How closely did the Arizona Board of Regents vet UA deal with controversial online school?

When Gov. Katie Hobbs recently demanded answers about the University of Arizona’s acquisition of a controversial online school, she specifically asked how the body overseeing the state's universities vetted the deal.

This week, the Arizona Board of Regents sent the governor a detailed answer. But that response seemed to diverge from what the regents’ executive director told The Arizona Republic just days before.

In a report signed by Board Chair Fred DuVal and Board of Regents Executive Director John Arnold, they described the board as “vigilant” in negotiations for the deal with the troubled Ashford University and its parent company, Zovio.

“Regents were highly engaged on the proposed transaction, on multiple occasions presenting the (UA) team with detailed questions on key matters, including the potential impacts of the transaction on (UA), financial projections and risks, academic requirements and standards, accreditation issues, oversight of Zovio’s performance, and regulatory and legal issues,” DuVal and Arnold wrote to Hobbs.

But in a Feb. 16 interview with The Arizona Republic’s editorial board, when asked directly whether the Board of Regents vetted the UAGC deal, Arnold said he was legally barred from sharing specifics but said, “We did not independently vet the acquisition.”

Instead, he said he asked a “couple of individual regents” to work with UA President Robert Robbins on the deal but the board didn’t examine it "independent of the work that the university did that did include independent reviews.”

“And we were comfortable with the vetting process that they went through,” Arnold said. He now also serves as UA’s interim chief financial officer, a situation that the governor and others have said raises concerns about a conflict of interest.

Arnold told The Republic that he “understands the perception of a conflict of interest” but that the “immediacy” of the school’s financial crisis and “the background that I bring to this particular issue” overruled that concern.

Ashford University was a for-profit online school that faced multiple lawsuits about misleading students on the cost and value of its degrees. A California judge fined the school $22.3 million and the U.S. Department of Education later forgave $73 million in loans to students who enrolled.

The school’s faults were well known before the deal was struck.

In their report to the governor, DuVal and Arnold wrote, “The (UA) team was clear-eyed in recognizing the headwinds facing Ashford, including repercussions from the alleged aggressive marketing and debt collection practices, declining enrollments due to competition from other public and non-profit universities, federal and state investigations, and declining retention and graduation rates.”

Speaking to The Republic’s editorial board, Robbins said he was aware of the risk of acquiring a school the California attorney general was suing at the time, but decided to move forward with the deal because “we had a lot of very bright people who were advising us that the risk was very low.”

Public records obtained by The Arizona Republic from the months surrounding the original deal indicate something different: Robbins and UA officials were warned about the high-risk nature of the venture by multiple individuals, including the then-dean of the UA Eller College of Management.

Ashford’s parent company Zovio went bankrupt and liquidated all its assets, including the online university, in 2022. UA assumed full responsibility for the school and its hefty operating expenses — projected at $231 million for the current fiscal year. UA officials, including Robbins, maintain that revenue from the online university will nearly offset the operating expenses and that UAGC is not a contributing factor to the university's current $177 million financial deficit.

A spokesman for the Governor's Office said that while Hobbs appreciates the report from the Board of Regents, she "remains concerned about the lack of transparency regarding UAGC's acquisition."

"It's clear that (UA) knew about the issues with Ashford University and has not fully resolved all of them, which has further perpetuated concerns at the national level," Christian Slater, the governor's spokesman, said in an email. "The Governor will continue to demand accountability and transparency from the university and ABOR to ensure the full integration of UAGC into (UA) gives the same quality degree to every student."

How did UA assess the decision to buy Ashford University?

The 13-page report lays out how the Board of Regents and UA say they vetted the acquisition of the online school, including input from a higher education investment banking firm and a former attorney with the U.S. Department of Education.

It also explained some of the university’s motivation for its interest in UAGC. Under pressure from the COVID-19 pandemic, UA looked for ways to expand its online education presence, the report states. Officials said they could have selected several universities but chose Ashford because of its diverse student body and unique approach to online classes.

A core group of six people, including Robbins and UA's provost and chief financial officer, were involved in the evaluation. From there, working groups formed to tackle financial, academic and legal considerations for UA.

UA officials, aware of the ongoing investigations into Ashford’s parent company, interviewed Ashford staff to learn what changes were being made because of the allegations, according to the report.

UA officials said they’re taking precautions to ensure the school’s previous mistakes aren’t repeated. The report pointed to ongoing external and internal reviews of marketing practices. In addition, the Board of Regents is hiring consulting firm Ernst & Young to analyze UAGC’s finances and streamline its administrative roles.

From there, officials said they plan to integrate UA and UAGC as one institution. This could mean a singular student body with the same faculty, the report states.

In Friday’s interview with The Republic, Robbins said UAGC students already receive the same education as UA students, only to walk back the remark minutes later after acknowledging that UAGC students do not have access to the same courses, professors, resources or degrees as UA students.

Why did the Board of Regents prepare a report on the deal?

The Board of Regents' report was written in response to the governor’s demand last month that the board produce a report “that details the rationale and process that were used to assess the purchase of Ashford University and its subsequent rebranding as the University of Arizona Global Campus,” including details of how the deal was “vetted by university and ABOR officials.”

Hobbs’ letter cited an Arizona Republic investigation on issues behind the University of Arizona's multimillion-dollar budget shortfall and blasted the regents and UA officials for "lack of accountability, transparency and leadership."

“To say this situation demonstrates there is significant work ahead to restore the university’s financial health would be an understatement,” Hobbs wrote.

Arnold and Robbins both pledged increased “transparency” in the meeting with The Republic’s Editorial Board, including a promise to release more documents surrounding the UAGC acquisition for public scrutiny.

“We are going to be transparent and we're going to be decisive,” Robbins said. “We have $177 million structural deficit that we are going to solve; we have to solve it.”

Hannah Dreyfus is an investigative reporter for The Arizona Republic. You can reach her at hannah.dreyfus@arizonarepublic.com. Follow her on X, formerly Twitter: @Hannah_Dreyfus.

Helen Rummel covers higher education for The Arizona Republic. Reach her at hrummel@azcentral.com. Follow her on X, formerly Twitter: @helenrummel.

This article originally appeared on Arizona Republic: Arizona Regents send report to Gov. Hobbs on UA deal for online school