The University of Connecticut has recently faced criticism for its decision to accept a high interest loan to finance the Health Center’s outpatient facility. State auditors have claimed that the loan carries about $77 million more in interest than would be the case had the state sold bonds to finance the project.
But rather than accept responsibility for a poor judgment call, UConn has laid the blame at the feet of the state auditors whom the university claims should have prevented it from accepting the bad loan.
As reported in the CT Mirror, the state auditors claimed that they “never were apprised of the full details of the financing plan, and, regardless, are prohibited from giving management advice.” The auditors assert that they cannot give financial guidance to institutions they will later audit.
Despite these arguments, the university continues to assert that the auditors should have mentioned concerns about the loan before the university accepted it. UConn must stop blaming state auditors for its own poor management decisions and should take full responsibility for this decision. The university is free to defend its decision or explain it, but it is wrong to scapegoat the auditors who reviewed the financing.
The university further argued that its actions were justified because the state had told it to find a private developer and did not express an interest in issuing bonds. The CT Mirror reports, “…a UConn statement read, it ‘is not a realistic assumption’ that the governor and legislators would approve state bonding for a project they wanted a private developer to finance. Had the state intended to fund the project with state bond funds, it would have done so, and it did not.’”
The university seems to believe that when the state asked it to find a private developer, it wanted a private developer at any cost, which also seems to be an unrealistic assumption. Going to the quasi-public Health Center Finance Corporation to secure any loan from a private developer they could get, regardless of the interest rate, is not a reasonable interpretation of the legislature’s wishes.
In addition, the state’s aversion to bonding out was likely under the assumption UConn could get a loan at the market interest rate. It is not unreasonable to think that the state may change its position on issuing bonds if the alternative would put a much larger burden upon the Health Center and potentially the state itself.
If UConn had any doubts as to the state’s wishes, they could have simply asked what they should have done.