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Stony Brook, other SUNY foundations faulted in state audit

Stony Brook Foundation Inc., the university's fundraising arm,

Stony Brook Foundation Inc., the university's fundraising arm, was cited for questionable transactions and loose oversight in a sweeping state audit released Tuesday. Prospective students enter the Frank Melville Jr. Memorial Library at Stony Brook University in Stony Brook on Thursday, Aug. 10, 2017. Credit: Newsday / J. Conrad Williams Jr.

Stony Brook Foundation Inc., the university’s fundraising arm, was cited for questionable transactions and loose oversight in a sweeping state comptroller audit released Tuesday of New York’s public campus philanthropic organizations.

The report, conducted by the office of State Comptroller Thomas P. DiNapoli, found that 10 of the 30 organizations were operating without required contracts, more than half had not been audited by SUNY since 2007 and the two largest — the University at Buffalo Foundation and the Stony Brook Foundation — had not established required policies and procedures for key business functions.

“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.”

The 36-page report includes 18 pages in which SUNY officials dispute the findings, question its methodology and cite factual errors.

“While we are appreciative of the comprehensive audit work done by OSC [Office of the State Comptroller] we are concerned that the draft report is not fair and balanced,” Eileen McLoughin, SUNY’s senior vice chancellor for finance and chief financial officer, wrote in the Jan. 8 response.

The audit covered the period from July 1, 2013, to Oct. 12, 2017. The purpose was to determine whether SUNY was providing sufficient oversight of campus foundations.

There are 30 campus foundations affiliated with SUNY’s colleges and universities with net assets totaling $2.1 billion, as of June 2015. The Stony Brook Foundation and the University at Buffalo Foundations were the largest, controlling $1.1 billion, according to the report.

The campus foundations are private, not-for-profit organizations designed to raise and manage money and real estate donated by alumni, parents, community members, family foundations, university employees and corporations to fund approved university activities and scholarships.

In an email Tuesday night, the SUNY chancellor’s office said: “We strongly reject the assertions made by the Comptroller in this ‘audit.’ SUNY maintains very tight financial controls over its affiliated foundations, which operate through philanthropic donations and do not contain any public funds, and provide additional financial support to the important academic mission of the institutions.These controls include annual independent audits, strict expenditure polices and oversight. They also include contracts between the campuses and their respective foundations, which are a function of SUNY policy, and are not required by law. SUNY recently updated these contracts to comply with enhanced foundation guidelines adopted by the Board of Trustees in May 2016, a process that began well before the onset of the Office of the State Comptroller’s audit. Those contracts are now finalized for almost all campuses. This audit report simply ignores the facts, which are readily verifiable.”

With regards to the Stony Brook Foundation, or SBF, auditors questioned two $300,000 housing loans made to the foundation’s executive director and to the provost/senior vice president of academic affairs, revealed in a 2014-15 tax filing, and inquired why both individuals were receiving compensation from both the university and the foundation, in addition to tax benefits. The executive director received $584,834 and the provost $658,596, which included state and foundation compensation, according to the report.

Stony Brook Foundation board member Richard Nasti said he was “very, very disappointed” to see the final version of the audit because it lacked context. He had no problem with the controller’s office auditing SUNY’s oversight of the foundations but called any commentary by DiNapoli auditors of the private, 501c3 “an overreach.”

“This particular audit went far beyond the scope of what it should have been,” Nasti said.

The report also showed, SBF did not disclose to the state a conflict of interest involving the affiliation between one of its board members, who served on the foundation’s investment committee, and a firm that provides investment services to the foundation. An official in DiNapoli’s office confirmed Tuesday the board member was billionaire James H. Simons and the firm was Renaissance Technologies, based in East Setauket. Simons declined to comment on the matter Tuesday, his spokeswoman said. Auditors also found SBF did not competitively procure contracts including those for lobbying services, fundraising, and entertainment and that they were awarded based on referrals or long-standing relationships. Nasti said 90 percent of the foundation’s contracts were competitively awarded.

Frederick E. Kowal, president of the United University Professions, the union representing 42,000 academic and professional faculty within SUNY, said in a statement Tuesday that the union was troubled by the report and would continue to push for new legislation to give DiNapoli audit oversight of the campus foundations.

“SUNY must wake up, step up and demand far more accountability from the foundations. The foundations — and SUNY — owe that to the students and the SUNY community at large,” Kowal said.

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