(This is the body of an e-mail, which has been circulating among numerous Stevens Alumni) 

A faculty study in the spring of 2005 revealed that Stevens had experienced poor financial performance over the previous five years.  This came as a surprise to alumni, faculty and trustees because the annual reports published by Stevens and sent to the alumni, faculty and trustees showed budget surpluses.   As it turned out, Stevens reluctantly admitted that two sets of books were being kept and the budget surpluses shown in the annual report were really deficits under generally accepted accounting principles.  Subsequently, Stevens also disclosed that major alumni gifts had been used to offset budget deficits.

The Stevens faculty voted in spring 2005 to ask the Board of Trustees (BoT) to conduct an independent third party audit to overcome the lack of transparency, document the financial mismanagement and make recommendations for improvement.  The Jersey Journal in a March 2005 editorial entitled “Stevens should open up its books” urged the Stevens BoT to act prudently.  Rather than open its books to an independent review, Stevens produced “white papers” and other documents that covered up the facts.  One would have thought that a school that cherishes its Honor System would welcome an independent investigation.

During 2005 and 2006 a number of trustees, alumni and faculty tried to convince Stevens that greater transparency and accountability were essential to the long term interests of Stevens.  Again the BoT refused to conduct an independent audit.  A number of key trustees quit or left the BoT because of the lack of transparency and accountability.

In desperation, a complaint was filed in October 2006 with then Attorney General Stuart Rabner, asking the State of New Jersey to appoint a receiver for Stevens Institute of Technology (SIT) given that the Defendants (Raveche, Babbio, DeBaun and Schulman) were “jeopardizing SIT’s future through excessive and fiscally imprudent borrowing and taking money from SIT’s endowment in order to meet excessive operating expenses which include inflated salaries and low interest loans for themselves.”  It was filed by the Saul Ewing law firm representing “several dedicated [former trustees], alumni and faculty members” who have “grave concerns about numerous financial improprieties and significant failures of corporate governance at SIT.”  The complaint’s allegations include the following:

Below is summary information from the audited financial statements that are posted at SIT’s web site (http://www.stevens.edu/fd/annualreport.html).
 

Cumulative operating losses for the past four years total $25.4M, a net operating margin of -5.6%.  If the $18.7M of “Net assets released from restrictions” are excluded from operating revenues, the four year operating loss is a staggering $44.2M (a net operating margin of -9.9%).  While audited financial statements for the fiscal year ended June 30, 2007 have not been posted to the web site yet, credible sources report that operating losses of $4.2 M were incurred.

According to the footnotes in the audited financial statements, the number of students declined from approximately 5,300 during the fiscal year ended June 30, 2005 to approximately 4,800 at June 30, 2006. 

At June 30, 2006, cash was a paltry $261K, despite a $13M line of credit and loan from PNC Bank against which $10.7M had been drawn.  Long-term debt totals $80.2M.  SIT’s financial position is weak, there are serious allegations with respect to the integrity of the endowment funds, and the total endowment of $140.5M is meager for a university of this size. 

Class of 1960 Concerns

Nearly 30 years ago, members of the Class of 1960 established a scholarship fund in memory of deceased classmates with the intention of building a corpus that would provide a full scholarship to a needy student each academic year.  Throughout its annual fundraising efforts and especially in anniversary years, the Class of 1960 has raised more than $1M for Stevens, with a significant portion of these monies designated for the Class of 1960 Scholarship Fund.  Although the class has, on numerous occasions, requested an accounting of the status of the Class of 1960 Scholarship Fund, none has ever been provided.  As the Class prepared for its 45^th reunion, it was told anecdotally that the corpus amounted to “about $350,000.”  However, no hard copy report was provided.

It seems paradoxical that, in the 21^st Century, a technological university of SIT’s caliber is unable or unwilling to provide annual reports on its endowed scholarship funds to those who have established them.  This runs counter to the prevailing practice at other colleges and universities.

Given the widespread allegations of financial improprieties at SIT, such failure to disclose information about the scholarship funds has shaken donor confidence in the institution’s ability to properly segregate and protect such valued assets.

To further discuss this article, please visit the forum area at: Summary of Allegations of Financial Irregularities