Yesterday, J. Michael Gower began his tenure as the university’s new Chief Financial Officer, a post created by President Robert L. Barchi in the wake of the UMDNJ merger. But little has been said about Gower’s history, which is peppered with two separate controversies, including a resignation from a previous post at the University of Vermont. Documents from the school obtained by Muckgers staff members shed greater light on the circumstances surrounding Gower’s resignation and the violations of policy that prompted it.

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When J. Michael Gower, Rutgers’ new Chief Financial officer, was appointed to his post in late August, university officials touted him as an accomplished administrator and asset to the university community. At Yeshiva University in New York just prior to his appointment, he oversaw millions in university finances while serving as the school’s Vice President of Business affairs. Before that, he served as the University of Vermont’s Vice President of Finance and Administration, where he was tasked with overseeing the planning and management of UVM’s administrative and financial functions — a set of responsibilities not unlike the ones he’ll take up here.

Indeed, that fact of Gower’s experience — that he has it — is perhaps uncontroversial. In a letter to the Rutgers community notifying members of Gower’s appointment, President Robert L. Barchi referred to him as “a financial planning expert with more than 30 years of experience in university and medical school business management,” whose duties will include “overseeing the implementation of a responsibility centered budget management system.” He’ll need the experience, too — appointed in the wake of Rutgers’ recent merger with UMDNJ, Gower will be responsible for managing a financial department of new and enormous complexity.

Of course, nowhere in his address did Barchi mention how or why Gower ultimately left UVM, which remains the subject of serious controversy. In 2008, Gower resigned from the public university after it was discovered that the school had entered into multiple contracts with a management consulting group under his supervision that violated internal policy and procedures. A 2008 internal investigation, conducted by Deloitte & Touche LLP shortly following the incident, confirmed the violations committed were within Gower’s responsibilities. That report, along with other documents acquired by Muckgers staff members, shed greater light on the circumstances surrounding Gower’s resignation and the break from procedure that prompted it.

Procedural Breakdown

In April 2008, University of Vermont President Daniel Mark Fogel sent a email to the university’s community, vaguely titled “PeopleSoft and Internal Controls.” Addressing an issue that took place two years earlier, Fogel cited a “breakdown in internal controls” that allowed multiple university contracts, together worth over $10 million, to be signed without proper approval and in violation of UVM policy. “I have a strong commitment to accountability,” Fogel began the email, “and I can assure you that the unfortunate situation described in this memo will be corrected promptly, fully, and clearly.”

The situation Fogel proceeded to describe involved an “extensive” engagement between the UVM and a global management consulting company called Huron Consulting Group, initiated in 2006 to address a series of complications arising from the university’s then recent implementation of a PeopleSoft information management system. The engagement was necessary, according to university officials, to resolve issues with grant and research administration, the school’s financial systems, and other information transition matters the school had been dealing with at the time. In his email to the UVM community, Fogel described Huron as doing “effective and productive work on a mission critical project.”

But the engagement, extensive as it was, soon fell apart. Two years after the UVM entered into contracts with Huron for the company’s consulting services, university administrators discovered that at least three of those contracts had been in direct violation of UVM policy and procedure. Under the supervision of Gower, the school’s Vice President of Finance and Administration at the time, the contracts, originally estimated to cost around $5 million, were signed with the approval of neither the university’s president nor its Board of Trustees. According to UVM policy, any consulting contracts in excess of $250,000 require approval from both entities.

Gower, whose responsibilities at the UVM included, among other things, ensuring the correct implementation of the school’s fiscal policies, resigned immediately following the address. In his letter of resignation, Gower cited “difficult struggles” that included “the very demanding and, at times, frustrating implementation of a comprehensive data management system,” adding that escalating costs, implementation obstacles, and communication problems all factored into the issue. “I regret that it has been such a difficult process and transition for our faculty and staff,” he concluded, “and I accept responsibility for those aspects that I and others on my team should have handled better.”

Launching an Investigation

In his email, Fogel continued:

“As many of us know, transitions to new financial and human resource information systems have an extensive history of difficulties, challenges, and cost overruns in numerous universities and businesses alike. Painfully, that has also been the case here at UVM. As problems arose, we needed additional expert assistance to complete the transition process and address serious problems, albeit at a significant cost. Although funds were identified to address these expenditures, communication about and approval of the extent of the contractual engagement, its costs, and the funding source did not meet the high standards to which we hold ourselves at UVM.”

The “significant” cost to which Fogel referred involved more than just the monetary burden UVM was forced to shoulder for PeopleSoft’s implementation and the Huron engagment (the $10.8 in consulting costs was in addition to a previous $26 million already authorized in 2004). It also came in the form of bad publicity, when UVM’s administration was forced to explain how, over so many years, the problem was allowed to get so bad. In a 2008 article by the Vermont Cynic, Fogel admitted that he was unaware of the extent of the contracts until they were brought to the attention of the administration by a department employee, and added that the funding for the them came from earnings on capital gains that were put aside into a fund of which he personally was unaware.

