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Oversight of ECC’s finances found lax

Senior executive staff at Erie Community College received unauthorized raises and bonuses of more than $100,000 between 2012 and 2015, and the college hired contractors without seeking competitive bids for their services and in some cases without having written contracts.

Those were among the key findings of a scathing new state audit of the college that’s due to be released Thursday.

The long-awaited audit from the office of State Comptroller Thomas P. DiNapoli determined that lax oversight by the college’s board of trustees allowed President Jack F. Quinn Jr. to make important financial decisions behind closed doors, compromising the transparency of the college’s operations.

“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,” the audit concluded.

The audit does not allege any fraud, misappropriation of funds or any other illegal activity.

College officials said they were taking the findings of the report seriously and would implement all 22 recommendations for improvement.

But Quinn and Stephen Boyd, chairman of the board of trustees, disputed the characterization of the board as lax in its fiduciary oversight duties.

Boyd said board members were always well aware of new hires and compensation for senior executive staff, even if the minutes of board meetings don’t reflect those discussions, which usually happened in executive session.

“We’ve got to do a better job of recording our actions and recording the rationale for our actions,” he said. “We’re going to do a better job of recording the steps we take and the rationale.”

With any raises, bonuses or senior staff hires, Quinn said, he sought input from board members and followed up with emails.

“What the comptroller is saying is, we didn’t do a good enough job documenting this stuff in the minutes, and I think that’s a valid criticism,” Quinn said. “It’s not enough to just verbally share this with the board and follow it up with emails.”

State auditors began examining ECC’s books in October 2014, and an analysis of their findings initially was expected last spring or summer.

Instead, the audit arrives on the heels of faculty buyouts aimed at helping the college close a projected multimillion-dollar budget deficit in the current academic year. With more than 10,000 students, ECC is the region’s largest community college, and third-largest higher education institution, by enrollment. But that enrollment has declined significantly in recent years, and because tuition is a major source of revenue, the college has had to raise tuition and dip into reserves to balance its budgets for the last two years. Last spring, Quinn also implemented emergency belt-tightening measures such as leaving vacant positions unfilled, limiting travel, deferring road maintenance, reducing office supplies and cutting back on contracted services.

The audit suggests that college officials should have been more vigilant about spending, especially when paying senior executive staff and procuring professional services.

Among other findings in the report:

• Between 2010 and 2015, the college created an additional 10 senior executive positions with annual salaries averaging $75,600, despite failing to provide any written justification for the hires, as required by the policy of the ECC board.

• The board never authorized salaries for the new positions, or for any of the 28 senior executive staff posts, aside from Quinn, from 2013 to 2015. Their annual salaries totaled about $2.2 million.

• The college didn’t properly document financial transactions between it and the Erie Community College Foundation and the Auxiliary Services Corp. of Erie Community College.

• Between 2013 and 2015, Quinn authorized salary increases and bonuses of $118,000 for senior executives without board approval, and in 2012, he authorized a 2 percent salary increase for 15 senior executives on the payroll, again without board approval.

• Joseph W. Stewart, associate vice president of information technology, received “questionable payments” totaling $74,750 from 2010 to 2013, after a memo from Quinn directed the college’s payroll supervisor to pay Stewart a weekly $500 stipend as “additional compensation for a three-month temporary assignment.” College officials could not provide documentation describing the temporary assignment. Quinn authorized the payroll supervisor by email to continue providing the stipends to Stewart in varying amounts until September 2013. And in August 2014, Quinn directed the payroll supervisor in an email to pay a one-time cash bonus of $2,500 to Richard C. Washousky, executive vice president of academic affairs.

Stewart received the extra pay for his additional work during a crisis, when he was asked to help process 2,000 applications to the college that had been misplaced. Boyd said the board knew about the payments and Stewart’s additional responsibilities. “He was giving us updates every month on what he was doing,” Boyd said. As for Washousky’s bonus, Boyd said it was the board that recommended it, as a reward for his excellent work on the college’s Middle States Accreditation review process.

The audit also found inaccurate paid leave time balances among senior executive staff amounting to 72 days – a value of $25,000.

One executive on paid leave in January and February 2015 was overpaid $2,761 because she had already exhausted her leave balances. Another executive retired and cashed out his overstated leave balance, resulting in an overpayment of $2,524.

One of the executives already has paid back the overpayment, while the other is on a four-month repayment plan, Boyd said. The college’s antiquated paper-based payroll system contributed to the errors, and college officials are looking to install a new electronic system that would have built-in audit functions, he added.

The college also was criticized for the way it hired some contractors. The audit cited 11 instances in which the college paid a total of $440,000 for services rendered without using requests for proposals, as required by the college’s procurement policy. And in eight cases, professionals were paid $342,000 without any written contract, including an engineering firm that received $19,000 for engineering services related to a kitchen renovation.

College officials first learned details of the 32-page draft audit in late November, and they responded in December with a 10-page letter. Dennis P. Murphy, vice chairman of the ECC board, will lead a working group to review the audit and create a “corrective action plan” that will be due to the comptroller’s office in 90 days.

“We’ve already been working on some of these things for a long time,” said Boyd, who described the audit as an opportunity for the college to improve further.