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DiNapoli: Many SUNY Campus Foundations Operating Without Contracts or Proper Oversight

A third of the 30 State University of New York (SUNY) campus foundations were operating without the contracts they are required to have with their campuses while overseeing and managing billions in donations and resources, according to a report released by State Comptroller Thomas P. DiNapoli. More than half of the foundations have not been audited by SUNY in at least 10 years.

"We found numerous problems with SUNY's oversight of its campus foundations. SUNY does not regularly examine the foundations' books, and my auditors found instances of questionable expenses," DiNapoli said. "SUNY administrators need to improve their oversight efforts to make sure billions of dollars are being handled properly."

State-operated campuses are authorized to contract with foundations, which are private, not-for-profit corporations, to support fundraising efforts, real property management, or other activities and functions that are not specifically vested with the campus. Generally, foundations receive and manage donations and make these resources available to the campus to support approved programs and activities.

SUNY's 30 campus-related foundations had net assets totaling $2.1 billion as of June 30, 2015 (most recent available financial information), with foundations at 10 campuses controlling about 84 percent of these funds.

DiNapoli's auditors found 10 of the 30 foundations were operating without contracts with campuses, including the University at Buffalo Foundation (UBF), one of the largest with $723 million in assets as of June 30, 2015. Auditors found two foundations, Stony Brook Foundation (SBF) and UBF, controlled $1.1 billion, more than half of the total foundation assets.

Auditors also determined 16 foundations have not been audited by the SUNY administration since at least 2007. In addition, auditors found that SUNY administrators do not obtain or review certain available documentation that could be used to assess risk in the foundations' operations.

SUNY officials told auditors they lack recourse for foundations that are operating without a contract. Officials added that they continually contact foundations for status updates on contract negotiations, and have even developed interim contracts to help bridge the gap created by guidelines instituted in 2016, without success.

DiNapoli's auditors noted that SUNY administration could improve its risk assessment process to focus on the areas with the greatest risk of fraud.

In examinations of UBF and SBF, auditors found both foundations provide a significant amount of funding to the campuses for salaries and other forms of compensation, some in addition to state salaries. Auditors found neither foundations' payroll-related policies included provisions to ensure the compensation they were funding was justified or benefited the campus.

Auditors sampled 50 individuals, selected based upon risk, compensated by UBF for the fiscal year 2014-15 that ends June 30 and found that in addition to a state salary, 20 were paid nearly $1.8 million by UBF. Four of these individuals each received salaries exceeding $100,000 from both the University at Buffalo and UBF. For example, one individual received a state salary of $351,438 while also receiving $308,453 from the foundation.

In a sample of 19 of the 50 individuals, whose foundation compensation totaled $1,683,909, auditors found insufficient justification for the compensation for two individuals whose total salary and fringe benefits amounted to $239,743.

Auditors identified contracts that were not competitively procured by UBF and SBF, including contracts for lobbying services, fundraising, and entertainment that were awarded based on referrals or longstanding relationships.

DiNapoli recommended SUNY administration:

  • Work with campuses to ensure all foundation contracts are executed on a timely basis;
  • Routinely evaluate relevant, available information to assess risk in the foundations' operations; Incorporate identified risks into the audit planning process and examine high-risk areas;
  • Ensure all foundations have comprehensive policies and procedures that address all areas specified in SUNY provided guidelines; and
  • Review the questionable expenditures identified in the audit and determine whether they are reasonable and consistent with the foundations' mission to support campus programs and activities.

SUNY officials disputed several of the audit's findings and conclusions. Their complete response is included in the audit.

Read the report, or go to: http://osc.state.ny.us/audits/allaudits/093018/sga-2018-16s93.pdf

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