DCC board shares its review of the college’s budget challenges

Jamie Ausk Crisafulli
Sunday, June 13, 2021
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The Dawson Community College Board of Trustees met Thursday to continue its assessment of the deteriorating financial situation of the college and to make plans for the upcoming year’s budget which currently shows a deficit of $590,000.

The board will meet again Monday, June 21 to attempt to make progress toward a final budget for fiscal year 2022.

In the meantime, DCC Board Chairman Chad Knudson and Vice Chairwoman Cindy Larsen developed a review of the budget situation as researched by the two board members. The report noted that once the board was presented with the financial situation by Vice President of Business and Finance Doug Cherry at last month’s board meeting, the board leaders directed college administrators to refrain from any involvement in the budgeting process.

The college has been borrowing significantly from auxiliary funds for five years, depleting the cash reserves from $3.8 million in 2016 to what is expected to be around $800,000 at the end of the current budget year.

The report noted that the fundamental error made was accepting a deficit budget adopted in FY18 as the baseline and not using new revenue to replenish the cash reserves borrowed against to promote growth at the college.

The board’s research noted that while the financial situation did not include any fraudulent acts, it was undoubtedly foreseeable.

Knudson said he and Larsen used historical records including materials provided by the college, news and audit reports in their research.

The first task was to determine if there was any evidence of fraud, theft or other criminal practices that resulted in loss of funds. Interviews with current and former college officials tasked with the finances of the institution made it clear that there were no inconsistencies or practices that would indicate any kind of fraudulent activities.

The second question noted in the report was “how was the situation described by VP Cherry created and was it foreseeable?”

Knudson and Larsen’s report noted that “there is significant, consistent public evidence that the situation was foreseeable.” The state of the college’s finances was predicted by both board members and auditors through concerns that were often reported in the media and discussed openly at meetings of the board of trustees.

The two board members delved into the issue of the college exceeding its FY2021 budget significantly. Cherry estimates the college will deplete its cash reserves by another $600,000 to $800,000 in FY21, which ends June 30.

The conclusion: the culture at the college supports a blatant disregard for the budget.

The budget adopted by the DCC Board of Trustees for FY2021 included significant cuts in combination with predictions of growth in revenue that would allow the college to start the process of rebuilding cash reserves.

While the budget adopted by the board indicated cuts in spending, the two board members determined that every budget at DCC increased spending over the previous year.

“It is clear that last year’s budget was not adhered to. It is important to note that the FY21 budget adopted by the trustees included a 7% increase in salaries and benefits. Despite this significant increase in budget authority, VP Cherry reports that actual salary and benefit expenses were about $600,000 over budget,” the report noted.

The FY2021 budget approved by the board also included the elimination of three positions, but Knudson said to the best of their knowledge, those layoffs were never made.

The report also said that few employees are actually tracking their department budgets and that the college’s President, Dr. Scott Mickelsen, would often grant spending requests that had been denied by the business office for budgetary reasons.

“It is our belief that Dr. Mickelsen relied on his gut feeling that there was ‘new’ money coming in (grants, tuition, fees, etc.) that could be spent above and beyond the approved budget amounts. This is wrong in both substance and theory. As previously outlined any ‘new’ money is already obligated to closing the existing deficits, and the budget authority established by the board is binding and can only be changed by the board,” the report noted.

State of the budget

Following the presentation by Knudson and Larsen, Cherry gave an update on the work being done to create a balanced budget for the college for fiscal year 2022. Throughout his presentation, Cherry noted the importance of practicing “radical transparency throughout the budgeting process.”

He noted the institution has been practicing “creative finances” to make the budget appear to work, while it continued to deplete its cash reserves. He added he understood why the college leaders used reserves to promote growth at the college.

“Enrollment has skyrocketed. Job well done. Now it’s time to get the financial house back in order,” Cherry said.

He also said he was not confident the college’s negative budget practices could be turned around in a year’s time, later saying that he would be willing to operate in a very limited negative state heading into the year - at maximum a $100,000 deficit, noting budget measures to get to even that point would be significant.

“But we cannot sustain like this. We have a responsibility to this community and the people of Montana to keep DCC (soluble),” Cherry noted

To this point, he has been able to determine $67,000 to cuts in the general fund budget so far and maximize COVID funding to give the college another $100,000 in funding for the upcoming budget.

Through his work over the past couple of weeks he has also found that the college uses more grant funds to cover positions than he had previously thought, which is a savings in the budget as well.

Additionally, Cherry said he would be recommending another $100,000 out of the Ullman Fund to be used in FY2022.

With those measures, Cherry noted that his current estimates show that the FY2022 is still facing a $590,000 deficit.

While Cherry has a bit more work to do to gather the full information needed to develop abudget for FY2022.

He said furloughs and “very strategic” layoffs should be expected.

Reach Jamie Ausk Crisafulli at rreditor@rangerreview.com.

“It is clear that last year’s budget was not adhered to,” Board of Trustees report

“Enrollment has skyrocketed. Job well done. Now it’s time to get the financial house back in order,” Doug Cherry, VP Business and Finance