NEW YORK, Dec 2 (Reuters) - An audit of the Ben & Jerry's Foundation, a U.S.-based non-profit solely funded by the brand, found that it had deficiencies in financial controls and governance, according to Magnum, the Unilever ( UL ) unit set to be spun off next week that will own the ice-cream maker.

The audit also found deficiencies in other compliance policies such as conflicts of interest, according to the statement from the Magnum Ice Cream Co, an independent unit of Unilever ( UL ).

Magnum is set to inherit a long-standing feud between Unilever ( UL ) and Ben & Jerry's ( UL ) stemming from the politically progressive brand's stance on the Israeli-occupied Palestinian territories.

Magnum conducted the audit as a matter of good governance in preparation for the upcoming spin-off, it said.

A Unilever ( UL ) spokesperson echoed those reasons in a comment to Reuters, adding that Magnum is "taking appropriate steps" in response to the findings.

Ben & Jerry's ( UL ) and the foundation did not respond to requests for comment, but its co-founder Ben Cohen said in October that he expects the conflict between the brand and its new owner to grow after the spin-off.

Magnum did not make public its findings but said it has shared them with the Ben & Jerry's Foundation and is trying to work with them on strengthening corporate governance by adopting a code of ethics, conflict-of-interest policy, term limits for trustees and due diligence and financial controls on grants.

Magnum said the trustees have not fully addressed the deficiencies. The Unilever ( UL ) subsidiary shared the statement in response to Reuters' questions about the audit. 

The trustees signed a code of ethics in recent weeks, according to two sources familiar with the matter, who asked not to be identified because they were not authorized to speak to the media. The sources added the audit did not find wrongdoing, ethical malpractice or violations.

Unilever ( UL ) and Magnum have been upping the pressure on Ben & Jerry's ( UL ) ahead of the spinout, as the irreverent ice cream brand will make up a larger portion of the new company's sales. The brand has been one of the few voices in corporate America speaking out against policies backed by U.S. President Donald Trump and Israel's war in Gaza.

Ben & Jerry's ( UL ) annual revenue of 1.1 billion euros ($1.28 billion) accounts for almost 14% of Magnum's global turnover, compared to just 1.8% of Unilever.  

Earlier this year, Unilever ( UL ) threatened to pull funding from the charity unless it agreed to the audit, Reuters reported. The foundation receives about $5 million annually from Ben & Jerry's ( UL ), and Magnum said it plans to continue fully funding the organization.

Ben & Jerry's ( UL ) co-founder Jerry Greenfield, who resigned as a "brand ambassador" earlier this year, is stepping down as trustee from the foundation, the sources said. Greenfield did not respond to a Reuters request for comment. 

LONG-LASTING FEUD

Ben & Jerry's ( UL ) secured substantial leeway in its 2000 merger with Unilever ( UL ) that others who have sold to big corporations have not enjoyed, including an independent board.

The agreement also preserved the foundation, set up in 1985. It uses contributions from Ben & Jerry's ( UL ) to make donations to other non-profit organizations focused on issues ranging from racial equity to environmental protection.

But the relationship soured in 2021, when Ben & Jerry's ( UL ) said it would stop selling in the Israeli-occupied West Bank, which had financial consequences for Unilever ( UL ) as investors supporting Israel pulled out of the global consumer goods conglomerate.

The Ben & Jerry's ( UL ) independent board has sued Unilever ( UL ) twice, most recently accusing its corporate parent of wrongfully muzzling it over statements it wanted to make on Gaza; Unilever ( UL ) has said the brand has evolved into one-sided advocacy on controversial topics.

Cohen has launched an effort to buy back the brand; Magnum has said the unit is not for sale.

He has said Magnum is censoring Ben & Jerry's ( UL ) ability to speak out on progressive causes like Palestinian rights and U.S. immigration, a claim Magnum denies.

In a draft prospectus for its public listing, Magnum warned that actions by Ben & Jerry's ( UL ) could result in reputational damage, boycotts or investor claims.