State audit questions $200,000 payment to BCCC

Baltimore City Community College received a $200,000 payment under "potentially questionable" circumstances from a company that was leasing it space, according to a state legislative audit released Wednesday. The matter has been referred to the attorney general's office for further review.

The inquiry is the latest trouble for an institution that is battling to keep its accreditation and to build healthier relations between faculty and top administrators.

The college says the $200,000 payment was a "contribution" from its landlord at the Maryland BioPark in West Baltimore. But the state audit says that description contradicts previous documents from the college, which describe the payment as related to the lease agreement for the BioPark space.

If the payment was part of the lease agreement, it should have been revealed to the state's Department of General Services and the Board of Public Works, the audit says. Under state law, the audit adds, any payment related to the lease should have gone into the college's operating budget instead of to the BCCC Foundation, a separate legal entity that ultimately received the $200,000 to support scholarships.

The audit says the community college provided inconsistent and unclear explanations of the July 2009 payment from Wexford Science & Technology, which leases out space in the BioPark. The report also raises questions about a March 2009 modification to the college's BioPark lease, which appeared financially unfavorable to the state.

The college defended the $200,000 payment in its written response to the audit, saying that, as a "contribution," it did not have to be reported to the Department of General Services or the Board of Public Works, both of which had to approve the 10-year lease agreement.

"As detailed in this report, during the audit, we received inconsistent explanations from BCCC and the lessor regarding the nature of this transaction," the state auditor writes. "BCCC's response does not provide any substantive clarification of this matter, nor acknowledge or explain the transfer of the funds to the BCCC Foundation."

These questions prompted the auditor to take the unusual step of referring the matter to the attorney general, though the referral "does not mean that a violation of the law actually occurred or that legal action will be taken."

A spokesman for the college said President Carolane Williams was not available to discuss the audit Wednesday but added that she would answer questions later in the week.

The audit is the latest in a string of difficulties for the community college. In 2010, faculty members voted no confidence in Williams as she worked on plans to streamline the college's academic offerings. Last July, the Middle States Commission on Higher Education put the college on probation, saying it lacked any comprehensive method for assessing student achievement. Gov. Martin O'Malley then overhauled the college's board of trustees because he was disappointed with the institution's progress.

College and faculty leaders have said the campus is more unified now as the college works to maintain its Middle States accreditation. But the audit introduced a new note of turbulence.

Bruce Myers, the state's chief auditor, said that "you could be dealing with just a lot of confusion here." But he said his office was troubled by the college's inability to explain clearly its handling of the payment.

Wexford President Sandy Weeks said the $200,000 contribution was part of a fundraising campaign to help the community college open a space in the BioPark, which was developed in partnership with the University of Maryland, Baltimore. The community college needed money to make improvements to the rental space, Weeks said, but he added that the $200,000 was given with "no strings attached."

"If they were able to use it for scholarships, good for them," he said.

Weeks said Wexford regularly offers grants to desirable tenants. "We really wanted them in the park," he said of the community college. "We thought they would be a valuable tenant, and we were right."

In its response to the audit, the community college said that UMB actually solicited the contribution from Wexford. Jim Hughes, UMB's vice president for research and development, said the university was not involved in negotiating the details of the grant.

"But we were certainly very keen to get BCCC in the BioPark," he said. "And we certainly worked with them to find various grant opportunities."

Hughes said the community college is "doing a great job" in the space, training skilled workers to staff neighboring tenants.

According to the audit, the community college had made $2.8 million in lease payments and $4.4 million in renovation payments for the BioPark space as of June 2011. In spring 2011, the college had 90 students enrolled full-time in science, technology, engineering and math programs at the BioPark.

The audit also says the college accepted a lease modification in March 2009 that "did not appear to be in the state's interest." When construction costs at the BioPark were less than projected, the college had the option of accepting an upfront credit of $1 million but instead opted to reduce its lease payments by $965,000 over a 10-year period. That decision could cost the state $160,000 in investment income, the audit says.

Myers said his office found no evidence of a link between the $200,000 payment and the modification to the lease agreement.

The audit says the college and the Department of General Services did not disclose the $1 million credit option when the agencies received retroactive approval of the lease modification from the Board of Public Works.

In its response, the college said the lease modification was financially responsible and said the obligation for disclosing the decision lay with the Department of General Services.

Wexford said he wasn't aware of the lease modification but said such credits are typical when construction costs come in lower than expected. He said Wexford would have had little involvement in the college's decision to accept one method of credit payment over another.

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