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Audit says U. Red Zone violated policies; Review ordered

By Benjamin Wood | Posted - Jul 14th, 2013 @ 4:45pm

SALT LAKE CITY — Utah higher education officials say they will work to revise their policies after a legislative audit accused school auxiliary services of competing unfairly with private business.

The audit, released Monday by the Office of the Legislative Auditor General, found that off-campus stores such as the University of Utah's Red Zone and conference centers at both the University of Utah and Utah State University violate State Board of Regents and campus policies by advertising to and providing services to the general public.

In the summary of the audit, performed by Richard Coleman, David Gibson and Derek Olson, the Legislature and Board of Regents are encouraged to clarify state policy and potentially enact statute regarding competition between institutions of higher education and the private sector.

"While the Board of Regents has a policy on competition, we believe it is outdated and unenforced," the summary states. "We think policymakers should consider providing additional guidance on how far institutions may encroach on private businesses."

In a written response to the audit, Dave Buhler, commissioner of higher education, concurred with the recommendations made by auditors and said he would work with Utah's college and university presidents to present the Board of Regents with policy revisions by the end of the year.


Buhler said he was cognizant of the sensitivities regarding off-campus businesses, but also said there is pressure for campus auxiliaries to earn enough revenue to provide services to students.

"This is not always an easy balance to achieve," he said. "Revenues from auxiliary services help fund many institutional expenditures, which often include the construction and upkeep of housing units, campus bookstores and student center facilities."

Pamela Silberman, spokeswoman for the Utah System of Higher Education, said the next step for the commissioner and his staff will be to review the current policy, then discuss potential changes with Utah's college and university presidents.

The earliest opportunity for Buhler to meet with school presidents would be during August's Council of Presidents meeting, Silberman said, though it will likely be months before any specific revisions are ready to present to the regents.

Silberman said she did not anticipate any punitive measures being taken against schools for violating the Board of Regents' auxiliary services policies. Instead, she said, the intention is to address any inconsistencies and avoid confusion in the future.

"I think it’s mostly to make sure everyone is on the same page," Silberman said. "It’s more to see what do we do going forward rather than looking backward."


The audit focused on the University of Utah's Red Zone stores, which sell university merchandise and have grown to include three off-campus locations along the Wasatch Front. Sales at those off-campus locations have increased from $810,000 in 2011 to almost $2 million in 2013, according to the report, which auditors wrote "indicates an increasing encroachment by a higher education enterprise into the private sector."

Auxiliary services have an unfair advantage over commercial businesses, auditors wrote, in that they qualify for special tax exemptions and in some cases operate in taxpayer-supported facilities.

The Red Zone stores were also found to be in violation of a State Board of Regents policy that states the primary purpose of campus auxiliary enterprises is to "provide specified services to students, faculty, staff or guests of the institution."

"Although on-campus sales of merchandise can be considered incidental to normal operations, we do not think off-campus stores in local shopping centers qualify as incidental," the audit states.

Auditors also found auxiliary services in violation of policy that prohibits advertising services to the general public.

"The Sandy Red Zone participates in local community events and sponsors a local high school football program," the audit states. "In short, a good portion of Red Zone advertising can be seen by a general audience beyond the campus community."

In addition to the Red Zone stores, the audit found fault with the practice of using campus space for events such as weddings, receptions, high school dances and corporate banquets. Among the spaces listed in the audit are Rice-Eccles Stadium and the University Guest House and Conference Center at the University of Utah and the University Inn and University Conference Center at Utah State.

Arnold Combe, vice president of the University of Utah, wrote in response to the audit that the decision to expand Red Zone stores off-campus was made partly due to increased interest in merchandise following the university's inclusion into the Pac-12 Conference.

Combe also suggested that auxiliary services play a role in recruiting new students and serving the broader campus community.

"To attract quality students and faculty, the university must continually strive to strengthen ties with its broader community, which includes students, faculty, staff, alumni sponsors, neighbors and other interested citizens," he said.

Benjamin Wood

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