Sen. Clarence Lam and Del. Jared Solomon, co-chairs of the Joint Audit and Evaluation Committee, at a hearing Wednesday about an audit of the University of Maryland’s global campus. Photo by William J. Ford.

Lawmakers questioned University of Maryland Global Campus officials Wednesday about the school’s use of no-bid contracts for university-generated business and the effectiveness of $500 million in advertising contracts.

The hearing by the Joint Audit and Evaluation Committee follows a The August audit of UMGC by the Legislative Services Department’s Office of Legislative Audits that also criticized the online university for handling payment checks and tracking student residency status.

But the audit — and much of Wednesday’s hearing — focused on advertising contracts and a University of Maryland system policy called the High Impact Economic Development Activities program. Under HIEDA, campuses in the system are allowed to give preferential treatment to businesses they are winding down in specific circumstances.

“I can only tell you that I’ve never seen a situation like this in state government in my 29-plus years with the state of Maryland, so (HIEDA) was clearly a unique activity,” said Legislative Auditor Brian S. Tannin. commission at the start of the over two-hour hearing.

Sen. Clarence Lam (D-Anne Arundel and Howard), the committee’s co-chair, said the audit showed that while Ventures, a spinoff from UMGC under HIEDA, had revenues of $215.3 million from fiscal years 2017 to in 2022, $198.1. million of this amount came from the university.

“I wonder if that really meets the spirit of why we created these HIEDAs,” Lam said.

University of Maryland Chancellor Jay A. Perman disagreed with Lam’s analysis, but “is on board” with the program, which aims to create businesses that help generate income and entrepreneurial activity.

“I think we never like to fail, but in trying to execute the intent, I think there are some issues that you’ve raised that are totally valid,” Perman said.

Ventures was just one of the HIEDA companies cited in the audit. He said UMGC in 2015 dissolved its Office of Analytics to create HelioCampus, providing $10 million in startup funding for the company to assist universities with analytics.

The following year, the global campus created Ventures, a tax-exempt holding company for UMGC businesses, which the university seeded with $15 million. A year later, in 2017, UMGC spun off its IT office into AccelerEd, a subsidiary of Ventures.

The auditor noted that of the $198.1 million in business that UMGC gave to Ventures, $184 million of those service agreements were made without competitive bidding and with little follow-up. Although HIEDA policy does not require institutions to seek competitive bids, the audit states that “the law does not require the exclusive use of these entities.”

The policy establishes six criteria for colleges and universities to establish a HIEDA-related business, including the production of at least $1 million in annual gross revenue, the formation of new companies to register or incorporate with the state, or an academic program that meets labor demand. in an “area of ​​documented labor shortage”.

UMGC President Gregory W. Fowler noted that Ventures has awarded $1.6 million in scholarships to 950 Marylanders in fiscal year 2024 and another $1.4 million planned for this fiscal year.

Fowler also addressed criticism of the school’s advertising program. In 2019, the Board of Public Works approved $500 million split between two six-year advertising contracts. University officials said Wednesday that about $317 million has been spent over the past five years.

By comparison, Fowler said, two of the school’s national competitors for online students — Southern New Hampshire and Western Governors University — spent $144 million and $127 million, respectively, in 2019 alone.

“Since joining the University in 2021, I have approached the goal with the understanding that we at UMGC are not called to supplant or supplant the important work being done by our fellow residential institutions, but rather to expand that work to new populations , often disadvantaged. … as we learn new things ourselves,” Fowler said.

Despite the advertising contract, the university announced layoffs in 2022 of several dozen employees after a drop in undergraduate enrollment in the fall of 2021. School leaders at the time blamed the pandemic as a major cause of the drop in enrollment.

Del. Committee member David Moon (D-Montgomery) said a “half a billion dollars” in advertising should have generated more money in the stock market.

Meanwhile, global campus officials said Attain Partners will conduct a study for UMGC that will evaluate the current HIEDA model, among other things. The report is due next spring, but Lam did not appear to be confident in the value of that report.

“Why should we trust the recommendations” in the report, Lam asked.

“We’ve gone through the acquisition process … and to make sure we’re bringing in someone with the ability to say this is not biased one way or the other,” Fowler said.