This audit assesses implementation of the University Operating Flexibility Act by the State University of New York (SUNY). The legislation was designed to give SUNY more autonomy to make daily operating decisions, in order that SUNY could better compete with other major higher education institutions nationwide. The legislation empowered SUNY to implement most budget transfer, personnel, and purchasing decisions without outside approval. The audit examines SUNY's use of its additional powers. The implementation of the Graduate Education and Research Initiative (GRI) designed to improve the quality of SUNY graduate programs is also reviewed. The assessment involved interviews with SUNY Central staff, review of pertinent documents, and field work at 10 SUNY campuses. The audit found that SUNY Central and the 10 sample campuses used budgetary flexibility effectively to meet short-term fiscal and program goals. SUNY Central, however, had not developed focused long-term plans to more fully capitalize on its budgetary autonomy. Flexibility had a minimal impact on faculty recruitment and promotion decisions. GRI funding facilitated growth in research dollars and increased minority graduate student enrollment. Campuses made quicker purchases and largely complied with SUNY purchasing regulations. However, some sole source purchases were inconsistent with state comptroller guidelines. (JDD)