Blog posts last week reported on financial and administrative issues at Erie Community College as well as the contract between Erie Community College and Canisius College for the provision of ECC student housing at Canisius. Today’s post concludes this series of reports by examining the use of expense accounts by senior management at ECC.
That spending is significant even while it is proportionally one of the smaller expense items at the College. Its significance speaks to the approach of the school’s leadership to their fiduciary responsibilities. College revenues, regardless of the expense category, come from the collective pockets of the students as well as county, state and federal taxpayers.
The College President, Dr. Dan Hocoy, receives an annual base salary of $225,000 plus related fringe benefits including retirement and medical insurance. He was provided with a brand new Lincoln to drive. He is also entitled to a cost-of-living salary increase each July first of his term, which makes his current salary approximately $230,000. He can receive an annual bonus of up to $25,000, $5,000 of which is guaranteed. The remainder of the bonus is determined based on his annual evaluation by the Board of Trustees.
Hocoy also has the use of expense accounts from different sources at the College: an expense allocation from the ECC Foundation, an affiliated organization; and an expense allocation from the Auxiliary Services Corporation (ASC), another affiliated organization of the school.
The operations of the Foundation and the ASC were a major part of the State Comptroller’s audit of the school in 2016. Here’s a part of what the audit said:
The Board has not provided adequate oversight over the College’s contracts with the affiliated entities to ensure services were rendered as contracted and the consideration provided by the College was appropriate. The College, the ASC and the Foundation are separate and distinct entities governed by their own Boards…
The close relationship between the three entities and these overlapping roles have often compromised the transparency of the College’s actions and operations… Additionally, the ASC acts as the custodian and has fiduciary responsibility for all student activity fees collected by the College…
The [student] fee’s purpose is described as being “to support co-curricular and out of classroom activities which provide intellectual, social, cultural and leadership opportunities, as well as support services, which assist in student persistence and are an integral part of the mission of Erie Community College.”
The Foundation relies heavily on the College for financial support and also receives financial support from the ASC…
The ASC has an agreement with a soft drink company whereby the ASC collects commissions on vending machines and pouring rights revenues from serving the company’s products in the cafeterias. Each year, the ASC remits $38,840 of its pouring rights revenues to the Foundation.
The Foundation uses these funds to provide the President with a “discretionary” spending account for expenses not included in the College’s operating budget. The Foundation Director provided us with a detailed cash disbursement report showing payments totaling approximately $33,400 issued from the President’s discretionary account. We noted numerous reimbursements to the President and payments to vendors for dues, dining, banquets and entertainment. During 2013-14, the reimbursements to the President totaled approximately $9,500 and included a $4,000 reimbursement for catering services at the President’s holiday party. Additionally, we noted payments totaling approximately $7,400 to a private club for the President’s membership dues, fees and banquet services.
According to the ASC President, the prior College President started the practice over 10 years ago. Prior to remitting the funds to the Foundation, ASC would pay a portion of the President’s discretionary costs for entertaining and promoting the College. However, the ASC Board felt conflicted about paying for certain types of expenses. As an example, the ASC President cited expenses for alcohol. Therefore, the Foundation took over paying for these expenses.
As noted in a post last week, there has been no public report by the school, the state comptroller’s office or Erie County representatives about ECC’s compliance with the recommendations contained in the state audit.
The need for and benefits of an expense account by a college president for the development or maintenance of relationships with other schools or partnerships is understandable. The actual use of the president’s expense accounts, however, raises issues about the judgment involved in some of the expenditures.
Under the Freedom of Information Law I requested and received documentation concerning the use of the expense accounts made available to President Dan Hocoy for the period January 1 through May 31, 2018. I choose that time period to start six months after President Hocoy began his service to the school, allowing for a time period when start-up operations and relationship building would occur. Actual receipts for the expenditures were acquired and reviewed – a total of 365 pages.
The following are some highlights of the spending reported in that documentation:
- During the five month period reported in these records a total of $37,482.96 was spent through the president’s discretionary use of the funds provided by the ASC and the Foundation.
- A total of $14,148 was spent for vendors and supplies related to the presidential inaugural events.
- Excluding the inaugural expenses, average monthly expense account spending totaled $4,667.
- A total of $2,028.74 is itemized as paying for alcoholic beverages at lunch or dinner meetings. The actual amount may be somewhat higher since details on receipts vary from establishment to establishment.
- An additional $1,172 was spent for the purchase of alcoholic beverages that were given to Board members and senior staff for holiday gifts.
- There were 164 different expense items paid during this period.
- 115 of the expense items during the five month period were payments for lunch or dinner meetings involving the president.
- 51 of those meetings were with staff members of the College. No explanation is indicated for why it was necessary to hold so many meetings with staff out of the office. Total costs for the staff related lunch and dinner meetings was $4,430. Some of those meeting included charges for alcoholic beverages ($993.56).
- 12 of the meetings included one or more Board members.
- 3 of the meetings were with elected officials.
- The remaining 49 meetings were with other individuals.
- The majority of the meetings occurred at restaurants in Williamsville. Sun Cuisines and Siena appear the most times on the receipts.
- A total of $6,985 was spent at the Hotel Henry for a holiday party and for a reception following the president’s inaugural event. The CEO of the Hotel Henry is Dennis Murphy, who is also Chairman of the ECC Board of Trustees. I made no attempt to determine whether Mr. Murphy recused himself from any decisions about the use of the Hotel Henry, nor did I attempt to determine whether the use of the Hotel had been approved by the Board. Perception is very important when publically managed money is involved.
- $200 was expended from Foundation funds for the purchase of two tickets for an ActBlue event which was attended by Board members. ActBlue is a Democratic Party oriented fundraising organization. The receipt from ActBlue states that “100 percent of your contribution went to campaigns.” A donation to a political organization can jeopardize the Foundation’s tax exempt status as a 501(c)(3) organization.
The President of Erie Community College reports to the Board of Trustees of the school. It is my understanding that Board members are provided with regular summaries of expense account spending by the President. The Board determines how it monitors or controls the use of ASC and Foundation funds provided to the president and whether or not they pass judgment on the purposes and values of the expenditures. At the end of the day, control and management of all spending, including the expense accounts, is the responsibility of ECC’s Board of Trustees.
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