Ball State Bonanza

, Ethan Gaitz, Leave a comment

Bureaucratic ineptitude is nothing new to the American public (as well as the readership of AIA). It becomes almost invariably more difficult for an agency or institution to function smoothly once it reaches a certain size; unable to effectively conduct oversight of itself, expansive bureaucracy faces the constant nagging threat that some low or mid-level official will engage in unchecked and unmonitored behavior that could inflict serious institutional damage.

ball state university

This was the case at Ball State University, a public institution located in Muncie, Indiana. Ball State maintains that its “investments are preparing bright students to take advantage of current and emerging job opportunities, meet[ing] society’s most pressing needs, and serv[ing] the communities in which they will live and work.”

Well, it turns out that Gale Prizevoits, former director of cash and investments, was held responsible for essentially gambling away $13.1 million of the university’s money according to The Chronicle of Higher Education. Prizevoits, a midlevel administrator, was fired by the university in 2011.

Ball State’s overall investment approach has been characterized by university officials as “conservative,” but it seems as if “dwindling budgets and intensifying revenue pressures” may have fueled Ms. Prizevoits’s impetus to devise new, creative investment tactics. With a weak economy and virtually no economic growth, perhaps it should come as no surprise that businesses and universities alike are exploring drastic solutions to improve their bottom line. Desperation breeds unprecedented action.

In this case it was not the “soundness of Ms. Prizevoits’s investment strategy [that got her into trouble] but her dealing with people who, the courts have found committed fraud.” (see the subheading “Lack of Due Diligence” for a detailed account of those who Prizevoits made business partnerships with)

Randall Howard, Ball State’s treasurer and vice president for business affairs put it best: “If you combine at least one person wanting to commit a crime with somebody else who is either helping to conceal the crime or not being diligent in the controls, you can’t have enough controls to protect for everything.”

Anthony Page, an Indiana University law professor, commented by noting that “[Universities] must make sure there are controls so that one misguided employee can’t blow so much money.” Why/how was Prizevoits able to sign off on questionable high-dollar contracts with no permission from higher level administrators? Why did Ball State not have an effectual oversight mechanism in place to monitor an office that handles $270 million to $350 million of the university’s funds?

All are well warranted questions and it seems as if Ball State has actually taken some measures to address these institutional deficiencies.

One fix to the university’s financial practices is that investments can “be purchased only through brokers on an approved list.” “All investments must also flow through a single prime broker, who cross-checks all purchases.”

This marks solid progression toward improving the administrative structure, but ultimately “no risk-management strategy is foolproof.”