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UB Council receives update on financial issues

By SUE WUETCHER

Published September 26, 2017

UB has taken steps to tighten financial controls after an audit uncovered financial mismanagement in the former University Life and Services (ULS) and the Faculty Student Association (FSA), members of the UB Council were told on Monday.

Speaking at the council’s first meeting of the 2017-18 academic year, Laura Hubbard, vice president of finance and administration, noted there had been a number of “control breakdowns” in ULS and FSA that contributed to the thefts by former UB employees Dennis Black and Andrea Costantino. Among them were a lack of financial stewardship of resources, inadequate segregation of duties and a lack of organizational governance for FSA, including the composition of its board of directors and its fiduciary responsibility.

After the audit of ULS and FSA was initiated in April 2016 — at the request of President Satish K. Tripathi, who suspected potential financial mismanagement in ULS — Hubbard said some FSA accounts and credit cards were frozen, and $3.2 million was transferred from FSA accounts to state accounts. The results of the audit also were reported to SUNY and to the state Inspector General, she said.

UB worked with SUNY and FSA to update the FSA bylaws, which included adding three independent members to the FSA board — those independents now make up the board’s new audit committee — as well as three more administrative representatives. Hubbard noted the previous four administrative representatives had all come from ULS, and the three new members will come from Finance and Administration, Student Life and Academic Affairs, giving the board “some campus diversity.” These new board members join six student and two faculty representatives on the board.

FSA also was given some recommendations for further action, including a holistic internal controls review, which is underway this fall, she said.

Hubbard noted that since her arrival at UB five years ago, her office has launched other internal control initiatives unrelated to the recent financial mismanagement. Among them:

  • Ramped up the internal audit department by hiring a director for the department — who now reports to the president, rather than the university controller — and two additional auditors. “We can have the best budget-allocation system in the world, but if we don’t follow up and make sure the funds were spent the way they were intended, we’re still not performing our mission,” Hubbard said. She noted UB now has an annual audit plan with a goal of focusing on the “highest-risk activities.”
  • Reinvigorated the policy process. “We had been getting out about one policy per year,” she said. Many of the new policies that have been promulgated are “gap policies”: policies that exist at institutions like UB but had not been in place at UB until now, she said. UB policies can be found in the Policy Library.
  • Conducted an enterprise risk assessment for the university. UB has hired a director of business compliance and internal controls to assist units across the university with risk assessments. “The process there is about taking a deeper dive in our organization,” Hubbard said. “We’re a large, complex organization, so we’re engaging our various leaders and stakeholders in how they see risk and what we’re doing to mitigate it.”
  • Put into place a new Enterprise Risk Management structure to look at all types of risks — from strategic risks to transactional activities. ERM activities now report to the president, and the process includes ERM executive sponsors, who review high-level risks facing UB, as well as an ERM Steering Committee composed of “functional experts” across the university who conduct an initial assessment of the full range of risks facing UB and identify key risk areas. “The idea is to have those functional experts helping us think about what the risks are, and the executive group thinking about how we prioritize things and where we see the highest risks,” Hubbard explained.
  • Implemented an anonymous Ethics Hotline. UB previously had used SUNY’s hotline, which she said, “isn’t particularly anonymous” since tipsters email their concerns to the director of internal audit. She said that most fraud is detected via internal audits or through tips. Having a hotline exclusive to UB will “save fraud, save expenses and provide an outlet for faculty, staff and students to share concerns,” she said. The hotline is managed by EthicsPoint, which ensures the information is forwarded to UB while keeping the tipsters anonymous, she added.
  • Examined risk management activities across the affiliated entities, including instituting annual budget meetings with auxiliary enterprises.
  • Undertaken IT initiatives that will both improve the customer experience for units like travel and procurement, while also allowing for better controls.

“Our hope would be to manage it (fraud) to zero,” Hubbard told council members. “That’s not always possible, but we certainly do want to provide the environment where we have good stewardship of our funds and recognize the importance of that.”

In other business, the council approved three naming resolutions. The new athletics fieldhouse is now the Murchie Family Fieldhouse in honor of UB alumnus and athletics benefactor Tunney S. Murchie and his family. The Institute for Sustainable Transportation and Logistics in the School of Engineering and Applied Sciences is now the Stephen Still Institute for Sustainable Transportation and Logistics in honor of UB Engineering alumnus and benefactor Stephen E. Still, BS '73. And the Buffalo Law Review Suite — the O’Brian Hall offices of the student-run journal — is now the Anthony J. Colucci Jr. Esq. ’58 Buffalo Law Review Suite in honor of the UB law school alumnus, accomplished attorney and community leader.