Dickinson State University has made assurances to students that their scholarships will be available come spring semester, even if the DSU Foundation doesn’t reimburse the university for those costs.
On Tuesday, as students were preparing for Thanksgiving break, DSU President D.C. Coston sent a campus-wide email to reassure scholarship recipients and the university as a whole that the problems at the troubled Foundation would not affect the upcoming academic semester.
“The University is in a position to assure that for this academic year the scholarships that have been awarded will be honored. You do not need to be concerned about your scholarships for the fall or spring semester. Please make sure your parents and your friends understand this as well,” Coston wrote in the letter.
The announcement that DSU will continue to provide scholarships to students comes less than a week after Attorney General Wayne Stenehjem filed his motion to move the Foundation into receivership, citing concerns by Coston, the North Dakota University System staff and two accounting firms.
That motion, filed in the Southwest Judicial District Court, showed that the Foundation has not paid DSU $260,000 for scholarships already provided to students this semester, and that officials are concerned that the Foundation won’t reimburse the university for scholarships during the upcoming spring semester.
“During the first semester of this academic year, DSU provided $260,000 in scholarships to DSU students, anticipating reimbursement from DSUF,” Murray Sagsveen, the university system’s chief of staff and ethics directors, stated in an affidavit provided to the attorney general.
When asked how the university will cover the cost of student scholarships if they are not reimbursed by the Foundation, Marie Moe, DSU’s executive director of enrollment services and communication, wrote, “The University is in good financial standing.”
“If the Foundation cannot pay for scholarships awarded this year, the University will honor the scholarship commitments,” Moe wrote in an email response.
But while the Foundation, which is expected to be placed in receivership by December, currently owes DSU $260,000, the cost could be much more if the organization does not cover any scholarships during the spring semester.
According to the Foundation’s financial filings from 2001 to 2013, the Foundation dispensed, on average, more than $769,000 a year to the university to cover scholarship commitments.
From July 2012 to June 2013 alone, the Foundation reimbursed the university for $963,319 in scholarships, according to a qualified audit conducted by Dickinson-based accounting firm Brady Martz.
Glen Young, the Foundation’s current CEO and chief financial officer, said that the Foundation does have the money to pay for the scholarships, but that the two “wedded” institutions were waiting on a new operating agreement to be finalized before the university is reimbursed.
The current operating agreement dates back to 2007, Young said. Such an agreement is required by the State Board of Higher Education.
However, in August, former Foundation CEO Kevin Thompson notified the university that the operating agreement would be terminated within a year and that DSU owed the Foundation $474,880 under that agreement, according to Sagsveen’s affidavit.
“We did that to basically say, ‘Come on guys, we have to come to an agreement,’” Young said.
Young said once the new operating agreement - what he called a memorandum of understanding - is in place, the university will be reimbursed for the scholarships that have been awarded. But he added that the university will owe the Foundation nearly a half-million dollars.
The need for the university to cover student scholarships is just the latest example of how the Foundation’s financial problems are affecting donors, DSU, the university system and affiliated businesses.
In the past two weeks, reports have come out that show the Foundation’s problems have caused donors to consider the removal of their scholarship funds, held up the university system’s annual audit, caused investors in the Hawks Point to consider selling the assisted living facility and lowered DSU’s credit rating to a point where the Higher Learning Commission - the state’s accrediting institution - will likely have to review the university’s finances.
At the same time, the Foundation’s failure to reimburse DSU for student scholarships is just the latest problem between the Foundation and the university.
For more than a year, the relationship between the Foundation and DSU has been troubled.
In the fall of 2013, an open records request showed that communication between the Foundation and the university had broken down, something that has continued throughout much of 2014.
In March 2014, the Foundation’s board of directors amended the organization’s bylaws to effectively remove Coston from the Foundation’s board and executive committee. Until that point, the DSU president was a non-voting member of both administrative groups.
Then in August 2014, the same month DSU paid Fargo-based accounting firm Eide Bailly to perform a focused review of the Foundation, Thompson, the former CEO, announced he would terminate the operating agreement and bill the university the $474,880 that he said was owed to the Foundation.
The university disputed that bill, according to Sagsveen’s affidavit.
With the Foundation entering receivership, it is unknown how the court-appointed third party will decide to pay for scholarships while simultaneously straightening out the organization’s finances.
According to the attorney general’s motion, whoever is appointed as receiver is expected to maintain the normal operations of the Foundation without using restricted assets - scholarship funds - to cover operating costs.
That task is made more difficult because of the large amount of debt carried by the Foundation, including $3.9 million owed for the Blue Hawk Square student housing development, $2.5 million owed on a $3 million line of credit and $4.1 million owed on the Biesiot Activities Center.
State officials said they hope that the Foundation’s finances will be corrected by June 2015, when the receiver is required to complete the work.
Brown is a regional reporter for The Dickinson Press. Contact him at 701-456-1206 and follow him on Twitter at Andy_Ed_Brown.