A consulting firm hired in March to conduct an efficiency review of Iowa’s public universities has billed the institutions $1.62 million to date for its services, including $220,273 for expenses such as meals, travel and lodging.
The three universities so far have paid a combined $1.55 million of the total bill, which is expected to swell to more than $3.3 million and include paying New York-based Deloitte Consulting staff members as much as $450 an hour.
The University of Iowa and Iowa State University each are responsible for 45 percent of the cost, which has translated to $729,123 through July 31. The University of Northern Iowa must pay 10 percent, or $162,027 to date, according to the contract.
Although the Board of Regents has received expense totals from Deloitte Consulting LLC for things such as meals, travel, lodging, telecommunications and miscellaneous items, it has not requested specific receipts.
That decision seems to run contrary to policies at the state universities and the Board of Regents Office requiring receipts for expenses, and it apparently raised concerns from board staff about first-class airfare and alcohol reimbursements.
In an email sent May 20 from Patrice Sayre, chief business officer for the Board of Regents, to Terry L. Johnson, associate vice president and university controller for UI finance and operations, Sayre mentions those issues.
“I discussed (Board of Regents Executive Director) Bob Donley’s concerns with Deloitte staff, and they will comply with the noted issues of no first-class airfare or alcohol reimbursements,” Sayre said in the email, obtained by The Gazette through an open records request.
Sayre told The Gazette that the board has no reason to believe Deloitte was expensing such things to the universities.
“We wanted to agree that we are not paying for first-class airfare and alcohol, and they have assured us they are not doing that,” Sayre said.
The board is not, however, verifying that by requesting receipts for expenses, and at least one regent said that needs to change — or at least be reviewed.
Sayre said it’s not customary to see receipts for every single meal, plane ticket and hotel stay. Instead, the board office has received nine invoices with totals for both fees associated with professional services and expenses.
In some cases, expense totals are broken down by meals, travel and lodging. But there are no specific receipts as to what was purchased and how much each meal, plane ticket or hotel room cost.
“We did not request specifics — that is not typical for when they call for out-of-pocket expenses,” Sayre said. “Think about the enormity of that. They have quite a large team traveling to four different sites. That detail would be very difficult to verify.”
Deloitte officials declined to answer direct questions from The Gazette about whether they have expensed first-class airfare and alcohol to Iowa’s regent universities. But Sheila Koppin, regent communication officer and transparency officer, said that — based on prior discussions with Deloitte — it’s the board’s understanding that Deloitte typically does not expense those items and often does not provide receipts for every meal and plane ticket.
‘We should go back and review this’
Receipts for expenses are required for reimbursement at the state’s public universities.
The UI travel policy, for example, states that “receipts for airfare, rental car, train, hotel and conference fees and any other single expense of $75 or more must be scanned and attached.”
Iowa State’s reimbursement policy for travel and non-travel expenses likewise states that “original receipts for the scanned documents must be kept on file at the department for one full year.”
The Board of Regents Office policy for reimbursement of travel expenses requires travel expense vouchers to be submitted promptly upon return from a trip, and it explicitly requires receipts for foreign travel when costs top the standard per diem.
The Board of Regents’ contract with Deloitte does not require receipts for expenses, and Iowa’s Chief Deputy Auditor Warren Jenkins said that’s all that matters.
“It all comes down to the provisions of the contract,” Jenkins said. “Our biggest concern would be whether they were complying with the contract.”
A contract not requiring receipts for expenses only becomes a concern when they seem excessive, such as $1,000 an hour, Jenkins said.
“If receipts are not required, and they appear reasonable, then I would say there is not much to be concerned about,” he said.
According to a Deloitte email sent April 24 to Sayre, the firm expensed $99,716 from March 29 to April 19 on lodging, meals, travel, telecommunications and miscellaneous costs. That included $4,907 for meals, $7,073 for lodging and $32,059 in the week of April 5.
From April 20 to May 24, Deloitte expensed $120,557 to the regent universities for items that included travel, meals and lodging.
Regent Bob Downer said he knows from experience how quickly expenses for these types of projects can mount, and he’s not concerned, “so long as we weren’t paying any excessive rates for anything.”
But, Downer said, he would like to see the receipts to verify that.
‘This is pretty rich’
The board launched a massive efficiency review last year and hired Deloitte in an effort to make its institutions more sustainable. The review is being conducted in three phases, and Deloitte in the first phase identified 17 opportunities that it said could result in $30 million to $80 million in savings over time.
Those savings could come in the form of more efficient operations and possibly job cuts, officials have said.
As for steep hourly rates estimated for Deloitte employees in the second phase of the three-phase efficiency review, Downer said he doesn’t think they’re outside the market range — especially for companies based in bigger cities.
Deloitte Principal Chris Rose is expected to earn $450 an hour and make $12,600 for an estimated 28 hours of work — or three and a half full days — in phase two of the Board of Regents’ project. Deloitte Director Rick Ferraro is anticipated to make $425 an hour or $91,800 for an estimated 216 hours of work, according to the contract.
And Senior Manager Virginia Fraser is expected to make $129,000 in phase two of the project, earning $375 an hour for an estimated 344 hours of work, according to the contract.
“I think this is pretty rich,” Downer said. “But at the same time, based on my experience in comparable situations securing professional services from lawyers or certified public accountants who are located in major cities, this is probably not out of line.”
And Downer said he’s been pleased with the Deloitte officials he’s met with and believes they are a competent team. If they deliver on the expected total project savings of between $30 million and $80 million, Downer said that would be consistent with his expectations. Still, with the prospect that the Board of Regents on Wednesday could approve paying Deloitte more to implement recommendations related to the universities’ sourcing and procurement practices, Downer said he’s wary.
“I certainly have concerns that we not get into a commitment that substantially exceeds what had been presented to us previously,” he said.