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The high cost of (cherry) red tape

Copyright © 2016 Albuquerque Journal

This story has been update to reflect when the school’s Clery Act officer will call the Honolulu Police Department.

When the Lobos baseball team went to Honolulu in February for a tournament, players stayed at a hotel in the Honolulu Police Department’s jurisdiction.

To comply with the federal Clery Act – just one of nearly 500 laws that colleges must follow – UNM is required to call Honolulu police to get incident reports for the hotel and surrounding area that meet certain criteria, then include that data in an annual report submitted to the federal government.

If it doesn’t, UNM risks violating the law, which requires colleges to submit an annual report of certain school-related incidents.

With fines of $35,000 for the smallest of violations, UNM isn’t willing to take that risk, especially as its budget shrinks. So in August 2015, it created a full-time post with an $81,717 salary to make sure the school doesn’t mess up.

The Clery Act is just part of the burgeoning world of compliance in higher education. Fear of losing financial aid, being sued or enduring a scandal has schools spending millions of dollars to follow the rules and write the reports showing they did so in case the Department of Eduction investigates.

From checking to see if male students are registered for the draft, to keeping an up-to-date fire incident log, to having policies against discrimination, showing compliance with the hundreds of laws, rules and regulations is costing higher education millions of dollars that school leaders say could otherwise be spent on staff, faculty, labs or other programs. Compliance costs at UNM are at the very least $1.8 million a year, while the tab at UNM’s Health Sciences Center is about $3.3 million annually.

Those numbers are just the salary and office budget for staff whose job is entirely compliance-related.

UNM President Bob Frank says the cost estimate is “very conservative,” because it doesn’t include the time it takes from school operations and opportunity costs nor the time taken by front-line employees enacting the myriad of policies.

“The complexity of the environment has gotten so much deeper and intricate,” Frank said of the last five years.

How much more?

So the cost is surely much more, but no one at the school, higher education compliance trade organizations or the federal government can pinpoint exactly what it costs a university to comply with the more than 3,000 pages of laws from the U.S. Department of Education and the nearly 100 pages of laws from New Mexico.

Stanford University in 1997 estimated it had $20 million per year in recurring compliance costs, noting it was likely an underestimate. And Vanderbilt University said it spent an estimated $150 million on compliance in 2013, about 11 percent of its budget, though it was criticized for including research compliance costs that have a different funding stream.

But there is more to compliance than the up-front cost.

“I can’t give you the cost of compliance, but the cost of noncompliance could be catastrophic,” said Helen Gonzales, UNM’s chief compliance officer.

That catastrophe would be the loss of federal financial aid, which at UNM was $158 million in 2015. That has never happened in the nation.

Gonzales said compliance officers equally fear civil lawsuits and damage to their reputations.

“Think Penn State,” she said, referencing the 2011 child abuse and cover-up scandal involving assistant football coach Jerry Sandusky, which resulted in serious sanctions, including a $60 million fine from athletics compliance; criminal and civil proceedings; firings and a stain on the school’s reputation.

The Department of Education’s investigation into Pennsylvania State University continues to this day – a timeline consistent with its reputation for taking years to complete investigations.

The Penn State case prompted many schools, including UNM, to examine their compliance structures. Months after the scandal broke, Frank launched an executive review and decided to create the school’s first Compliance Office.

“We recognized we had to have a unit that really focuses on it and integrates all of these strands that are all over the university now that the federal government has created so many different requirements,” Frank said. “And if you miss one, there is a penalty to the university.”

Gonzales said one of her primary responsibilities is to help campus departments determine which laws carry the most risk if they don’t comply, a form of risk management.

“This is our institution’s attempt to balance this compliance and to use resources effectively,” she said. “We provide enough support so we have structures in place to protect from any potential harm. The rules are intended to protect those students, but the cost of doing that can be underestimated by those making the rules. … You have to get to the business of educating students.”

Growing mission

In recent years of tight budgets, Frank said UNM has had to put money into compliance positions and budgets.

“If we had our druthers, we’d be hiring more police officers, not hiring more people to report about it. And that’s what happens here. You end up hiring more reporters, internal reporters, rather than the action people you’d like to have out there,” Frank said. “The front-line people get short shrift for the bureaucracy that we are required to meet.”

Gonzales launched the Compliance Office in 2013 with one other staff member and a $25,000 budget. The two oversee all of the school system’s compliance with federal and state laws. Her office works with 18 “compliance partners” across the campus, mostly managers who are in charge of making sure the applicable laws are being carried out in their offices.

Gonzales, like other compliance experts in the nation, say there are so many laws and regulations governing nearly ever facet of school functions that it is impossible to really put a number on how much it costs or how much time it takes to implement the laws.unmbox

Similarly, few compliance officers interviewed at UNM can offer clear examples of how the rules improve student education.

“Ultimately, the way it helps (students) is by staying in compliance we are able to stay in the federal aid system,” said Brian Malone, the director of the Student Financial Aid Office. “It’s the rules of the game. In order to participate, you have to follow the rules to stay in the game,”

His 30 to 40 staff members are responsible for collecting and processing federal, state and institutional aid to students. They must also provide information to the students and have data on hand in case a student requests it. And they must stay on top of new laws and rulings, which Malone said are “numerous.”

“In 2012 alone, the Department released approximately 270 “Dear Colleague” letters and other electronic announcements – this means that more than one new directive or clarification was issued every working day of the year,” according to a 2015 report from the Task Force on Federal Regulation of Higher Education, convened by U.S. senators.

Federal aid applications are run through numerous databases to check for inaccuracies or missing info, which requires a student to return to the financial aid office to fix the application.

For instance, all adult men must have registered for the draft or they are ineligible for federal financial aid. So the office must track this enrollment and get supporting documents if the federal selective service database shows a male student is not registered.

“It’s (the process) more complicated than it needs to be,” Malone said. “Ultimately, what it comes down to is, it can be intimidating. People throw their hands up. It seems confusing because of how much is involved with it.”

‘Jungle of red tape’

The task force report said “colleges and universities find themselves enmeshed in a jungle of red tape, facing rules that are often confusing and difficult to comply with. They must allocate resources to compliance that would be better applied to student education, safety, and innovation in instructional delivery.”

In its 144-page report, the task force concluded that “compliance with regulations is inordinately costly,” and “at best, institutions must hire additional staff to comply with federal mandates. At worst, compliance consumes resources that would be better spent educating students and supporting innovative research.”

And the time lost to compliance and opportunity costs can’t be counted.

“That’s where we’re ending up spending money instead of English professors or advisers or other things that would be very good as well, so it’s not good,” Frank said.

Frank said the bureaucracy of federal regulation “does have value.”

“But we’ve gone too far at this point,” he said.