After critical audit, UMGC will pull back units it had spun off as independent businesses
The University of Maryland Global Campus said Tuesday it will reintegrate offices that it had previously spun off as independent businesses, after a highly critical audit last year suggested that the move was both costly and that it skirted normal procurement procedures.
In letters to the campus community and to university and legislative leaders, UMGC President Gregory W. Fowler said the decision came after an outside consultant reviewed the relationship between the online campus and Ventures and AccelerEd, the two independent units it created.
'The final [consultant's] report has been completed, and pending the receipt of appropriate notifications and approvals, UMGC intends to reintegrate Ventures and AccelerEd back into the University of Maryland Global Campus (UMGC), ' Fowler wrote.
He said the university expects to notify the University System of Maryland Board of Regents of the proposal at regents' next June 13 meeting. If approved, Fowler said UMGC planned to target July 1 as 'Day One' of the transition, which is expected to take a year to 18 months to complete.
Sen. Clarence Lam (D-Anne Arundel and Howard), who served as co-chair of the Joint Audit and Evaluation Committee that grilled university officials last year on the audit, welcomed Tuesday's announcement as a 'positive development.'
'It makes sense,' he said, noting that the audit 'demonstrated a conflict of interest and a loss of state funds' with UMGC arrangement.
Lawmakers grill UMGC officials over ad spending, 'unique' contract system
Lam said that he and other legislators questioned 'whether this was an arms-length relationship' between the university and the supposedly independent firms that received virtually all of their business from UMGC. He said the arrangement allowed AccelerEd to 'circumvent normal procurement process.'
'This [bringing AccelerEd in house] is a recognition that this probably should not have happened,' Lam said, noting that the initial decision to separate the IT business from UMGC was probably 'shortsighted and maybe not the best use of taxpayer dollars.'
An August 2024 audit by the Office of Legislative Audits said UMGC spun off AccelerEd and Ventures 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, in 2017, UMGC spun off its information technlogy office into AccelerEd, a subsidiary of Ventures.
Ventures had $215.3 million in revenues from fiscal years 2017 to 2022, the audit said, but about $198.1 million of that money 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 the intent was executed.
But lawmakers pressed university officials about the use of millions of dollars through HIEDA. The university subsequently hired Attain Partners of McLean, Virginia, to conduct an assessment of 'our relationship to UMGC Ventures and AccelerEd.' A final version of that report has been delivered, a copy was not immediately available Tuesday.
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'Please know that we are committed to managing the transition thoughtfully and transparently every step of the way,' Fowler wrote. 'I assure you that we deeply value the contributions of every team member – at UMGC and AccelerEd – and will proceed with the utmost respect and care for all involved.'
Fowler said he planned to share more details with the campus community at a July 1 'global town hall.'
'I know that change can bring uncertainty, and questions are sure to arise about how this transition could affect individuals or teams across our operations,' Fowler wrote. 'And as always, I thank you for the work you do on behalf of our learners and in support of our mission.'
– Maryland Matters reporter Danielle J. Brown contributed to this story.
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