The report released by the state Inspector General’s Office Tuesday noted $11 million in rebates that vendors had paid the college from 2010 to 2013. Of that, the report notes $2.3 million was redirected to the school’s SCSU Foundation. From there, it was split into five different accounts. One was titled, “Institutional Development,” while the other four were “discretionary accounts” assigned to the school’s president, vice president of finance, vice president of institutional advancement, and general counsel. The foundation had no control over these accounts, according to the Inspector General’s office.
The report’s release was first noted by The State newspaper.
The report notes that money was used to pay for travel, an Atlanta Falcons football game, and even country club memberships. Meanwhile, the school slowly built up a deficit, which reached $13.6 million this year.
Inspector General Patrick Maley wrote the rebates were effectively state funds and should be directly returned to the university, since they meant the school had overpaid the vendor in the first place. “The optic of SCSU executives diverting $2.29 million of vendor contract rebates, which rightfully belongs to the university… looks highly inappropriate,” Maley wrote in the 13-page file.
He said the rebates incentivize school trustees to approve inefficient contracts. “As one experienced Board member commented on these rebate contract requirements, ‘why would I be forceful with a vendor if I’m getting something on the backend? I am going to do a whole lot of tolerating.’ One contract included a $200,000 unrestricted “partnership gift” on the first day of the contract.”
“Just get back to old fashion management of driving a hard bargain without convoluting rebates, making sure you get what you paid for with contract monitoring, and any revenues generated go to an agency’s general or unrestricted accounts to be used in the best interests of the agency.”
In 2012, an external auditor and the school’s new interim general counsel expressed concerns about the practice. Then-interim President Dr. Cynthia Warrick discontinued the policy and the board agreed any rebates should go back to the university itself. However, one last rebate from a vendor which operated the school’s mechanical plant was paid into a foundation account after current president Thomas Elzey took the post in late 2013. The Inspector General said the $200,000 check was designated to help pay for Elzey’s inauguration.
The Inspector General’s report stated that Elzey was not aware of the external auditor’s finding or previous decisions. He has agreed to end the practice.
In its response, SC State admitted the practice was not transparent.
“We concur with the IG that such practices at statewide institutions of higher learning may create a perception that total transparency is lacking,” school spokeswoman Sonja Bennett wrote in an email. “Moving forward the university will apply best practices to enhance transparency and accountability.”