TSU. The various teams met with a number of political and organizational obstacles and their work progressed slowly. In December 1998, lawmakers agreed to provide the university with additional state funding, but these funds were accompanied by a stipulation, similar to 1997's, that TSU rectify its long-standing financial problems by April 1999 or face takeover by one of the state's university systems. Understanding that much of the information contained in the draft report had not been updated since work on the review was interrupted in August 1998, the state leadership asked the present Comptroller to update the report's information and issue a final report. In February 1999, the position of TSU chief operations officer (COO) was filled, and Comptroller staff began working with the COO to update the report. While the review team was visiting the university, TSU President James Douglas was removed from office by the Board of Regents, and Dr. Priscilla Slade, the Dean of the College of Business, was appointed acting president. The chief financial officer also was removed and replaced with an interim appointment. On February 17, 1999, the State Auditor's Office issued a highly critical report, noting that of the five areas slated for improvement by the Legislature (finance and accounting, human resources, management information systems, planning and communications, and student financial aid), only two, management information systems and planning and communication, had demonstrated "substantial demonstrable progress." In response, TSU's president and members of the Board of Regents presented plans for making further progress by the April 1, 1999 deadline. Research Efforts With the help of MGT of America, the Comptroller's review team conducted surveys, public forums, and focus group sessions and interviewed university employees, members of the Board of Regents, students, parents, business leaders, and representatives from community organizations. In addition, the team collected comments from letters to the Comptroller's office and calls to the Comptroller's toll-free hotline. Selected information from the surveys, public forums, and focus groups appears in Appendices A through C. In addition, the review team analyzed data collected by the Texas Higher Education Coordinating Board. For purposes of comparison, five peer institutions within Texas were selected for their similarities to TSU in undergraduate student enrollment, minority enrollment, retention rates of first-time, full-time freshmen, and six-year graduation rates. The selected peer institutions were Stephen F. Austin State University, Prairie View A & M, Sam Houston State University, the University of Texas-Pan American, and the University of Houston-Downtown. In updating this report, Comptroller staff and consultants met with members of the TSU administration and analyzed the findings and recommendations. The recommendations contained in the present report have been reviewed by TSU administrators, who agreed to the associated timelines and implementation strategies, understanding that they are responsible for implementing each phase assigned to them. Acknowledgments The Comptroller's office and MGT of America wish to express their appreciation to the TSU Board of Regents and the university employees, students, and community members who helped with the review. Special thanks are due to Don McAdams, TSU's chief operations officer, for facilitating the final update of this report. Texas Southern University Originally established in 1947 to provide higher education to African American Texans who were unable to attend or denied access to predominantly Anglo institutions of higher education, Texas Southern University is now the state's largest historically African American institution of higher education. TSU serves about 6,300 students of varying ethnic backgrounds from many states and nations; more than 320 are international students. TSU is accredited by the Southern Association of Colleges and Schools (SACS) and includes eight colleges and schools: · the College of Arts and Sciences · the College of Pharmacy and Health Sciences · the

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