Regents committee calls for OK of $69 million for time to pull back spun-off businesses

Yahoo

05-06-2025

Leaders of the University of Maryland Global Campus, Asia, congratulate a graduate from during ceremonies in Japan in 2023. UMGC has long provided classes for servicemembers around the globe, but has heavily emphasized its online courses in recent years. (Photo by Lance Cpl. Thomas Sheng/U.S. Marine Corps)
The University of Maryland Global Campus should pay out $69 million to run out the contracts of two independent businesses it created that came under sharp criticism from legislators and legislative auditors last year.
That was the recommendation of the University System of Maryland's Board of Regents Finance Committee, which quickly voted Wednesday to extend the $46 million-a-year contract for UMGC Ventures for another 18 months, while the online university works to pull it and another spun-off unit back in-house.
Ventures handles the online UMGC's information technology services, and the university is 'not currently positioned to perform these functions in-house,' the resolution said as justification for the extension.
The resolution notes that it does not increase the current contract with Ventures, which handles UMGC's information technology services, but merely extends it a current rates. The contract will start July 1 and run through Dec. 31, 2026, the length of time UMCG officials said it will take reintegrate Ventures and the other independent unit called AccelerEd, a subsidiary of Ventures.
'The requested contract extension does not increase the annual contract from the current value of fiscal year 25,' UMGC President Gregory Fowler told the committee via Zoom. 'But it does provide us with a necessary runway to implement the reintegration services without disruption of these, which are critical IT services as we are trying to move forward.'
Fowler said a consulting firm had been hired to craft a reintegration plan and assess the university's relationship with the two units.
'I just want to say thank you for dealing with a difficult situation, and for your summary that you sent out,' committee member William T. 'Bill' Wood said during the brief discussion on the issue. 'That was really helpful to read that and understand,. And congratulations on almost getting through the whole thing.'
'Thank you, Regent Wood,' Fowler said.
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The move to reintegrate offices came after a critical August 2024 audit completed by the state Office of Legislative Audits (OLA), which stated the online university's creation of AccelerEd and Ventures cost too much money and appeared to skirt normal university procedures.
UMGC created the two companies under a University System of Maryland policy called the High Impact Economic Development Activities program. Under HIEDA, campuses in the system are allowed to give preferential treatment to businesses they spin off, under specific circumstances.
According to the audit, the campus created Ventures in 2016 as a tax-exempt holding company for UMGC businesses that the university seeded with $15 million. A year later, UMGC spun off its information technology office into AccelerEd.
Ventures had $215.3 million in revenues from fiscal years 2017 to 2022, the audit said, but about $198.1 million of that came from UMGC. And of the $198.1 million, about $184 million of those service agreements were made without competitive bids and with little oversight afterward, the audit said.
While HIEDA policy doesn't require institutions to seek competitive bids, the audit noted that 'the law does not mandate exclusive use of these entities.'
University officials defended the arrangement in the audit, and when they appeared before the joint committee nearly three months later, in a November hearing, they said they still stood by 'the intent' of the program, even if there were issues in how that intent was executed.
The university hired Attain Partners of McLean, Virginia, to study the companies, with a plan focused on seven areas that included governance and leadership alignment, communication and change management, finance and budgeting and technology.
According to an executive summary Attain presented in May, Ventures and AccelerEd helped create 174 jobs , supported St. Mary's College of Maryland and the University of Maryland Eastern Shore, provided $1.5 million in scholarships and established three technology programs.
The summary also highlighted legal advice offered by Florida-based Holland & Knight, which has a Washington, D.C., office. It said Ventures met its IRS designations and complied with UMGC rules by conducting business 'on an arm's length basis.'
Some members of Ventures' board of directors were not appointed by the university, governor or executive authority, so its board didn't require a quorum, and the university 'has no veto power or ability to reverse decisions,' the consultant's report said.
'It does not appear that Ventures would be subject to audit by UMGC or the University System of Maryland without either volunteering to do so or judicial deliberation,' according to the summary.
Among Attain's recommendations was to develop 'a 12–18-month implementation plan to incorporate the necessary frameworks, mechanisms, and structures within Ventures to support the commercialization lifecycle,' and it said that if UMGC absorbed AccelerEd's staff and services back into the university, it 'addresses the majority of OLA audit concerns.'
The Finance Committee's recommendation will be presented to the full Board of Regents, which is scheduled June 13 at 8 a.m. at the University System of Maryland at Hagerstown.