SC State must stop diverting money to foundations, report says

07/08/2014 10:55 PM

07/08/2014 10:56 PM

S.C. State University must stop sending millions of dollars in rebates from vendors to the school’s two foundations, the state Inspector General said in a report issued Tuesday.

From 2010 to 2013, the university sent $2.3 million of $11.1 million in rebates from food service, maintenance, beverage, bookstore and health insurance contracts to foundations that can spend money without legislative or public oversight, the report said. S.C. State struggled with a $13.6 million deficit this year as enrollment at the state’s only historically black public college has tumbled.

Rebates to foundations, totaling nearly $400,000, continued despite a former school president stopping the practice in 2012, the report said. The university also lacked oversight over rebates -- failing to notice that three vendors did not to make $323,000 in payments.

The Inspector General’s report also questioned rebates going to the university since vendors pay for projects unrelated to contracts. A food-service contract includes $5 million to go toward a wellness center. The report noted S.C. State asked the General Assembly this year for $5 million to repair a boiler system.

“The diversion of these funds removes transparency in the expenditure of these funds, as well as allows the use to be determined without competing in the normal university budgetary framework with other university business needs,” the report said.

An agreement with UGL-Unicco for maintenance work included $1 million for projects of the school’s choice. In addition to the $5 million for a wellness center, the food-service deal with Sodexo included: a $200,000 gift to the school on the first day of the contract; $350,000 annual contribution thereafter; $800,000 for upgrades on campus; and $710,000 to makeover dining halls.

The deals hit student bills. S.C. State students pay $343 a year extra for meals to cover these extra payments that go to the college and its foundations, the report said.

Other state public colleges also receive contract rebates from vendors, said the report, which did not cite specifics.

“One witness with broad experience said universities seem to be driving this practice rather than vendors,” the Inspector General’s report said.

The report raised whether state contracts should include rebates: “These rebates actually can create a perception of a gift, favor, or discretionary act. ... What image goes through most people’s minds, particularly taxpayers, when a contract term states, ‘a $200,000 unrestricted partnership gift on the first day of the contract?’ ”

The report suggests S.C. State establish a policy to send all rebates to the school, not its foundations and have the foundations return all vendor money to the college. In addition, the General Assembly should require state agencies to disclose rebates from vendors and not send any money to foundations or other outside group unless spelled out by law.

The state loaned S.C. State $6 million to play some bills and cover payroll and debt payments after the deficit became public this year.

School trustees are working with S.C. State President Thomas Elzey to slice the budget. The college has cut 180 employees and trimmed spending, including on cell phones.

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