Auxiliary Services Corporations Guidelines
July 01, 2011
This policy item applies to:
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.
Accordingly, an ASC is authorized to provide the campus with a defined set of services as follows:
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.
I. 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.
II. 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.
In order to help ensure that the ASC operates in accordance with sound business practices, it shall at a minimum:
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.
IV. 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.
There are no definitions relevant to this policy.
There is no related information relevant to this policy.
There are no procedures relevant to this policy.
There are no forms relevant to this policy.
Internal Revenue Code §501(c)(3) (Exemption from tax on corporations).
Internal Revenue Code §509(a)(3) (Tax exempt organizations).
Amended - March 22, 2011:
Amended - April 29, 2003:
Amended - May 27, 1992:
Established - December 17, 1975:
Standard Contract Clauses State University of New York - Exhibit A
Standard Contract Clauses - Affirmative Action Clauses - Exhibit A-1
Appendix A - Auxiliary Services Corporation (ASC) Model Contract
Appendix B - Guidelines for Auxiliary Services Corporations - Exhibit B
Appendix B-1 - Auxiliary Services Corporations Administrative Requirements - Exhibit B1
Appendix C - Auxiliary Services Corporation, Services and Activities - Exhibit C
Appendix D - Auxiliary Services Corporation, Facilities, Utilities and Other Campus Services Provided - Exhibit D
Appendix E - Auxiliary Services Corporation - Description of Affiliated Organizations and Campus-provided Resources - Exhibit E