University of Central Florida leaders on Thursday admitted to misusing state funds that were intended for operating expenses to pay for the construction of a new $38 million building.
The money was used to build Trevor Colbourn Hall, an academic building that opened last month on the west side of the campus. The funding issues came to light last month after the state auditor general’s office reviewed the project, and alerted UCF and the Board of Governors, which oversees the state university system.
Chief Financial Officer Bill Merck, who decided to use operating dollars to fund the new construction, resigned Thursday, a week after his financial oversight duties were reassigned. Merck, who has worked for the university since 1996, couldn’t be reached for comment.
UCF President Dale Whittaker, the former provost who moved into the university’s top post July 1, said Merck took “full and immediate responsibility” for the problem and thought he was doing it for the right reasons.
“My bottom line is this — in my presidency, something like this will never happen,” he told the Board of Governors.
University spokesman Grant Heston said Merck made the decision in 2016 to use money from the incorrect pot because the dollars weren’t available elsewhere.
The university has replaced the money with funds from other sources, Whittaker said, stressing that “students are not adversely affected” by these moves.
Whittaker and Board of Trustees Chairman Marcos Marchena discussed the matter Thursday with the Board of Governors at a meeting in Sarasota, where Vice Chairman Syd Kitson said he feared the matter would “seriously damage our ability to work with the Legislature this year” on funding matters.
Board Chairman Ned Lautenbach said he was “personally very disappointed” with what happened at UCF, pointing out the statewide university system has a $15 billion annual budget.
“When something like this goes off the tracks, that destroys the trust for the whole system, and I agree with Syd,” he said. “We’re going to have a more difficult time, as we should, with the Legislature, making sure we know what the hell we’re doing here.”
Kitson told Whittaker and Marchena he viewed the matter as a “serious breach of trust” and said the university needed to earn that trust back.
Whittaker agreed.
“That’s exactly the reason that I was so committed to making this transparent and fast and bringing it to the board,” he said.
The university has hired Atlanta law firm Bryan Cave to conduct an investigation, which will include inquiries into how the decision was made and whether other employees besides Merck were involved.
Whittaker also said that going forward he’ll split the responsibilities for overseeing facilities planning and university finances. Misty Shepherd, the associate vice president and CFO for the UCF Foundation, will be the interim vice president for administration and finance, while Kathy Mitchell, now the associate director of the university audit department, will serve as interim CFO.
Also, several high-ranking university leaders, including Whittaker, now will have to review the funding sources for large construction projects.
Construction on Trevor Colbourn Hall started in May 2017. The 136,786-square-foot building houses 10 classrooms, 19 study rooms and 343 offices and replaces a facility also known as Colbourn Hall, which is one of the oldest buildings on campus and is set to be razed.
The new Trevor Colbourn Hall is one of several recent and ongoing construction projects at UCF, where enrollment is growing rapidly. Whittaker said school leaders are reviewing other projects to make sure no others relied on misspent money.
University trustees must have confidence in their employees, Board of Governors member Jay Patel said, nodding to Whittaker.
“To build that bridge and build that trust, President Whittaker, you’ve got your job cut out for you, because there’s always going to be that doubt when things happen — are we being told everything up front? Let’s take the right measures.”
And Patel said he hoped the matter would prompt the trustees to “be more involved” in oversight of the university.
“This is an embarrassing moment,” he said. “But no more embarrassing than to the trustees.”
Board member Alan Levine echoed Patel, adding this type of problem could happen at any state university, and urging trustees to be vigilant.
“As good as our presidents are, our boards are not potted plants,” he said. “We appoint trustees to do good governance.”
Marchena said that he was on the university’s finance committee when the project was approved in 2014. University leaders initially wanted to renovate the old Colbourn Hall, which suffered from problems like mold and bricks falling off the facade. But the issues were so severe, he said, that they decided they needed to rebuild it. He said he and other trustees were told the money was coming from the proper place.
“I certainly want to tell you this is a sense of concern and embarrassment for us that this happened,” Marchena said. “In looking back, I wish I had asked that extra question, but we asked a lot of questions. We were misled and we’re going to take steps, as President Whittaker said, to try to make sure that it doesn’t happen again.”
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