For more than one year now, auditors from the State Comptroller’s Office have been at work at ECC. The report is now done and the college administration has prepared its response and is developing an action plan for addressing the document. I have reviewed dozens of state or county audits over my years in government. This audit is devastating.

The audit (“Board Oversight and Management of College Resources”) goes to the heart of the school’s management and operations. The picture drawn by the auditors is not a pretty one. It details a board that has ignored its fiduciary responsibilities. It details a college president who has been running the place pretty much as he sees fit.

The audit questions how salaries of senior staff have been determined and hidden from Board of Trustees, student and general public view. It is, after all, a public institution.

The audit questions procurement practices and the lack of accountability.

The audit details how two subsidiary organizations have channeled hundreds of thousands of dollars back to the college while lacking oversight of the College Board.

The Board of Trustees consist of ten members: five appointed by the county executive (two by Chris Collins, three by Mark Poloncarz); four appointed by the governor; and a student representative. There is currently a vacancy in the student representative position. One of Poloncarz’s designees, Tim Callan, is just in the process of being appointed.

Aside from the College Board, the county government, through the county executive and the legislature, has a role in reviewing annual budgets. The County Fiscal Stability Authority and the State University of New York have monitoring roles.

The audit runs 58 pages, chocked full of details of mismanagement. There’s way too much for this post, so I will start with the major findings as contained in the Executive Summary. There will be additional posts to this blog as I get into the issues in greater detail.

Here are some of the key findings, quoting from the Executive Summary, with some editing and annotating:

• The Board has established a lax control environment and has allowed management to assume Board responsibilities and make key financial decisions with little or no Board oversight. Additionally, the Board has allowed College officials to circumvent Board policies and compromise the transparency of College operations. The Board did not always perform its key financial decisions and deliberations in a transparent and public manner. As a result, the College’s stakeholders, including the students and taxpayers who fund its operations, cannot be assured that College resources have been used properly or that decisions have been made in their best interest.

• We found numerous control weaknesses over payroll processing and the maintenance of leave records. From September 9, 2010 through February 20, 2015, the President created 10 senior executive positions with salaries totaling $756,000 annually. Although the Board approved the creation of most of these positions, the rationale for approving these positions and the related salary information were not documented in the minutes as required by Board policies.

• The President directed the Payroll Supervisor by email to make questionable compensation payments to two executives totaling $77,000 and increase the base salaries of all senior executives by 2 percent, totaling $27,000, without Board approval. The salary increase was never approved by the Board and was not clearly disclosed in other public documents or records such as the annual budget. The College’s leave records also were inaccurate and had not been updated in a timely manner…

• The Board also did not always ensure professional services were procured in a competitive manner. We reviewed payments totaling approximately $1.2 million made to 16 service providers during 2013-14 and 2014-15. The College paid 11 professionals a total of $440,000 for services without using proposals. Further, the Board did not enter into written contracts with eight professionals for services totaling $342,000.

• The College has contracts with two affiliated not-for-profit corporations: the Auxiliary Services Corporation of Erie Community College (ASC) and the Erie Community College Foundation (Foundation). These entities provide certain services to the College’s students and perform certain functions on the College’s behalf. However, the written agreements do not provide a means for the Board to measure or monitor the entities in carrying out their contractual obligations to the College. Furthermore, financial transactions between the College and the entities were not always documented properly and conducted in a transparent manner.

 

• The ASC is responsible for the distribution of the College’s student activity fees. During 2013-14, the ASC distributed $1.5 million in fees on behalf of the College to various groups and organizations. However, the manner in which the College has directed the ASC to distribute these fees has not been transparent and the fees’ purpose has not been clearly communicated to students. Since September 2010, the ASC has transferred over $1 million to the College in support of a capital project. [Note: there is a question about the legality of this action.] The ASC remits $38,840 of its (beverage and vending machine) pouring rights to the Foundation. [Note: The Foundation uses those funds to provide the college president with a “discretionary” spending account, which has been used for dues, dining, banquets and entertainment, including $7,400 to a private club for the president’s dues and expenses.]

