A state legislative audit released Friday found that the University of Maryland, Eastern Shore could not account for a $25,000 grant payment made to its foundation, prompting the auditor to refer the matter to the criminal division of the state attorney general's office.
The Office of Legislative Audits, which reviewed the university's finances from 2010 to last year, also told university officials to contact the State Ethics Commission about a possible conflict of interest stemming from a business relationship between the foundation and a company owned by a UMES employee who also worked with the foundation.
The audit found that UMES allowed two university managers working with the foundation "to exercise virtually complete control over the grant transactions for both entities."
University system guidelines state that while a university's employees can work with its foundation, they cannot represent both in negotiations.
In addition to citing UMES for a lack of accountability over foundation funding, auditors reviewed $640,000 in payments the school made to its foundation from January 2011 to January of last year.
"Based on our review, we were unable to account for a $25,000 grant payment made in March 2011," the audit stated. "After obtaining a copy of the canceled check, we determined that the check was deposited in a bank other than the bank used by the Foundation."
Auditors referred that matter to the attorney general's office. Such a referral does not necessarily mean a criminal act has occurred or that criminal charges will be filed.
David Paulson, a spokesman for the attorney general's office, said, "We have received the audit and are reviewing it at this time."
The audit also found that a university manager working with the foundation was the controlling member of a company that owned the property where four foundation greenhouses were located for an agricultural project.
"The employee did not report this relationship to UMES," the audit said. "Furthermore, the employee did not always file financial disclosure statements with the State Ethics Commission."
The foundation and the company entered into a memorandum of understanding that stated certain costs incurred by the company during the project would be reimbursed by the foundation. According to the audit, the costs totaled about $380,000 from January 2012 to March 2014.
The agriculture project also was funded by a grant to UMES, the audit found. "These funds were used to pay for a portion of this employee's UMES salary and the project's operating expenses," the audit stated.
In addition, the employee also authorized payments to a company owned by a relative for construction services related to the agricultural project. Payments totaled about $115,000 from October 2013 to April 2014, according to the audit.
The auditor recommended that UMES refer the matter to the State Ethics Commission. The university system said in its response to the audit that it had done so.
"We are committed to taking the appropriate actions to ensure that these issues are corrected in a timely manner," UMES President Juliette B. Bell said in a letter to her cabinet and the school's Board of Visitors. "While many of the recommendations in the audit have already been implemented, some will be ongoing."