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SUNY audit recommends 29 changes to UB Foundation finance, management operations

The report found the foundation ‘substantially complied’ with SUNY guidelines and procedures


In SUNY’s first-ever audit of the UB Foundation, officials recommended 29 changes to the financial and management policies the private nonprofit has in place to oversee the university’s $1 billion endowment.

The report revealed foundation board members failed to disclose conflicts of interest, and on several occasions, voted on official business without quorum.

Although SUNY officials found the foundation had “substantially complied” with state guidelines and had “many” necessary financial controls in place, the report recommended university and foundation officials review a number of questionable practices, some clearly at odds with SUNY guidelines and New York state law.

Auditors looked at financial practices in place from 2014-16 and identified at least four instances where UBF board members failed to disclose conflicts of interest.

A foundation board member served simultaneously on the board of a health insurance provider to which the foundation made 74 payments totaling nearly $3.8 million in 2014-15 and 105 payments totaling $4.9 million in 2015-16.

The report also found two foundation board members served on the board of a research and innovation center associated with UB. The foundation made payments totaling $8.7 million to the center during the audit’s two-year period.

Although the audit did not find evidence that trustees participated in decisions or votes related to any of the transactions, it said the relationships should have been disclosed, and recommended foundation officials “proactively assist board members with identifying actual or potential conflicts of interest.”

The report also questioned the use of foundation bank accounts for money generated through the Center for the Arts, athletics camps, continuing education programs and other campus activities.

Money generated from state resources and state facilities should be managed in separate accounts in compliance with New York state law, according to the report.

Board members also violated foundation bylaws several times over the two-year period by voting on official matters without the required number of members present.

Foundation bylaws require a majority of the board to be present for quorum, but in at least four instances, boards voted on official business with only half the members present.

In one instance, foundation board members voted on an investment transaction without the required number of members present.

Auditors also recommended a number of changes regarding payroll and procurement policies. The report found that although the foundation established written policies for almost all other key business functions, it does not have a written policy regarding payroll.

Among the recommendations, auditors said the foundation needs to reassess how it reports employee salaries on forms it’s required to file with the IRS to maintain its tax-exempt status.

The foundation reported nearly $40 million in salaries for “non-employees,” despite providing the employees with health and fringe benefits and foundation-issued tax forms. Auditors questioned the classification, and said it should be reassessed in its next tax filing.

Although university guidelines require campus officials to show at least three quotes for purchases over $50,000, the foundation does not follow up on disbursements to ensure goods and services are competitively bid on.

In one instance, Campus Living employees spent more than $317,000 on bathroom flooring for foundation-run housing complexes, and the purchases were not properly documented.

UBF executive director Ed Schneider thanked audit officials in a letter, writing, “UBF takes great pride in the work it has done over the years, and this audit and the many other reviews done over the years would seem to reinforce that point of view. … Thanks for your good work, thoughtful report and related recommendations.”

Schneider also said he would work with SUNY and UB officials to address each of the report’s recommendations.

UB spokesperson John Della Contrada released an official statement that said the university is pleased the audit found the foundation to be “substantially compliant” with SUNY guidelines and the foundation operates with a “high degree of transparency, providing the public with information that is above and beyond what other campus-related foundations publicly disclose.”

Twice since 2011, UB has successfully fought efforts in court to subject the foundation to open government laws. In 2012, UB spent thousands of dollars on lobbying while the state legislature considered a bipartisan bill that would subject campus-affiliated foundations to freedom-of-information laws, state records show.

Separately, the foundation paid a lobbying firm $20,000 to represent its interests in Albany during the same period. The transparency bill was also on the UBF’s radar, according to state records.

Della Contrada’s statement also said the university would help the foundation improve its practices and operations when appropriate.

The audit comes almost a year later than SUNY auditor Michael Abbott originally told trustees it would be released.

An arguably more critical audit from the State Comptroller’s office in February questioned whether current SUNY guidelines provided sufficient oversight for the state system’s 30 campus foundations. State Comptroller Tom DiNapoli recommended increased oversight and transparency of the private nonprofits, including regular audits.

Sarah Crowley is the senior news editor and can be reached at sarah.crowley@ubspectrum.com or @crowleyspectrum.


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