• Pursuant to the operating agreement between the College and its Foundation, the College pays the majority of the Foundation’s operating expenses and provides the Foundation with rent-free office space at the City Campus. The value of this compensation during 2013-14 was approximately $290,000… The Foundation Director generally reported gifts or donations to the President but did not report monetary gifts to the Board. The Foundation did not inform the Board of more than $303,000 in monetary donations and did not inform the President of two monetary donations totaling more than $154,000. Therefore, the Board could not ensure that such gifts are being used in the College’s best interest.

• The Board’s failure to provide adequate oversight over the College’s financial operations and key officials has helped to create an environment where there is no expectation to follow policies or to be accountable to the public for the use of College resources.

Where ECC goes from here

ECC uses an advertising slogan – “start here, go anywhere.” That might be better modified to address the results of the state audit – “start here, but who knows where we are going?”

The continued tenure of the College president should be reviewed by the Board and the same recommendation may be appropriate for some senior staff members. Perhaps new board members would help.

The President of the Board of Trustees, Steve Boyd, has responded to the Comptroller’s audit, trying to explain and justify many of the board and administration actions (or lack thereof). Scapegoats abound. Boyd’s reaction to the audit would do Donald Trump proud. The tone is, we’re doing well, and whatever has not been done well is someone else’s fault. Boyd says that there is a history of making politically connected staff appointments (true), but he conveniently overlooks that his president had a long political history himself.

The county executive and legislature need to significantly increase their oversight of the College, and the four-person Fiscal Authority staff should also be pressed into service. What is the role of the county comptroller?

There are a lot more details which will lead to a lot more suggestions about the school’s management. Stay tuned.

Some facts about ECC to place things in context

Enrollment at the school has been declining steadily for the past several years. The 2015 enrollment was 11,822, down 1,828 (13 percent) less than five years ago.

Tuition was increased by $300 for 2015-16, equaling the increase put in effect for the previous year.

State aid is awarded on a rolling average of enrollment, so while there have been small increases in the per-student state grants, actual state dollars to the college are dropping because of the decline in enrollment.

County funding for ECC was increased for 2016 by $245,683 to a total of $16 million. Except for a funding increase of $125,000 in 2015, county government assistance has been static for nearly eight years.

The state’s original vision for the funding of community colleges was that students, the state and the sponsoring county would each contribute a third of the total annual expenses of the school. That formula was breached long ago. ECC students now pay, either through their state and federal tuition assistance or their own funds, more than half of the annual budget.

The college’s Board in November approved contracts with the school’s two largest unions, the Faculty Federation and the Administrators. Pay raises averaged approximately 2 percent annually between 2009 and 2020. Starting this year, all employees will contribute to the costs of their annual medical insurance, beginning with five percent in 2016. The college anticipated a 27 percent increase in per person health insurance costs beginning this month.

Although the college has indicated that they have sufficient money in their fund balance to cover back-pay and some of the new costs, it is not clear that they will have sufficient funds going forward to meet their new contractual obligations.

As part of the contracts the college offered early retirement incentives to some members of the bargaining units. Business First reported on December 17^th that 49 eligible ECC employees, including 37 full-time faculty members, accepted that offer.

The college budget for 2014-15 totaled more than $112 million. If you go searching for the current 2015-16 budget you will not find it on the internet.

The college budget details the salaries of all college positions except for its senior staff, referred to in the budget as the Senior Executive staff, or SES. The audit spends a great deal of time on the SES.

The college administration has in recent years added several high priced executives, including at least one that previously served as a congressional staffer when the college president was a member of Congress. Prior to the current administration the college relied on the county attorney for legal advice. Now there is an in-house counsel with her own staff.

Aside from annual operating expenses, ECC has substantial capital needs estimated at more than $100 million. In particular, the North Campus in Williamsville, which was originally constructed in the 1950’s, could use substantial renovations. A new structure for that campus is still in the planning stages, as it has been for several years now. The college administration, with no specific plans or identified funds, has also suggested that the school be a part of a City of Buffalo plan to construct a mixed use facility across the street from the Lafayette Hotel.

The college last year prepared a document it refers to as to as “ECC Excels.” While it discusses the broad educational mission of the college, it mostly complains about insufficient state and county government funding.