An audit of Fresno State's auxiliary organizations, including the athletic corporation that funnels money into Bulldogs sports, has found at least $3.6 million in wasted spending and slipshod accounting.

The audit found no pattern of intentional wrongdoing or fraud, but it did identify "weaknesses" that allowed auxiliary organizations to handle money and administer programs with little or no oversight.

More than $3.6 million was lost, poorly documented or even stolen between 1999 and 2002, the review by the California State University trustees' audit committee found.

The report also describes a culture that allowed the university's auxiliary operations to run with almost total autonomy. As they did, it says, some boards failed to hold regular, public meetings announced by posted agendas and conducted with required quorums, a legal condition for taking action.

The auditors reviewed the CSU Fresno Foundation, CSU Fresno Association, the Agricultural Foundation, the Athletic Corp., Fresno State Programs for Children and Associated Students of CSU Fresno. Fresno State's auxiliary organizations are designed to be self-supporting, nonprofit enterprises. They operate in such nonacademic areas as food services and housing and in some cases primarily administer private funds that are donated to support scholarships, athletics and special programs.

The audit comes as Fresno State struggles with a budget crisis that has led the university to curtail enrollment and cut programs while asking students to pay more. While the audit covers only the auxiliary organizations, its findings cast an unflattering light on how some university officials oversaw spending.

Among the auditors' key findings:

More than $930,400 from a $2.16 million sale of campus agricultural land to the California Department of Transportation for construction of Freeway 168 was given to the Ag Foundation in a questionable deal approved by university administrators. The Ag Foundation essentially fabricated documentation that made it appear the money from the sale was used to reimburse expenses.

The CSU Fresno Association invested millions in a biomass energy plant it received as a gift in 1999, expecting it to earn more than $1 million a year, an expectation that was unrealistic. The plant lost more than $700,000 by mid-2002, prompting its sale, which the university now says helped it break even.

The Athletic Corp. spent thousands of dollars without documentation, including a $1,000 tip to a bus driver during a bowl game trip to San Jose, country club memberships for coaches and money for clothing and travel.

The CSU Fresno Foundation exercised lax security over checks, and the CSU Fresno Association did the same with a rubber signature stamp and blank checks.

The CSU auditors suggested 107 remedies for these and other faults at Fresno State.

The CSU Fresno Foundation and CSU Fresno Association are two separate organizations under the university's auxiliary operations. The foundation is the designated recipient of all charitable donations. It develops and administers grants and contracts, and manages trust accounts that support university operations.

As of last June 30, the foundation's trust accounts exceeded $17.6 million.

The CSU Fresno Association runs commercial operations at Fresno State, such as the student bookstore, food services, student union and University Courtyard student housing.

University President John Welty called the audit report "extraordinarily helpful."

"These are areas where, clearly, we need to develop policies and procedures," he said, citing the need for better segregation of accounting duties and controls over cash.

The audit's first recommendation is for Fresno State to develop procedures to "oversee the various ancillary organizations."

Welty said: "I wouldn't characterize it as needing better oversight. I would characterize it as needing better policies and procedures."

Welty and Chris Robinson, campus internal auditor and interim assistant controller for athletics, said Fresno State has acted on or is in the process of enacting all audit recommendations. The university had been too optimistic in promising to complete so many recommended changes by last Dec. 31, Robinson said.

Welty said Fresno State will have complied "substantially" with all recommended changes by March 1.

Michael Redmond, a senior auditing director with the CSU Chancellor's Office in Long Beach, said Fresno State has cleared 60 recommendations, which he called "good progress." He said, "They are taking what we recommended, and going beyond it. ... The president there hasn't been called on the carpet because they have been moving to meet the recommendations all along."

Audits have led to special investigations at some CSU campuses, but Welty said he believes that will be unnecessary at Fresno State: "This is a routine audit, and I don't think that anything in the findings suggested individual impropriety or anything that would trigger an in-depth review."

The existence of the audit was known to a fairly small circle on campus.

