Auditor General Jack Wagner Calls On General Assembly, Gov. Corbett to Take Lead in Reforming Governance At Penn State

HARRISBURG, Pa., Nov. 14, 2012 /PRNewswire-USNewswire/ -- Auditor General Jack Wagner today called on the General Assembly and Gov. Corbett to take charge of reforming Penn State University in the wake of the Jerry Sandusky child sexual-abuse scandal, saying that the university's board of trustees has shown little appetite for enacting the reforms necessary to enhance governance, improve transparency, and restore the university's tattered reputation.

"In spite of its public vow to accept in totality the Freeh Report and adopt its suggestions, the Board of Trustees has taken few substantive steps over the past year to reform itself," Wagner said at a press conference today on the release of his report on Penn State governance-related issues. "It's time for the General Assembly, the governor and the Board of Trustees to step up, show leadership and take charge of reforming Penn State."

Wagner's 124-page report contains nine major findings and makes over two dozen recommendations, including removing the university president from the board of trustees and making the governor a non-voting rather than voting member. Wagner's report also recommended shrinking the board's size from 32 to 21 voting members.

Wagner said he could not guarantee that his recommendations, if implemented, could prevent another Sandusky scandal; "nevertheless, we are convinced that our recommendations, if implemented, will reduce the potential that similar breakdowns in human character will remain undetected in the future."

The Department of the Auditor General has been actively monitoring Penn State since Sandusky's arrest last Nov. 5, 2011, Wagner said. During that time he personally met with Penn State administrators and trustees, including interim president Rodney Erickson. Members of his staff also met with Penn State administrators, and talked with experts from around the nation to review Penn State's governance structure and what steps it could take for improvement.

Wagner's staff found that most aspects of Penn State's governance, from its bylaws and statutes to its power structure, were antiquated and out of step with most other universities. Nowhere was that more apparent than in the extraordinary power invested in the president, Wagner said.

The university's president serves multiple and conflicting positions:  president of the university, member of the board of trustees, and secretary of the board of trustees. The president serves on nearly every board committee, subcommittee, and special committee and can refer matters to and/or influence the work of such groups.

Wagner said the conflicts of this multiple-role presidency are obvious because as the university's top employee and administrator, the president reports to the trustees, making him subordinate to the board. However, as the board's secretary, the university president controls the flow and content of information to the other trustees, making him more powerful than the other trustees.

In an interim report released in late July, Wagner called for the removal of Penn State's president as a voting member on the board of trustees; three months later, it remains the first recommendation in his report because there simply is too much power concentrated in one individual, to the detriment of the board and its members as well as faculty; students and their families; and taxpayers.

"The added roles the board has assigned to the president give the holder of that position far-reaching and widespread powers that impair good governance and collaborative leadership," Wagner said. "The necessary and healthy boundaries between the president as employee and the board as employer are indistinguishable."

The Penn State Board of Trustees also includes the governor as a voting trustee, but the governor's ability to vote creates conflict-of-interest questions because he recommends the annual appropriations to the General Assembly, approves grants, and makes decisions on capital expenditures, which makes the governor responsible for making critical decisions that affect the operation of public institutions, including Penn State. As a voting member of the Penn State board of trustees, the governor can vote on expenditures for projects funded with the same state monies that he approves as governor, or on any other Penn State issue with its roots in the governor's decision-making. 

Wagner's report also found that the large size of Penn State's board is atypical for most public universities.  In comparing Penn State to the public universities in the Big Ten Conference, Wagner's team found that only Penn State's board had more than 18 voting members.  On average, the other public Big Ten universities had 11 voting members, or 12.1 total members.

Penn State was also atypical among the 20 largest U.S. universities. Specifically, the Penn State board, with its 32 voting members, differed markedly from the boards of the other 19 universities, whose governing bodies averaged just 11.6 voting members, or 12.4 total members.

Large boards with 20 or more members are more likely to allow governance responsibility to default to the university president or the executive committee rather than to the trustees where it belongs, Wagner said. The size should be manageable to ensure a meaningful dialogue among the trustees.

The other findings in Wagner's report include:

• Only 13 of board of trustees' 32 members are needed to establish a quorum, meaning that official business can be transacted by a minority of the board.
• The Penn State board allowed high-level university employees to become trustees/officers, and vice versa, thus creating a cast of influential insiders with the potential to impair objective and independent thinking. 
• Penn State has historically opposed opening its records under the state's Right-to-Know Law and has been largely excluded from that law; Penn State is also not subject to the Public Official and Employees Ethics Act.
• Penn State has not welcomed governance transparency and has impeded it by restricting the public's access to the board and filtering how trustees communicate.
• The Penn State board has 16 retired emeritus trustees who can receive most privileges given to the 32 active trustees. Wagner recommended that Penn State refrain from granting emeritus status to employees who do not qualify, such as was the case with Jerry Sandusky. 

Wagner called on the General Assembly to adopt the recommendations contained in the report at its earliest convenience. Because of the end of the legislative session, this cannot be done until January. Therefore, Wagner recommended that Penn State refrain from hiring a new president until the necessary reforms are implemented.

"I believe that leadership begins at the top," Wagner said. "If Penn State's leaders – in this case, the board of trustees – refuses to show that leadership in this time of need, then the General Assembly and governor must fill the void."

Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly.  He is the commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations. The Department of the Auditor General conducts thousands of audits each year.  To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's website at www.auditorgen.state.pa.us. 

SOURCE Pennsylvania Department of the Auditor General