University funds misdirected

FS officials said more than $600,000 given to athletics

By Brent VonCannon
The Collegian

University officials have admitted that more than $600,000 intended for academics and other programs was misdirected to the athletic department in recent years.

However, a former Fresno State official said the donation dollar amount could be in the millions.

The university said in a news release to the campus community Feb. 2 that the situation had been corrected, and that the university had recently notified each corporate donor whose donations were misdirected.

Barry Humphrey, former university associate vice president, said he didn’t know whether the misdirection of funds, all of which came from corporate donors, was intentional or a mistake.

“I don’t care how it happened, just what happened after,” Humphrey said in a telephone interview with The Collegian. He was referring to the university’s actions after officials discovered the problem. He said the university covered up its tracks with its own version of a repayment plan but failed to notify the affected donor companies at the time.

Humphrey resigned from his position with the university in 2003 and now sells real estate in the San Luis Obispo area. He cited differences with fellow Fresno State officials as one of the reasons for his resignation.

“I suggested we go to the donors and see what they would like done with their money,” Humphrey said. “But they [the university] decided to find a way to give the money back using other donors’ money.”

In acknowledging mistakes made in the past, Welty said in the release, “Mistakes do happen and it is our responsibility to fix problems when they are found.” Besides repaying money into academics, Welty said other corrective measures were taken such as personnel actions, and that management controls and procedural guidelines have been beefed up for accounting and oversight. Since information about personnel issues are confidential, the actions taken were not made public.

In the meantime, the university has slashed more than $336,000 in sports funding over the last four years and directed it toward academic programs such as the library and marching band. But how that ties in to adequate funding for current sports programs is unclear, said Thomas Boeh, Fresno State’s athletic director.

“Athletic budgets in general tend to be roadmaps,” Boeh said. He said both new funds and new expenses are constantly popping up, and the important thing was to maintain a balanced budget at the end of the day.

Boeh said he didn’t know what, if any, effect the matching gifts repayment plan has had on school athletics over the last four years (he has been with Fresno State less than two), but said the athletic budget for this year was $22 million and that the total amount spent varies from year to year. For example, a men’s cross-country program was restored for the 2006-07 season while the more expensive wrestling program was cut.

Dean of Student Affairs Paul Oliaro said Thursday, “Students were not affected.” Oliaro also said the athletic corporation didn’t do anything to take away from student athletes.

Humphrey was quoted in a Jan. 28 Fresno Bee article saying the donations issue was brought up in several meetings attended by him and other top university officials in 2002 and 2003, and that an audit of the donations in question was subsequently performed. Humphrey claimed that millions of dollars in misdirected donations were then discovered in the audit.

Fresno State has not confirmed any such audit, but The Fresno Bee said former internal auditor Chris Robinson did issue an audit report in February 2003. That audit covered three fiscal years between 1999 and 2003 and found that about $461,000 of restricted corporate matching donations had been wrongly put into the athletics budget. The Fresno Bee also said Robinson subsequently outlined a repayment plan based on the years audited.

Humphrey said Peter Smits, vice president for university advancement, was responsible for moving forward with the repayment plan with little to no discussion.

Humphrey said administration officials hoped the whole matter would go away. “But donors are very specific about where they want the money spent,” Humphrey added. He said undesignated gifts made out to the university call for spending the money where it’s needed most. The problem, Humphrey said, is that none of the donations in question were undesignated. The only fair way to fairly resolve the problem was to go back to the donors in the first place, Humphrey said.

Smits was out of town Thursday, but he responded to questions from The Collegian in an e-mail. He said the university did nothing improper with anyone’s money following Robinson’s audit. “There is no report or investigation which claims there was a cover-up,” Smits said in the e-mail. “Humphrey left the university before the investigation was concluded and the restoration was put into place.”

Smits said the matching donations in question were directed to athletic scholarships by the donor, but that some of the donors’ companies specifically didn’t allow matching gifts for athletic purposes.

Thus, some employees who wanted to donate to athletics ran up against their company’s protocol forbidding it. Smits said it was the responsibility of the donors to get the matching gift form from their companies to go with the donations.

Furthermore, Smits said he did not order any audits as claimed by Humphrey, and that only “the internal auditor reports to the president.” Smits confirmed an internal investigation from 2002 to 2003 which covered a previous three-year period, which he identified as the audit performed by Robinson.

“The internal investigation by then-university auditor Chris Robinson is the only one I am aware of,” Smits said.

Welty said no deceit was involved in either the initial misappropriation of donations or in the actions taken afterward in repaying those donations. In the Feb. 2 news release, Welty said the university discovered the problem on its own accord during an investigation of another sports-related set of budget irregularities in 2002.

Welty said the problem occurred with matching gifts that are used to support athletic scholarships. The matching gifts were raised through the Bulldog Foundation, an organization that raises millions of dollars each year for such things as athletic scholarships, and whose members can make matching gifts to support those scholarships. The Bulldog Foundation is not responsible for allocation of the funds it raises.

Welty said many businesses use corporate matching gift programs to match donations made by employees to nonprofit organizations, in this case Fresno State. But when the university received matching gifts from corporations, Welty said the development office apparently overlooked the fact that many of the corporations involved didn’t allow their donations to be used for athletic purposes.
After discovering the accounting errors made, Welty took action by authorizing that the misallocated donations be sent to “fully qualified academic purposes.”

Welty said he authorized repayment of $350,000 from “non-state, discretionary funds” because the university was in part responsible for the mistake. He also ordered the $336,754 taken out of the athletics department to help reimburse academics.

A representative from the Bulldog Foundation, who wished to remain anonymous because of the sensitivity of the issue, said it remained to be seen whether the recent news would hurt business recruiting and fund raising. The foundation does its annual fund-raising drive in the spring.

According to The Fresno Bee, officials from the Bulldog Foundation did meet with Welty and other university officials two weeks ago and gained some assurances that the financial problems would not harm the organization’s reputation.

University Communications spokesperson Shirley Armbruster said the university will issue updates as the investigation moves forward, but that no press conference was planned to address the issue.

Outside legal experts and auditors have been called in to conduct the investigation. Welty said in the news release that refunds with interest were offered to the affected donors, but that no donor companies have responded to the offer since being contacted last month.

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