Outside firm will manage COD's finances
A financial services firm will manage the College of DuPage's money on an interim basis after two top administrators were placed on leave this week for not following established investment practices.
COD will pay Chicago-based Alix Partners an initial retainer fee of $15,000, plus hourly fees for individual managers who will oversee the college's financial department, until an internal investigation of the school's financial management practices is completed, officials said.
The COD board of trustees voted 4-3 Thursday night to hire the firm, which will provide an interim chief financial officer and controller to work with acting interim COD President Joe Collins and financial department staff members.
On Tuesday, Collins put Thomas J. Glaser, the college's senior vice president of administration and treasurer, and Lynn Sapyta, assistant vice president of financial affairs and controller, on paid administrative leave after an audit revealed the college lost $2.2 million in a risky investment fund.
The internal audit, kept under wraps by administrators until after a new board majority came to power in April, found the college's financial staff increased COD's investments in the Illinois Metropolitan Investment Fund from about $10 million in April 2014 to more than $80 million in September 2014.
While the college's investment in the fund in April was 4 percent of its portfolio, the investment had increased to 29 percent by September, though policy established by the board of trustees limited investments in local government investment pools to 5 percent.
Glaser placed the funds with IMET because of anticipated higher yields, but the fund defaulted on certain loans last October and COD lost more than $2.2 million -- the greatest such loss of all municipal investors statewide, college officials said.
The audit by the college's internal auditor, James Martner, also cautioned against investing as much as 43 percent of college investments in bond mutual funds, due to interest rate risk.
The vote to hire Alix Partners was split, with new board Chairwoman Kathy Hamilton and her endorsed "Clean Slate" trustees in favor of bringing in the firm, and the three other trustees opposed.
"We have to have these positions filled," Trustee Charles Bernstein said. "We were put in a very difficult position. The former vice president of finance countered the board policy in the way he dealt with the college funds. He put the funds at greater risk. The number one directive in terms of how the college makes its investments is safety. It's preservation of capital."
Trustee Dianne McGuire said the board should have been aware of how much was being invested from its monthly schedule of investments report. She was in favor of investing more in a fund with higher promised returns.
"The return was better than we could get anywhere else. We saw it every single month. There was nothing hidden. None of us asked a question," McGuire said.
She said it was a "rush to judgment" to put Glaser and Sapyta on leave.
"We are fiscally healthy because of the leadership on campus," she said. "We were out of compliance for five months. Once it was noted, things got back into shape. It's not quite as serious as it appears."
McGuire and trustees Erin Birt and Joseph Wozniak questioned the costs associated with hiring Alix Partners, but Vice Chairwoman Deanne Mazzochi put the blame on those trustees.
"The costs we have to incur for Alix or anyone else who comes in to fill this role while Mr. Glaser and Ms. Sapyta are on administrative leave is a cost, frankly, on the prior board," Mazzochi said. "It's your fault we're in this scenario today. You don't blame the cleanup crew that has to come fix your mess."
The decision to put the administrators on leave follows the new board's decision in April to tell President Robert Breuder to step aside. The new board members have promised other reforms at the Glen Ellyn-based community college in the midst of federal and state investigations into the school's financial practices.