State audit challenges UB Foundation spending

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The University at Buffalo Foundation spent almost $40,000 on questionable entertainment expenses, operated for three years under an expired contract with the campus, and lacks policies to ensure contracts are competitively bid, according to an audit released yesterday by the state comptroller’s office.

The foundation also paid the salaries of two retired university staff members who returned to state employment, while they were also collecting state pensions – allowing them to circumvent state caps on “double-dipping,” the report found.  

The private UB Foundation is technically separate from the public university, but has long faced pressure to be more transparent about how it does business. Last year, its assets totaled more than $1 billion, making it by far the largest of the campus foundations across the SUNY system.

The state comptroller’s year-long examination, which included all 30 campus foundations, found widespread problems with SUNY’s oversight of them. More than half of them have not been audited by SUNY in over ten years, the report noted, and a third are operating under expired contracts with their campuses.

“I think we now have a situation where the issue is not just the lack of transparency, but serious concern over how these hundreds of millions of dollars are being used,” said Frederick Kowal, president of the union representing SUNY employees.

“It’s clear that SUNY, either because they don’t want to or because they are not interested enough, have not been auditing these foundations to the extent they need to be.”

Edward Schneider, the foundation’s executive director, said in a statement to Investigative Post that the comptroller’s report in many instances “makes findings based on its opinion and judgement about how independently governed campus-related foundations should operate, as opposed to what is required by applicable law or regulation.” He added that the foundation now has a new contract with the campus. 

Among the foundation’s spending that state auditors challenged: almost $7,000 for a class reunion; more than $10,000 for a retirement party; and almost $17,000 on a “donor recognition dinner.” Even though the foundation’s own policy allows these types of expenses, the report questioned whether they are consistent with the foundation’s mission.

“Retirement events recognize outstanding employee service and enhance employee campus morale,” SUNY’s chief financial officer said in response to the audit’s findings, also noting that, in some cases, such events raise more money than they cost to organize.

Auditors also found more than $6,300 in expenses that were not properly documented, for instance, with original receipts, as required by the foundation’s policy. When this happens, “alumni and other benefactors cannot be adequately assured that their gifts and donations are used for approved programs and activities,” the report notes.

Schneider said the foundation’s board – not the state comptroller or even SUNY – ultimately has discretion over its expenses.

The foundation also provides funding towards some UB employees’ pay and benefits, in some cases on top of their state salaries. In two instances, the report found that being paid by the foundation, rather than the university, allowed staff members to get around state limits on the amount that can be paid to retirees who return to work while collecting a pension.

One received $118,696 in annual pay and benefits from the foundation, as well as a state pension of just over $76,000 for the same position. Another received $119,565 from the foundation, while also collecting a state pension of more than $120,000. Had these people been paid directly by UB, rather than by the foundation, state law would have capped their annual pay at $30,000, according to the audit.

The report also questioned the way the foundation chooses companies to do business with, finding that it lacked written procurement policies that require competitive bidding. In one case, the foundation entered into a contract for legal services without clear selection criteria to justify the choice, the report found.

A separate SUNY audit of the foundation, expected to be released last summer, has not yet been made public; the reason for the delay is unclear.

The foundation is not subject to the state Freedom of Information Law, and has resisted efforts to change that, arguing that doing so would jeopardize its ability to keep donors’ identities confidential.  

“We are not interested in where the funding comes from,” said Kowal, president of United University Professions, which has supported efforts to subject campus foundations to more transparency. “What we’re interested in is how it’s used.”