FOR RELEASE:

Audit Finds Suny Research Foundation Spending Circumvents State Rules And Oversight

Analysis of Foundation Connected with State University Questions Weak Contracting Practices, Supplemental Payments to SUNY Employees

The State University of New York (SUNY) Research Foundation made questionable expenditures including hiring of a lobbyist to advocate for the University system without requiring any documentation of services provided, supplemental housing allowances to SUNY college presidents who were already receiving housing allowances from the University system, salary payments that allowed State employees to circumvent Retirement and Social Security law, and tuition for a SUNY employee's child to attend an out-of-state college, according to an audit released today by Comptroller Alan G. Hevesi.

Auditors analyzed expenditures by the SUNY Research Foundation (SUNY RF) over a two-and-a-half year period and found millions of dollars in purchases made without using a competitive process as well as millions in payments made to contractors without proper documentation. Much of the spending by SUNY RF, an independent non-profit, is made on behalf of individual SUNY campuses or to support the SUNY system.

"The SUNY Research Foundation has made millions in questionable purchases and payments that, in some cases, would not be acceptable under the rules that govern the State University system. This is highly inappropriate and it is unfair to the students and faculty on all SUNY campuses - and indeed to all New Yorkers," Hevesi said.

SUNY RF does have financial controls in place for purchasing and procurement. However, after testing a sample of transactions, auditors found that 11of 68 contracts analyzed (16%) valued at $2.4 million were awarded without competitive processes or were single-source procurements that were not properly justified. Numerous expenditures were not appropriate because they did not support the SUNY system or were made to circumvent state rules and regulations.

Specific findings include:

• A SUNY RF contract to provide lobbying services for the SUNY central office worth $1.32 million over two years did not require the adequate documentation of the services to be provided, and 14 payments on the contract were made without any details provided regarding work done or incidental expenses being reimbursed.
• SUNY RF was used to pay two SUNY college presidents additional housing allowances on top of the $37,500 that was the maximum they were allowed to receive from their respective colleges. One received $51,000 from SUNY RF; the other received $46,500.
• A SUNY employee received $7,000 from SUNY RF to pay for his child's college tuition to an out-of-state college, as part of a package to attract the employee to work at SUNY. SUNY RF officials said the payment was justified because the employee was a "top expert" in his field and his decision to come to SUNY was a "major coup."
• SUNY RF supplemented the pay of another SUNY employee - whose job duties were not related to the Foundation - because the individual was unable to obtain a higher salary grade in the SUNY position. Human resources files indicated that the arrangement was to be temporary until the employee passed the required exam for promotion. However, auditors found that the supplement has been in place for 16 years, and that it reached 15.3 percent of the employee's state salary. Auditors determined that this was a violation of State Retirement and Social Security Law; SUNY RF officials agreed and the individual was removed from the Foundation payroll.
• A State retiree was hired to work at SUNY under the provisions of Section 211 of State Retirement and Social Security Law, which limits the amount that retirees may earn working for the State. Auditors found that SUNY RF inappropriately supplemented the salary paid to the individual by SUNY to allow the employee to earn more than permitted by State law.
• Two SUNY RF consulting contracts on behalf of SUNY Stony Brook -$650,000 for computer software-related services and $265,000 for development of a capital plan - were done as single-source, but officials could not provide documentation justifying the need for a single-source contract.

SUNY RF was established in 1951, and since 1964 has been responsible for the fiscal administration of research programs on SUNY campuses that are funded with outside research grants, rather than State appropriations. The Foundation is supported by these grants - which generally include funding for administrative and facility costs - and also receives revenue from gifts, investment income and other sources. During the two years ending June 30, 2003, Foundation revenues funded about $1.2 billion in research, and the Foundation received about $247 million in administrative reimbursements and from other sources.

Based on a 1977 agreement between SUNY and the SUNY RF, SUNY RF is required to make an annual payment to SUNY's income fund. The amount of the payment is based on SUNY RF annual revenues and is determined by the Foundation and SUNY, subject to approval by the State Budget Director after consultation with the State Comptroller. Auditors calculated that as much as $109 million was available to make payments to SUNY during the audit period - July 1, 2001 through December 31, 2003.

The 1991-1992 State budget allowed SUNY RF to avoid using this formal process to determine how campus' administrative costs for grant-funded projects were reimbursed. However, SUNY RF has not made the annual payment to the SUNY income fund since then, maintaining that the elimination of the requirement was permanent, not just for 1991-1992. Auditors disagreed, citing the lack of language included in budget documents subsequent to 1991-1992, and noted that payments through the income fund would be subject to increased oversight.

Auditors recommended that the Foundation follow its established policies and procedures for procurement, and establish formal guidelines and limitations for acceptable types of expenditures.

SUNY RF's complete response is included in the audit.

Click here for a copy of the audit.

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