In response, UVM’s Board of Trustees launched an internal investigation, spearheaded by Burlington law firm, Dinse, Knapp & McAndrew, to probe into the circumstances which led to the policy violation. The investigation pulled from background checks and interviews with key UVM staff members, data analysis from the university’s Financial Record System and PeopleSoft accounting systems, and information relating to the internal controls in place during the incident. According to President Fogel, the help of independent experts was needed in order to “examine [the] situation fully and to assist… in creating better systems and controls going forward.”

The investigation’s findings were published in a Delloite & Touche report on Sept. 3, 2008. In it, Delloite noted “a lack of compliance with various university policy requirements” and “process breakdowns” that allowed multiple vendor contracts to be signed without approval. Of six contracts signed between 2004 and 2008, three were signed by Gower outside of a $30.5 million dollar spending limit set by the Board of Trustees in April 2007 for the Peoplesoft implementation and without Board approval. In addition, the report found that for some of the contracts, the final cost significantly exceeded the initial cost estimated. Other areas of potential concern included:

The existence of control and process-level breakdowns in UVM’s procurement process, including sourcing and contracting of vendors like Huron

The discovery that for four out of six of the contracts, work had begun on the project without an executed contract being in place

A lack of transparency between the school’s Division of Finance & Administration and the Board of Trustees where budget creation and reporting processes were involved

A substantial number of the vendor contracts tested were entered into based on non-competitive bid forms which had not been approved by the appropriate authority

Ultimately, the report concluded that “potenial improvements could be made in management oversight at the VP of Finance and Administration level … where .. it is typically the responsibility of a VP of Finance … to implement policies, procedures and standards which facilitate and effective control environment” and recommended that the university “evaluate its current structure in an effort to achieve effective corporate governance.” In his email, Fogel said that the “unfortunate situation is no reflection whatsoever on Huron” whose “work is absolutely necessary.”

A Second Controversey

Less than a month after leaving the UVM, Gower was appointed to his latest post at Yeshiva University, a private college focusing on Jewish scholarship in New York City. There, he worked to strengthen the school’s financial foundation as its Vice President for Business Affairs and CFO.

But Gower soon found himself mired in controversy at Yeshiva, too. At the peak the 2008 scandal surrounding disgraced investment advisor Bernie Madoff and his massive Ponzi scheme, Yeshiva announced that it has lost $110 in estimated profits (Madoff had been on the board of trustees at Yeshiva since 1996, and the university had a significant amount of funds invested in his Wall Street firm). Two weeks later the university revised the number, claiming that it had actually only lost $14.5 million. Gower called the profits, which had first been attributed to Madoff’s investing success, “fictitious,” saying that any money the school thought it had earned through Madoff’s investments never actually existed.

The accounting error drew criticism from a number of media outlets and Yeshiva community members. One blog blasted Gower and Yeshiva President Richard M. Joel for the blunder, saying it suggested the university’s accounting system might be in disarray. “The revised loss is a mysterious and troubling revelation,” the piece’s author wrote. “Joel and Gower may think dribbling out information is transparency, but all we’ve seen them do is add to the confusion.”

More recently, Yeshiva’s credit rating was downgraded by Moody’s investor service from A2 to Baa1 on the basis of sizable operating deficits and weak cash flows.

The Right Choice?

After accepting his resignation, UVM President Fogel praised Gower for his work at the university. “Much has been accomplished under Mike Gower’s leadership” Fogel said, “and I wish Mike well in his future endeavors.”

Gower’s appointment at Rutgers became effective yesterday, Sept. 30th. For the next few years, Gower will be in charge of a nearly $3 billion operating budget in a new position created specifically to deal with the repercussions of the UMDNJ merger, a monumental restructuring that has added thousands of students to the university and greatly increased its financial assets. He’ll report directly to Barchi, and will work closely with chancellors, deans, senior administrators, and budget officers to lead the integration of the university’s financial units.

Surprisingly, Rutgers’ controversial hiring choice has garnered little attention at a university that has seen quite a bit of it in recent months. In a statement regarding Gower’s shaky history, director of media relations E.J. Miranda said “The university was aware of the matter, and discussed it during the recruiting process with Mr. Gower and others familiar with the facts.” When asked about Gower’s time at UVM, Enrique Corredera, director of UVM communications, answered “the University of Vermont issued a public statement when Michael Gower announced his resignation in 2008. We have nothing further to add today.”

But the real irony of Rutgers’ hiring of Gower is captured in this sentence, said last year by President Barchi during his address to the university Senate: “We need to be crisper. We need to be more responsive and more direct in our financial management and reporting.” If crisper, more direct reporting in financial management is what the university is looking for in this new post, Gower, given his track record, should have been the last candidate in line.

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