The Reputational Costs of Lack of Oversight: CUNY Invites Scrutiny and Takes its Licks

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November 15, 2016; Wall Street Journal

The City University of New York (CUNY) has not yet gotten proper control of its over $1 billion endowment, according to a recently released interim report by New York State Inspector General Leahy Scott.

The IG was asked by CUNY’s board to review the university’s oversight practices following the resignation under pressure of CUNY-CCNY President Lisa Coico, who allegedly misused funds to pay for personal expenses. According to the Wall Street Journal, “The inspector general’s report found…potential financial mismanagement at other CUNY schools. […] Brooklyn College’s former president used $36,000 intended for the school to pay for a part-time housekeeper for her university housing…as well as $35,000 in school funding for her retirement party.” Another branch of the CUNY system, Queens College, used funds from its endowment to augment the salary of its president. Further, the IG also challenged the university’s expenditure of more than $1.6 million to lobby for increased funding.

As additional evidence of alleged mismanagement, the IG pointed to the severance package granted in 2013 to then-retiring Chancellor Matthew Goldstein, which included a commitment to a salary for his Chancellor Emeritus position of $300,000 for the next five years. “The report said that there was a “lack of scrutiny at the time” and that the board “should be mindful of these issues” when making future appointments.

The inspector general said, “Spending practices at [CUNY] have raised several clear and immediate concerns, including a glaring lack of transparency and the potential for waste and abuse. CUNY’s affiliated foundations are entrusted with approximately $1 billion and must ensure those funds are expended for the benefit of the school’s educational mission.” And in choosing to first hire their own counsel to conduct an internal investigation, the university “also violated state law…for failing to report fraud and abuse to the inspector general.”

CUNY Chancellor James B. Milliken said, as he should, that he takes seriously the findings of the state’s inspector general about the university: “CUNY must have in place the policies and practices that reflect and ensure the highest levels of integrity, accountability and transparency.”

Beyond a critique of the oversight the university has of its charitable funds, it once again raises an issue about university endowments in general: Are they being used for the charitable purposes for which they were intended? Should not their primary focus be on supporting the school’s educational impact? For a college system whose core purpose is ensuring affordability, it is proper to question whether its endowment practices keep tuition as low as possible to reduce economic barriers to attendance. NPQ covered similar questions when Congress held a set of hearings on this issue this past September.

CUNY receives significant funding from the state. This funding is threatened by an ongoing battle between Bill de Blasio, New York City’s mayor, and Andrew Cuomo, New York State’s governor, made all the more contentious by this NYS Inspector General’s interim report. While the amounts in this report may appear small given the overall size of the university’s endowments, it’s the fundamental decisions being made that are being contested. At a practical level, an extra $30,000 spent on scholarship assistance would make a great deal of difference for students who find the current annual tuition of $6,330 a hardship—Martin Levine