M E M O R A N D U M


							March 22, 2011


TO:		Members of the Board of Trustees

FROM: 	Nancy L. Zimpher, Chancellor 

SUBJECT:	Amendments to Campus-Related Auxiliary Services Corporations Guidelines


Action Requested

          The proposed resolution approves and adopts revised guidelines for 
campus-related auxiliary services corporations.

Resolution

	I recommend that the Board of Trustees adopt the following resolution:

Whereas by Resolution No. 2003-39, adopted April 29, 2003, the State University Board of Trustees established the Campus-Related Entity Guidelines, including Guidelines for Campus-Related Auxiliary Services Corporations, which went into effect on July 1, 2003; and

Whereas a University-wide Task Force on SUNY Auxiliary Services Corporations was convened in order to review and make recommendations regarding the governance, structure, policies and practices of campus-related Auxiliary Services Corporations throughout the SUNY System in order to strengthen their standing and to address potential audit concerns; and

Whereas the Task Force has made recommendations to revise the 2003 Auxiliary Services Corporations Guidelines by specifying operational areas where management policies should be established and by strengthening the independent status of these entities; now, therefore, be it




Resolved that the Guidelines for Campus-Related Auxiliary Services Corporations, approved by Resolution No. 2003-39, be, and hereby are rescinded, and revised Campus-Related Auxiliary Services Corporations Guidelines (copy on file in the Office of the Secretary of the University) be, and hereby are, approved for implementation beginning July 1, 2011.

Background

	The campus-related entity guidelines are being revised to clarify the intent of the guidelines adopted in April 2003 and to address issues and circumstances that have changed since then. The principal changes are as follows:

* Further clarify the mission and responsibilities of the campus-related organizations.
* Emphasize that the Boards of Directors of these organizations must provide a governance and oversight structure that ensures that they operate in accordance with their mission and legal requirements.
* Add an administration section to the guidelines that requires that (1) the organizations’ Boards of Directors approve annual reports, periodic fiscal reports, and the annual audited financial statements, (2) the organizations have developed and implemented policies and procedures covering all major areas of operations, and (3) there is in place a system of internal controls over the primary activities of the organization.
* Allow the ASC to provide student housing or hold real property through an affiliated Limited Liability Company (LLC).
* Allow the ASC to hold real property if it has (1) a written business plan with linkage to its mission and tax-exempt purpose, (2) adequate insurance / reinsurance and Directors and Officers coverage, and (3) a risk management plan in place.
* Require that the Auxiliary Services Corporations meet all regulatory filing requirements on a timely basis.





The State University of New York Guidelines for Auxiliary Services Corporations

I. Authority

On March 22, 2011, the State University Board of Trustees adopted the following Guidelines for Auxiliary Services Corporations (ASCs) (Trustees’ Resolution No. 2011-XX).  These Guidelines supersede Guidelines originally established by Trustees’ Resolution 75-330, dated December 17, 1975, as amended by Trustees’ Resolution 92-104, dated May 27, 1992 and Trustees’ Resolution 03-39, dated April 29, 2003.  These Guidelines were developed as a result of the work of a Task Force established by the Chancellor to clarify the role of ASCs operating in support of the overall campus mission. 

These Guidelines are effective July 1, 2011.  The Chancellor is also authorized to develop supplementary administrative requirements, not inconsistent herewith, in the implementation of these Guidelines.

II. Mission

Auxiliary Services Corporations (ASCs) are authorized to provide a defined set of auxiliary services where students and faculty/staff have a significant interest in the quality and price of the services provided. An ASC may also provide services to campus entities, State University of New York (University) hospitals, clinics, long-term care facilities (e.g., Long Island Veterans Home) and members of the public at events that are consistent with the mission of the University and whose purpose will directly benefit the campus.
III. Responsibilities
An ASC is authorized to provide the campus with a defined set of services as follows:
* Provide food service including concessions and administering pouring and similar rights; 
* Provide bookstores, campus stores and computer stores; 
* Provide amusements, vending and laundry operations; 
* Provide other student/faculty–related services as defined by the ASC contract. Some examples, which are not intended to be all inclusive are: ID card operations, cable television, banking services, telecommunication services and hair salon; 
* Provide administrative support (payroll, purchasing, etc.) to independent third-parties related to the campus, including, but not limited to campus-based foundations, student government organizations and alumni associations; 
* With the approval of the chancellor or designee, provide student housing services by a separate affiliate or single member limited liability company (LLC) of the ASC; and
* Ownership of real property by the ASC, or through a separate affiliate or single member LLC of the ASC for use in its operations to carry out its missions and services.  An ASC may hold real estate directly related to its authorized services to the campus without establishment of a separate LLC if the corporation establishes a written plan accepted by the ASC Board of Directors and Campus President.  This plan should be forwarded to the Chancellor or designee for approval within 30 days after acceptance by the campus and should include:

* Acceptable business plan for the property and services thereon and linkage to the corporation’s mission, objectives and tax exempt status;
* Risk identification, assessment, and monitoring plan; and
* Adequate ASC liability insurance, reinsurance and Officers and Directors insurance coverage.

