Hobbs blasts lack of leadership in U of A financial crisis

After Gov. Katie Hobbs blasted the handling of the University of Arizona’s financial crisis, immediate reactions included the regents’ chairman saying an outside auditor will be hired — as Hobbs wants — and the Faculty Senate chair saying a “no confidence” vote in UA’s president is off the table “for now.”

Hobbs, in a letter released late Thursday, said: “I no longer trust the process that is in place.”

“This is no longer just about finances. This is about a lack of accountability, transparency, and at the end of the day, leadership,” Hobbs wrote to Regents Chair Fred DuVal and Regents Executive Director John Arnold.

“It is now apparent that we can no longer continue on the same course,” the governor said.

“There is no coherent vision, let alone even an agreement on the severity of the problems, on how to lead the university moving forward,” Hobbs wrote in the letter, which she also posted on her X (formerly Twitter) account.

ABOR is the oversight board, of which the governor is a member, for the state’s three public universities. Arnold, its director, is also interim chief financial officer and vice president of business affairs for the UA — a situation Hobbs likened to a potential case of “the fox guarding the henhouse.”

Hobbs said she is concerned there is a “real or perceived conflict of interest” in having ABOR’s Arnold serving as interim CFO at the UA since Dec. 13, when UA President Robert C. Robbins announced he had “accepted the resignation” of Lisa Rulney as CFO in the midst of a budget deficit and a $240 million miscalculation of cash reserves.

“As Governor, and as a member of the Arizona Board of Regents, I have a responsibility to ensure accountability in order to restore faith and trust in the university,” Hobbs wrote. “… In order to avoid this from becoming a case of the ‘fox guarding the henhouse,’ it is time to bring in an independent, third-party consultant.”

She said an independent consultant is needed, and quickly, to plan proposed solutions, conduct an external audit, and provide monthly reporting to her and to ABOR.

And she warned that if she doesn’t see adequate progress, she will work “to identify further changes to leadership.”

Outside auditors to be hired

DuVal, the regents chair, told the Arizona Daily Star Thursday night that ABOR found the problem and is capable of fixing it, though he added that the governing board will retain an outside auditor.

“The governor has made useful suggestions that track with our plans,” DuVal said. “We will be announcing the details of our plan on Monday. In addition, we will be retaining outside third party auditors to bring extra credibility to the work.”

Hobbs also told ABOR, whose members are gubernatorial appointees, to submit a plan to her by Feb. 9 “that includes the major strategies and tactics that will be used to resolve the financial issues at the university. The plan should include key metrics and benchmarks that will be used to measure the progress and success of the implementation of the plan.”

“As this financial crisis has already damaged ABOR’s credibility in their oversight functions, there must be greater separation between the Board and the university to restore the trust of my office and the public. … I recommend Executive Director Arnold transition out of the CFO role at the University of Arizona as quickly as possible,” wrote Hobbs, who has the fiscal power of negotiating with legislators the budget that determines state funding for the universities.

“Ensuring stability”

Faculty Senate Chair Leila Hudson echoed Hobbs’ concerns — the Faculty Senate had called in December for an independent audit of UA — while saying Friday that she wasn’t sure a vote of “no confidence” in Robbins would be the right call.

The Faculty Senate did previously vote, in spring 2023, that it lacked confidence in Robbins over the UA’s handling of safety and security issues before hydrology and atmospheric studies professor Thomas Meixner was fatally shot on campus in October 2022, allegedly by a former grad student who had repeatedly lodged threats.

“I have people reaching out to me from inside the institution and outside the institution, very enthusiastically requesting a vote of no confidence,” Hudson told the Star Friday morning. “At this point, I am more concerned with ensuring the stability and the continued operations of the university because that’s what we owe to our students.”

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Hudson added that there will be “plenty of time in the future” to evaluate Robbins’ tenure and decide whether or not the Faculty Senate should take a vote of no confidence, “so I am not in any hurry.”

“I hope that moving at a more measured pace and not leaving any stone unturned in our attempts to have productive, collaborative, honest reform that does not unfairly blame the academic units for the mismanagement and oversight crisis” is the way to go, Hudson said. “I think it behooves us to move a little more slowly.”

Hudson added, however, that her thinking is not stagnant and she could change her mind before the Faculty Senate’s scheduled meeting on Monday.

“Alarming” but fixable

Hobbs’ letter came just hours after Arnold, at an ABOR meeting earlier Thursday, said the UA’s cost trajectory is “alarming” but fixable, and that the solutions he and his team are working on will take about 18-36 months to implement.

Robbins said in December that the size of the deficit was still being determined. Arnold, in his presentation Thursday, mentioned a $140 million gap last fiscal year, of which he said the UA athletics department was responsible for about $35 million. Arnold also said he has observed a “disconnect between the actual cost of operating a school and the resources that are being allocated to that school.”

The restrictions the university has now placed on hiring, raises, financial aid and construction projects will “slow spending over the next six months,” Arnold said. Those savings will “give us a little time to really dig in and define the scope and nature of the problem that the university is facing. … And I think in the next few days, we’ll be in a position to really talk about the issues we’re facing and immediate steps.”

ABOR, in December, approved changes in financial management and oversight, including creating two additional financial reports that must be completed by the UA, Arizona State University and Northern Arizona University. Moody’s Investors Service, a bond credit rating business, subsequently gave a thumbs up to ABOR’s “rapid and disciplined response to improve the long-term stability” of UA.

UA Global Campus concerns

Hobbs, pointing to an article Thursday in The Arizona Republic, particularly called out what she said was “the incredibly risky nature of the purchase” by UA of the former Ashford University, an online school that is now UA Global Campus, and wrote that “significant ethical problems with Ashford University’s business model appear to have been brushed aside by university leadership during the acquisition.”

“In light of those concerns, I request the report include academic performance metrics for the Global Campus and information detailing the steps taken to ensure the Global Campus provides the same high-quality education given to students in the university’s other divisions,” she wrote.

But Arnold, earlier the same day, had told the regents that UA’s financial problems should not be blamed on UA Global Campus.

“We believe that (the acquisition) will have a positive impact on the university as we continue to realize savings through the merger process,” Arnold said.

UAGC became an asset of the UA on June 30, 2023, meaning all the expenditures of Global Campus had no impact on the miscalculation leading to the current financial crisis, he reported.

He also stated the university has been able to “eliminate positions” that overlap between the main UA campus and the UAGC program.

Arnold repeatedly stated that “the media” made mistakes in reporting on UAGC and on the UA’s financial troubles.

UA officials have said the Global Campus will substantially grow the UA’s presence in online higher education, a role that schools such as Arizona State University have dominated for years. They’ve called this an important service to offer to nontraditional students, in particular.

The regents, in November 2022, signaled they saw UAGC as important to UA’s future by creating incentives for Robbins to increase his overall pay by meeting performance benchmarks for the online school.

But many faculty members have been critical of the acquisition in the past, as shown in reporting by the Arizona Daily Star. In one of numerous examples, a committee of Eller College of Management professors issued a warning against the potential business deal in a letter sent to ABOR and Robbins in June 2020.