Ed State College (ESC) is state-supported and receives the bulk of its funding from tuition, state funds, research grants, and a few donations. The ESC Foundation, Inc. is a separate, but related, organization that receives all of its funding from tax-free private donations; the foundation uses those funds to provide scholarships and support to ESC students and faculty. Both of these organizations enter into contracts independently with vendors for items and services including contracts for office supplies, copier leases, and food services.
Both organizations currently have a contract with DinersCooking (DC) for food services. These contracts were negotiated independently of each other and have different start and end dates. These contracts give DC the exclusive right to provide food for events held by each organization; in other words, if ESC or the Foundation spends money on food, they must use DC for the duration of the contract. The seven-year contract between DC and ESC is coming up to an end on June 30 of this year, and ESC has sent out a request for proposal to many food vendors, which will result in a new contact between ESC and a food vendor to begin July 1.
A phone call in late March to ESC’s ethics hotline stated the following: “I am Jennifer Galileo, Controller for ESC. I am calling because the ESC President just asked me to destroy a letter and deny it ever existed. The letter was from DinersCooking offering to donate $700,000 for building renovations in exchange for a contract extension. The President demanded the original letter, which I gave him, but I have retained a copy.” An investigation revealed the following facts:
- DC did offer $700,000 for the purpose of renovating the campus-owned home used as a residence by ESC’s President. The photocopy of the letter referenced by Ms. Galileo revealed that the donation would be in exchange for an extension of DC’s food service contract.
- The president’s home is used for many functions that involve food services. As an old home, there are outdated kitchen facilities and other areas in need of repair including some mold or mildew that needs to be removed.
- DC is one of five food service vendors to submit a proposal for the contract. DC’s proposal includes a 10% increase in prices over the previous contract, which amounts to approximately $300,000 each year.
- In March, the president presented to the Board of ESC the offer of DC to donate $700,000, and the Board agreed to accept the donation with the restriction that it be used for repairs to the president’s home. The funds were to be distributed in the coming August. There was no mention to the Board of the letter referenced by Ms. Galileo or the exchange agreement.
- What are the ethical issues, if any?
- Who are the affected parties (stakeholders)?
- What are the professional and personal obligations of the individual(s) facing the dilemma?
- What are the potential options and course of action? List the options and the potential ethical and/or practical ramifications for each option.
- Select a course of action, including steps to resolve the issue.