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3 golden objects Minnesota Legislature

Office of the Legislative Auditor - Program Evaluation Division

Minnesota Supercomputer Center

Executive Summary

June 22, 1994

In this section we briefly review the history of the relationship between the Minnesota Supercomputer Center and the University of Minnesota. Readers are referred to our 1992 report, University of Minnesota Supercomputing Services, for a more detailed historical account of the relationship. In this section, we focus primarily on events that have occurred since the release of that evaluation.

The University acquired its first supercomputer in 1981. To provide a corporate home for this and future machines, in 1982 the University of Minnesota created the Minnesota Supercomputer Center. The University believed that, by forming a private, for-profit company, it could sell services to private customers and provide supercomputing resources to researchers economically. In order to take advantage of tax benefits, it was necessary that the University Foundation become the company's principal owner.

The University created the Minnesota Supercomputer Institute to provide administrative support to a group of key researchers that use MSCI's computers. Unlike MSCI, the Institute is a part of the University and organizationally separate from the Center. In 1984, the Legislature appropriated $2.6 million to the Institute to support the purchase of computer time and services from MSCI and $5 million to remodel a building in the Minneapolis High Technology Corridor to ho use the Institute. Since that time, the Legislature has appropriated over $70 million to support the University's supercomputing services. Not all of the appropriations have been used to purchase services from MSCI. The University has supported the effort with at least $5 million in additional funds, not including the support provided to the Institute.

Although legally created in 1982, MSCI's operational independence from the University developed over several years. In fact, from 1983 until 1985, University employees continued to operate the supercomputer at the University's computing facility in Lauderdale. In late 1985 and early 1986, the University and MSCI entered agreements that transferred the supercomputer management to MSCI. By December 1985, 18 staff had been hired (mostly from within the University) and a separate company began to take shape.

Since 1986, MSCI has operated as a separate company to provide supercomputer services to the University academic researchers as well as to commercial customers. The company has grown to have about 75 employees and over $20 million in revenues. The University accounted for about 55 percent of the Center's $22.6 million fiscal year 1993 revenues through its $8 million per year commitment and its Army High Performance Computing Research Center (AHPCRC). The federal government funds the AHPCRC research program. The University subcontracts the operation of the AHPCRC computers to MSCI. Figure 1 shows the operating revenue by source of funds for fiscal years 1991-1993.

University's Response to 1992 Evaluation

The University has taken a number of steps to strengthen accountability and to modify its relationship with MSCI. However, despite these changes, relations between the University researchers and MSCI have remained contentious. In January 1993, the Supercomputer Institute Planning Committee (the members of which are high level University researchers) voted a resolution of no confidence in the management of the Center, calling for "an immediate change in the top management of MSCI, Inc." That resolution further stated: "The contractor is not providing acceptable management of resource delivery to the University, i.e., the implementation of the contract by MSCI, Inc. is unacceptable. MSCI , Inc. has failed to manage our account [at] a minimally acceptable level." The MSCI Board responded to the fellows' resolution with a unanimous vote of support in its management.

In addition, several University Faculty Senate committees examined the issue of supercomputing at the University in response to our report's release. In particular, President Hasselmo and the Faculty Senate chair appointed an ad hoc task force to examine , among other issues, whether the University should sell its MSCI stock to the University of Minnesota Foundation. The task force met for several months and examined in detail the University's relations with MSCI. The task force recommended that the President take the following steps:

The University should not sell its interest in the Center to the University of Minnesota Foundation. It should, instead, strengthen the relationship it has with the Center.

A joint Institute/Center Steering Committee responsible to the Center Board of Directors and the University Board of Regents for defining and overseeing Institute/Center interaction should be formed immediately.

The President of the University should recommend to the Board of Regents individuals to replace the two Senior Vice Presidents on the Center Board of Directors. These individuals should be interested in and knowledgeable about academic supercomputing.

The Center must be held accountable to the University by requiring that it annually provide a full confidential disclosure of its financial and programmatic activities to the Chair and Vice Chair of the Board of Regents and to any other individual Regent who might request it.

The Legislative Auditor must be invited to complete his full financial audit of the Center.

The President of the University should insist that an external review of the management performance of the President of the Center be completed by September 1, 1993.

Responding to the task force, President Hasselmo recommended the following:

1. The University should not sell the Supercomputer Center.

2. The board of MSCI should update the Center's mission statement.

3. The University should update the mission statement of the Minnesota Supercomputer Institute (the organization serving the University supercomputer researchers within the University).

4. The board of MSCI should undertake a timely external review of the Center's management, focusing on the problems of communication and customer service.

5. A liaison committee should be formed to address Center/Institute joint planning and issue resolution.

6. The University Vice President for Research will complete the external review of MSCI and make appropriate changes based on the reviewers' recommendations.

7. The existing service agreement between MSCI and the University will be reviewed by the Chair of the MSCI board, the Chair of the University Foundation, and the University's Senior Vice President for Finance, and Vice President for Research to remove any ambiguities that may exist regarding the nature, amount, or particulars of the service to be provided.

8. The Center will be requested to provide annually a full confidential disclosure of its financial activities to the President, the Chair and Vice Chair of the Board of Regents, and any other Regent who requests the information. A financial examination of all funds expended by the University at the Center, and the Center's performance under contracts between the University and the Center, are proper subjects for public audit.

9. The two University vice presidents will resign from the Board of MSCI and will be replaced by two faculty members with the appropriate technical and financial expertise.

The President further stated that in making these recommendations he had "been mindful of the public's right to know what goes on in a public university, of our obligation to provide full disclosure of the use of all public funds to the Legislative Auditor, the Legislative Audit Committee, the Board of Regents, the University community, and the public."

On August 24, 1993 President Hasselmo appeared before the Legislative Audit Commission to discuss the potential audit and reported that at his urging the board of the Supercomputer Center had directed the Center's management to cooperate with the auditor. As mentioned earlier, at the August meeting, the commission directed the Legislative Auditor's Office to conduct both a financial audit of MSCI and a review by the Program Evaluation Division of the two questions related to the financial relationship between the University and MSCI.

During the course of this evaluation, action on several of President Hasselmo's recommendations has been completed. For example, external review of both the Minnesota Supercomputer Institute and the Minnesota Supercomputer Center have been completed.

Report of the External Review Panel on the Minnesota Supercomputing Institute. August 18, 1993.Minnesota Supercomputer Center, Inc. External Review. KPMG Peat Marwick. January 1994. A liaison committee composed of MSCI board members and researchers has also been formed, and has met three times, to monitor the relationship on an ongoing basis. The Center has also hired a person to serve as the University liaison. The University has also removed the two vice-presidents from MSCI's board of directors and appointed three professors and an alumni scientist to the board.

Most significantly, the University and the Center have finalized many of the details that were left unclear in the July 1992 MSCI-University contract. This took a series of meetings over a period of seven months between Senior Vice President Robert Erickson, Vice President Anne Peterson, University researchers, Steven Pflaum the MSCI board chairman and Center managers. The revised contract addresses more specifically many of the detailed arrangements that were left vague in previous contracts. The restated contract has been completed and will soon be signed.