Get Out of Debt Guy - Steve Rhode

College of New Rochelle Fails at Math or Just Paying Payroll Taxes

1-844-335-1967

College of New Rochelle, a Catholic college located in Westchester County, New York, announced last fall that it had failed to pay federal payroll taxes for about two years and that it owed approximately $20 million in unpaid taxes. A close examination of the college’s financial picture also revealed that the college owed an additional $11.2 million to other creditors.

Paying federal payroll taxes is required by federal law; and failure to do so can lead to big trouble. The Internal Revenue Service can impose fines and even jail time for wilful failure to pay those taxes.

The college released a statement in November suggesting that the college’s former controller, Keith Borge, was responsible for the error. Borge retired as controller of the college in May 2016. Without identifying Borge by name, college leaders said that the financial irregularity came to light only after the controller retired at the end of the 2015-2016 academic year.

Apparently, the college’s auditor did not discover this mammoth financial problem for some time, which is curious. The College of New Rochelle’s auditing firm was KPMG, a highly reputable global auditing firm with an reputation for competence and integrity.

CNR’s president, Judith Huntington, stepped down shortly after the college announced its financial crisis. Huntington said she relied on the controller to manage the college’s financial affairs, which is reasonable. But Huntington is herself a CPA and was employed for 15 years at KPMG as a senior audit manager. She’s also the director of a major bank. According to Bloomberg, Huntington served as a bank director at Signature Bank during the same time she was president of CNR. Apparently being a college president is only a part-time job.

At least one more senior administrator departed CNR after the financial scandal broke. Betty Roberts, Vice President of Finance, terminated her employment at the college sometime in late 2016. According to a news story, Roberts came to CNR after serving in a similar position at Alcorn State University, a Mississippi HBCU that was under investigation by the Mississippi state auditor’s office.

Will anyone be sued over this massive scandal? I doubt it. Little can be gained by suing individuals, who do not likely have the resources to pay any judgment that might result. And anyone who gets sued for the big screw up at the College of New Rochelle will likely implicate others.

How about KPMG? Can KPMG be sued for failing to pick up CNR’s massive tax liability more quickly?

Perhaps, but Huntington and KPMG undoubtedly have close ties stemming from her 15 years as a senior audit manager for the firm. And there may be lots of good reasons why the college might demur from suing a very powerful global firm.

So let’s just rack this incident up as an unfortunate episode in the institutional life of the College of New Rochelle. “Least said, soonest mended,” as the old saying goes.

But then there is the matter of a mysterious $5 million donation to CNR, which was made anonymously after the scandal broke. This quick cash will buy CNR some time to get its financial house back in order. What party would make a $5 million anonymous gift to a college that may not survive this huge financial crisis?

Perhaps the money is not completely a gift. Perhaps the donation was an exchange by some interested party for a covenant not to sue. We will never know.

We can take comfort, however, in a pledge made by KPMG, which was neck deep in CNR’s travails, that appears on its web site:

At KPMG, our promise of professionalism to each other, our clients and the capital markets we serve compels us to align our culture of integrity with our values, words and actions.

This is the same KPMG that was auditor for Wells Fargo when the bank created two million bogus accounts. Robert Earl Keen is right: “The road goes on forever and the party never ends.” – Source