Incriminating Internal Report Triggers Overhaul of Sefarim Sale
An internal audit of the Sefarim Sale conducted by Yeshiva University revealed a litany of “significant” weaknesses that, if not addressed, could result in “financial and regulatory exposure to the University.” The audit, released to a handful of university officials last year and disclosed to The Commentator this year, analyzed the 2010 Sefarim Sale. According to research done by The Commentator, the Sefarim Sale has only recently begun to implementing the recommendations cited in the 23-page comprehensive assessment.
The Sefarim Sale, a 35-year-old student-run nonprofit organization, has, up until this year, run completely independent of Yeshiva University. However, it has been under ever-growing scrutiny after three years of what Sy Syms School of Business Dean Michael Straus called “great, well-intentioned young student-leadership with little to no business experience. ”
After posting a net loss of over $19,600 on revenue of $851,700, the Sefarim Sale was audited at the request of Michael Gower, then Vice President for Business Affairs & Chief Financial Officer of Yeshiva University. The report found serious issues with the organizational structure, tax and accounting, financial management, informational technology and oversight within the business.
The University, fearing a potential legal responsibility for the Sefarim Sale, immediately highlighted the informal nature of relationship that had no clear written agreements detailing authority and accountably. The report noted that the Sefarim Sale had no independent board of directors, and thus no formal internal controls over its officers. The report recommended an independent board consisting of YU deans and Sy Syms School of Business professors to guide students and review and approve cash transactions.
The report highlighted major conflicts of interest with regard to student-officers on the board, leading with “minimal oversight,” paying themselves in book credits” and handling cash. A lack of independent oversight, the report noted, allowed the CFO to open a personal debit card and reconcile his own reimbursements, which “increase the risk of unauthorized charges and payments may remain undetected.” The audit noted that $2,000 was withstanding from funds relating to book credits for officers.
Given that the student-officers who run the sale usually do so for only one year, there is “no accountability for the results of the sale,” the report noted. It recommended key officers serve for two years. The report also recommended that the Sefarim Sale “officially receive oversight and class credits from SSSB and be taught as part of an educational program and a learning experience about how to run a business.”
The report noted that the Sefarim Sale failed to file 990, CHAR500, W4, W2, Minimum Wage, and Tax return forms properly and that it had difficulty providing proper documentation for the audit. Months of credit card statements, vendor reports, invoices and expense reports were missing, which exacerbated the chance that income and “expenses claimed may not be for a legitimate business purposes.” The report even found that blank checks were kept in an unlocked drawer.
“If you look at the makeup of the sefarim sale,” said Leonard Fuld, Clinical Assistant Professor of Accounting at SSSB, many students had “no business background whatsoever.” In response to the audit, Professor Fuld will be spearheading a new course taught at SSSB titled “Managing A Growing Business,” in which 11 hand-picked students, guided by SSSB professors, will act as consultants or leaders of the Sefarim Sale.
Students will use the skills and subjects they are studying in SSSB to inform their studies in the course and their eventual work in the sale. Accounting majors will organize the books, while marketing majors will advertise the sale to the greater Yeshiva University community. Students in the class are not required to work in the sale.
In the new class, students will study the management, promotion, accounting, and other elements of the sale and make recommendations to the student-officers. Professor Fuld told The Commentator that in future years the course may focus on another growing business outside of YU. Echoing Professor Fuld’s statement, Dean Straus said, “this is real, hands-on business and entrepreneurship right in our back yard. It makes sense to start with the sale.”
Despite the emphasis on the Sefarim Sale, SSSB insists it is not taking over responsibility. “We aren’t running the Sale,” both Dean Straus and Professor Fuld insisted, students are “recommending, not telling, the Sefarim Sale how to better run the business.” However, a new board, consisting of professors, Sefarim Sale officers, and students will be organized based on the audit’s recommendations. The board will have no official power over the sale, but the recommendations it makes will be take under serious consideration.
“The Sefarim sale can run better,” said Professor Fuld, who previously led departments at Citigroup and Griffon Corporation, “and I would say the same thing about General Motors and Nokia.”