Prior to Follett, DSU bookstore was losing money
A recent audit of Dickinson State University shows that although the university may not make much money — if any — from its contract with Follett Higher Education Group, it will not lose money, like it had when DSU managed it.
Currently, the university makes no money from the bookstore, as it would need to have sales of over $750,000 for the year to receive commission; however, making little to no money is better than losing money.
Although DSU's gross margin ranged from $261,760 in 2017 to $330,266 in 2015, those numbers do not take into account the costs of operating the bookstore.
"When we self-managed the bookstore, we had overhead costs ... We had salaries, benefits, office supplies. Any other expenses to run the bookstore are reduced from (the gross margin) as well," said Laura Nelson, interim vice president of finance and administration for DSU.
After calculating expenses, the bookstore went from making money in 2015 to losing money in 217 — $11,594.
Under the current contract with Follett, DSU pays for no expenses for the bookstore.
"The state auditor had said in this last year we didn't make $750,000, so we didn't get any commission. If that would have been the case for us, we don't have that overhead cost, so in reality not getting a commission, we're at zero. We didn't lose any money," she said.
Instead, the contract has already saved them money.
"We're saving money because we're not running as a loss, and we don't have the liability of the inventory," Nelson said.
Also, Nelson said Follett's commission is calculated from the bookstore's gross revenue, which has been over $750,000 in the past.
The same audit showed a mistake in the university's contract with Follett that puts it in noncompliance with contract requirements set forth by the North Dakota University System. The university left out a provision required by NDUS that requires a performance review every two years on contracts that are longer than three years. DSU's contract with Follett is eight years and ends in 2025.
It is unclear how the clause was missed.
"(Office of Management and Budget) helped us work on the contract ... The AG Office reviewed the contract office as well. When the AG Office reviews, they usually come back with any suggested changes on the contracts, and then we make any changes as needed. There is a good process. That process happened during this contract," Nelson said.
DSU's presidential cabinet met Monday to review the audit and discuss its next steps.
"Follett has reached out to me, so I'm going to contact them, and we'll see if we can get that put back in the contract or if they're willing to negotiate," Nelson said. "Talking to the (Attorney General's) office, it will be up to (Follett) if they want to change the contract or not," Nelson said.
They also discussed other areas of the audit, including the recording of retainage, lack of a nepotism and conflict of interest policy and a lapse in blanket bond coverage, all of which they are working to address.