The use by the ASC of the campus name and marks for corporate and fundraising purposes would be permitted pursuant to provisions contained in its contract with the campus.
IV. Structure and Governance
The ASC (the primary corporation) must be a non-profit corporation organized and existing under the laws of the State of New York, tax-exempt under §501(c)(3) of the Internal Revenue Code (IRC), and classified as a “supporting organization” to the campus under §509(a)(3) of the IRC, unless a different §509 classification would be more appropriate under the circumstances particular to the purpose of the corporation. With the approval of the chancellor or designee, the primary corporation may establish one or more affiliates or, under special circumstances, single member LLCs (the single member must be a tax-exempt entity) to the extent that it is involved in auxiliary enterprises of a nature where insulation of the primary corporation is desirable. Any affiliate would be a single member LLC  or a 501(c)(3) corporation and classified as a “supporting organization” to the campus under §509(a)(3) of the IRC, unless a different classification (e.g., a 501(c)(2) tax-exempt holding corporation) would be more appropriate under the circumstances particular to the purpose of the corporation. The majority of the members of the board of directors of any affiliate or single member LLC would be comprised of members of the board of the primary corporation.  The board composition of any affiliate or single member LLC formed for the purpose of providing student housing or owning real property shall not include any student representation.  
The campus will oversee the activities of the ASC through a contract with the campus and representation on the board of directors of the ASC. Any exceptions to this structure would require the campus president’s written approval in consultation with the chancellor or designee.
The ASC will continue to be the main campus entity representing students and faculty in the management of services where these constituencies have the dominant interest. As such, the board of directors of the ASC would consist of faculty, students and 

officers of the administration of the campus, and may further include alumni and local business leaders. No members of the campus council, other than the student representative, may serve on the board of the ASC. The student constituency shall have not less than 1/3, but no more than 1/2 of the voting membership on the board, including any student serving in the capacity of a campus council representative. Any faculty members shall be appointed by the campus faculty governance organization. The campus President or designee is an ex officio, voting member of the Board of Directors of the primary ASC.  The campus President may appoint to the Board no more than two voting members from the local business community who have management expertise in areas related to the services provided by the ASC.  

The ASC Board is responsible for the governance and oversight of the ASC’s affairs, personnel, and properties.  To address these responsibilities, the board should issue policies, ensure the ASC operates in accordance with its mission and all legal requirements, and monitor the ASC’s financial condition.

V. Linkage to Campus
A formal contract (Appendix A), in substantial accord with the model contract developed by the University, must be executed between the campus and the primary ASC.  The contract should be terminable in whole or part with 180 days written notice given by either party, extending for a period of not more than 10 years and subject to the review and approval of the chancellor or designee (and external state agencies when required). The contract authorizes the primary ASC to operate on campus, and should enumerate its activities and those of each affiliate or single member LLC it establishes. Each activity category authorized to the ASC would be identified in the contract, with written contract amendments required for new activities.
VI. Administration

In order to help ensure that the ASC operates in accordance with sound business practices, it shall at a minimum:	
* Comply with the Auxiliary Services Corporations Administrative Requirements.
* Obtain the Board of Directors approval of the annual budget, periodic fiscal reports, and the audited financial statements.
* Develop, administer, and communicate written policies and procedures for all key business functions.  These policies and procedures must at a minimum cover the following areas, where appropriate: cash receipts and disbursements, investment management, procurement (including travel expenses and credit cards), payroll, inventory, administrative services, and conflicts of interest.  Such policies shall ensure that disbursements are reasonable, are adequately documented when submitted for payment, and do not conflict with the law.  If the ASC engages a third-party (e.g., the foundation) to provide administrative support services, the ASC must ensure that this organization has in place, to the extent applicable, the written policies and procedures as enumerated above.
* Establish and maintain a system of internal controls that is designed to provide reasonable assurance about the achievement of the ASC objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, and compliance with laws and regulations.
The ASC shall have in place a mechanism to reimburse the campus for the use of space, utilities, and other services that the campus provides to the ASC consistent with the approved annual budget and terms and conditions of the contract with the campus.

VII. Accountability and Reporting
Each ASC must prepare an annual financial statement in conformity with U.S. generally accepted accounting principles and have an audit conducted by a licensed independent certified public accounting firm or sole practitioner (independent auditor) in accordance with generally accepted auditing standards. To enable the University to include pertinent information in its annual financial statements, the audit must be completed within 90 days after the close of the ASC’s fiscal year. The independent auditor may be appointed after a competitive procurement process for no more than a five-year term, after which the ASC must solicit these services through a new competitive procurement process. 
The books and records, financial condition, operating results, and program activities of the ASC (and any affiliate(s) and single member LLCs) would also be subject to periodic audit by the office of the university auditor, and to the extent allowed by law, by outside regulatory bodies. All audit reports from whatever source, including the certified (consolidated) financial statements and management letter (along with a corrective action plan) of the primary ASC (and any affiliate(s) and single member LLCs), must be transmitted to the campus president and office of the university controller. 
The ASC also must meet all regulatory filing requirements on a timely basis (e.g., federal and state taxing authorities).

The articles of incorporation and other organizing documents of the ASC (and any affiliate(s) or single member LLCs) must provide that the net assets of the organization shall be distributed to the campus or other campus-approved entity organized for similar purposes in the event that the ASC (or affiliate or single member LLC) is dissolved. Dissolutions and dispositions of related net assets are subject to all applicable laws, regulations and restrictions, and unless otherwise stated, the net assets revert to the campus or campus-approved organization. 
Board Resolution                                 -2-	March 22, 2011