After AU, Colleges Increase Scrutiny

At Georgetown University, President John J. DeGioia has asked that additional external audits of his expenses be done regularly. At George Washington, President Stephen Joel Trachtenberg said, the university has added a special audit on top of a regularly scheduled annual review and is considering bringing in more outside compensation experts.

And in the D.C. law office where Raymond D. Cotton specializes in university presidents' contracts, calls have been coming in from across the country, from school presidents and boards of trustees seeking advice. Their message, Cotton said: "Review our situation. Tell us what we have to do so we don't become another AU."

Thescandal at American University that cost President Benjamin Ladner his job last month came as Congress and the IRS were watching for possible abuses of compensation and spending within the nonprofit world. Most colleges and universities are tax-exempt because of their nonprofit status, and in exchange, the schools must be able to show that their salaries and benefits are not excessive.

After an investigation of travel and personal expenses ended Ladner's presidency -- and outrage over the more than $800,000 he received in 2004 added fuel to the already volatile situation on campus -- AU has added regular audits of top administrators. Interim President Cornelius M. Kerwin is receiving a $390,000 base salary this year, without all the perks, such as a chef, that Ladner enjoyed.

Many local schools have put in place layers of oversight and controls as well. Some had already started before Ladner made headlines. At Johns Hopkins University, there are now internal audits of the president's expenses, and his spending must be approved by the board chair. Last year, Catholic University added an audit committee to its board. The University System of Maryland has boosted the staff in its audit office, in part because of the recent Sarbanes-Oxley financial disclosure law regulating corporate boards, even though the federal law doesn't apply directly to nonprofit organizations.

Part of the scrutiny is driven by rapidly rising presidential pay. Nationally, the salaries of presidents at five schools -- Boston University, Vanderbilt University, Middlebury College, Wilmington College in Delaware and Lynn University in Boca Raton, Fla. -- topped the $1 million mark in 2003-04, according to an annual survey by the Chronicle of Higher Education. Johns Hopkins University President William R. Brody ranked 11th with nearly $900,000 compensation in 2003-04. Ladner was 13th.

Hopkins's size, complexity, medical center and reputation contribute to Brody's high salary, Cotton said. Part of his pay comes from the Johns Hopkins Health System, not the university.

Brody, who was chief of radiology at Hopkins's world-renowned hospital before becoming the school's president, also could earn a hefty salary in the private sector, Cotton said. He added that Hopkins gets more federal research and development funding than any university in the country.

"You take a look at the complexity of the job at AU versus Hopkins -- they're not just apples and oranges, they're apples and grapes," Cotton said.

At American, many on campus are still fuming not only about what Ladner was paid but also about the money auditors said Ladner and his wife spent on wine, elaborate dinners and limos, and the $3.75 million departure deal trustees gave him last month when he cut ties with the school. Ladner and his supporters have said almost all his spending was allowed by his contract, a claim disputed by many board members.

At a forum last week, trustees faced bitter questions from faculty and current and former students. Alumnus Hoy Booker asked, "Was the whole board aware this man was making 800-large a year?"

Last month, Sen. Charles E. Grassley (R-Iowa) asked for an exhaustive list of documents from AU -- the first school to be questioned by the Senate Finance Committee in an ongoing review of nonprofit organizations -- writing that he is "deeply troubled" by news reports about Ladner's pay, perks and severance deal.