Sept. 09--The College of DuPage's top two finance officials were fired Wednesday, following internal reports that found weak financial controls and violations of the school's investment practices.
Treasurer Thomas Glaser and Controller Lynn Sapyta, who have been on paid leave since June, were the first college officials to be fired following a regime shift at the Glen Ellyn-based school, where a new majority took over the board of trustees in April. President Robert Breuder remains on paid administrative leave.
"We are going to be embarking on a search for highly capable individuals and it is part of the new era for the College of DuPage," said board Chairwoman Katharine Hamilton.
Glaser's attorney, Shelly Kulwin, said he plans to file a lawsuit for wrongful termination and breach of contract.
"We believe the termination is unjustified. The charges on which the termination was based are meritless," Kulwin said. "The charges themselves reveal it is a clearly a political termination."
Sapyta's attorney, Peter Lubin, said in a statement that she "faithfully discharged the duties of her office" and "received numerous accolades" during her employment. He called Sapyta a "scapegoat" and said the charges are unfounded.
Since June, an outside firm has been reviewing the college's financial controls in the wake of a bruising internal audit that found the school's practices did not comply with its policies. One prohibited investment, for example, cost the college nearly $2 million in a single, high-profile fund, according to the audit.
But the review, by Chicago-based Alix Partners, found that the noncompliance was greater than the auditor realized, with about 73 percent of the portfolio, worth about $274 million last fall, not in compliance with school policy.
"That was a monumental failure on many levels," trustee Frank Napolitano said at an August board meeting.
Other reasons for the firings included financial mismanagement at the college's radio station and problems at its high-end restaurant, Waterleaf, according to a letter sent to Sapyta and obtained by the Tribune.
Glaser made $225,352 a year, and Sapyta made $159,057.
The audit and financial review detailed numerous breakdowns in oversight at the state's largest community college, an issue the Tribune has uncovered in a number of investigations over the past several months. According to the audit findings, the board of trustees did not get detailed quarterly investment reports as required, while the treasurer's committee, which is supposed to meet every four months, went almost two years without a meeting.
Finance administrators acknowledged that while they knew there were instances of noncompliance, they said the full board received monthly reports summarizing investment activities and "did not raise any concerns," according to the audit report.
The audit found that the college's portfolio exceeded its own policy limits for certain types of investments. The policies, for example, capped investments in local government investment pools at 5 percent of the entire portfolio, worth about $274 million as of Sept. 30. Yet the college eventually put more than 29 percent of its total value into the Illinois Metropolitan Investment Fund, a pool that invests tax dollars on behalf of more than 200 suburban governments.
The college's board of trustees authorized investing in IMET in April 2014, and about $10 million was initially invested. Then, without authorization or endorsement, college staff increased that amount by September to more than $80 million, or 29.2 percent of the portfolio.
At the time, IMET was providing a higher return than other investments, according to the audit.
The IMET fund, however, later disclosed that it believed it had been defrauded and lost more than $50.4 million for its participants. The college, the fund's biggest investor, lost $2.2 million. If the college had followed its policy and limited its investment to 5 percent, the audit found, it would have lost only $381,436. The college has since removed most of its money from the IMET pool and is trying to recoup its loss.
The audit also found concerns with other investments. The college invested 43 percent of its portfolio in bond mutual funds, far exceeding the 5 percent limit outlined in its investment policy.
The audit noted that the college should do a better job diversifying its portfolio, saying the bond mutual funds "could be problematic since they are susceptible to interest rate risk."
In addition, college auditor James Martner said three of the five mutual funds did not meet the quality standards in the investment policy. One of the funds owned a small percentage of risky derivatives, which should be avoided, the auditor noted.
The portfolio's overall performance also was lackluster compared with those of other community colleges in the Chicago area. The college's returns ranked fifth among the area's eight largest community colleges, with an average annual yield of 0.38 percent, according to the audit.
Top administrators in the college's finance department knew about the audit results in March, a month after the review was completed, but did not act, school officials said. The report surfaced in May, the officials said, after a new board majority took over and voted to place Breuder on paid leave.
Martner, who performed the financial review, reported directly to Breuder. The embattled president frequently applauded the school's fiscal policies when defending his controversial tenure that included accusations of lavish spending and excessive perks.
Instead of embracing recommendations in a bruising audit of their investment portfolio, school administrators attempted to retool the college's financial policies to quietly bring their own past practices into compliance, according to records obtained by the Tribune.
College administrators wanted extensive revisions to the school's investment rules, including increasing -- or even lifting -- the caps on how much the school could invest in certain funds. The new policies, which were to have been presented to the board of trustees in April before that meeting was canceled, also would have eliminated detailed quarterly reports to the board and would have given the school's treasurer significantly more autonomy than he had.
The proposed policies would have aligned the new investment standards with administrators' practices and would have eliminated the need for school finance officers to address the many recommendations of the just-completed audit they had not shared with the board. When the administrators wrote the policies for board approval, they suggested the changes would provide the flexibility needed to yield bigger returns.
"Staff has found the (current) policy to be too restrictive," the document states.
The proposal did not mention the audit.
Interim President Joseph Collins learned about the audit in early May, soon after he took over for Breuder, and he shared it with Hamilton. Collins ultimately made the decision to place the administrators on leave pending the review, officials said.
An outside firm has been overseeing the school's finances in the interim.
But even before the audit, Hamilton's evident disdain for Glaser and Sapyta put their employment in jeopardy. She has publicly criticized their performance during the past year, suggesting their oversight allowed hidden spending, unjustifiable expenses and, in one case, employee theft. Sapyta pushed back against the allegations at least one board meeting, accusing Hamilton of grandstanding and not understanding financial issues and policies.