Professor Catherine Jackson, chairwoman of the Kinesiology Department and recently named vice chairwoman of the Academic Senate, had neither seen nor heard about the audit. Such reviews usually go through the senate, she said.

She has taught seven years at Fresno State and finds internal oversight more exacting there than at other campuses in her experience.

"The level of caution here is very high," Jackson said. "Any time procedures needed to be tightened, they have been."

Geography professor James Kus is a former Academic Senate chairman. The chairman also sits on the CSU Fresno Association's board. Kus is also a member of the University Budget Committee, a function of the Academic Senate, and served for eight years as its chairman, into the early 1990s.

Kus said the Budget Committee hasn't discussed the audit. Welty has put together a group to oversee removal of grants and contracts from the CSU Foundation, Kus said, but "there has been no discussion of the audit on this campus."

The Budget Committee "for years" tried to get information about the university's commercial enterprises run by the CSU Fresno Association, he said, including food services and the bookstore.

"We were absolutely stonewalled again and again," Kus said. "They just laughed at us."

Kus was referring to years before Deborah Adishian-Astone became Fresno State's executive director of auxiliary services in March 2001. Adishian-Astone, asked to comment on the auditors' report, declined, saying she would defer to Welty.

CSU conducts audits of auxiliary organizations every three years.

Auditors who visited Fresno State from July 22 through Aug. 30, 2002, found "conditions which, in our opinion, would result in significant errors and irregularities if not corrected." The flaws include lack of resources, faulty judgments, unintended errors and "circumvention by collusion."

The auditors portray the university's auxiliary organizations as operating without sufficient controls. Their review recounts spending improperly monitored, property that should have been returned to the state but wasn't and failure to segregate accounting functions for better security.

The security issue is linked to one case last year involving an employee working at the CSU Fresno Foundation. She was accused of embezzling more than $192,000 and fired. Her case has not yet gone to trial.

Fresno State said it has since tightened the foundation's checking policy.

Auditors said the Ag Foundation has failed to be financially self-sufficient and that it didn't pay debts it owed the campus for such services as faculty work and use of campus land, facilities and equipment. The university's director of agricultural operations decided each year how much of the foundation's debt would be forgiven. The foundation reclassified that amount into a "fictitious" account, which held $350,000 by May 2002, the audit found.

University spokesman Mark Aydelotte said the amount the Ag Foundation would pay the campus has not been set in advance. In years when the foundation's enterprises earned more money, the foundation would reimburse the campus more than in leaner years.

Auditors want Fresno State to determine the line between the Ag Foundation's educational mission and its commercial activity, Aydelotte said. He said that Welty considers the distinction to be "somewhat arbitrary" because the university's teaching mission is "intertwined" with the foundation's agricultural operations.

Regarding auditors' criticism of a $1,000 tip to a bus driver, the university said the money was divided among seven or eight drivers during a week's service at the Silicon Valley Football Classic in San Jose. Auditors also said that football coaches received $9,000 in gift certificates for personal clothing not reported as income.

Fresno State football coach Pat Hill said he was unaware of any gift certificates but speculated that they came from Nike, the Bulldogs' apparel manufacturer.

The auditors also said that the university collected student body organization fees, held in a trust account, and released the money to the campus Associated Students. While the audit doesn't suggest the money was used improperly, state law places responsibility for safeguarding it with the university's chief financial officer.

The audit summarizes other "conditions requiring attention" at Fresno State:

The university needs a written policy on receiving and using funds for auxiliary organizations.

The campus needs written policy on sale of faculty-generated course materials.

The campus should seek the chancellor's guidance on how to handle proceeds from the sale of state land, which, if handled improperly, could be an illegal "gift of public funds."

Fresno State's administration of grants and contracts was not fully documented.

Some processing of university foundation cash receipts was deficient.

The Ag Foundation's incomplete accounting of how it received money left it open to potential penalties and review by the Internal Revenue Service.

The Ag Foundation's winery enterprise and farm market lacked oversight and security of its accounts. Cash at the farm market was sometimes left in an unlocked desk drawer. Cash from sales was mixed with petty cash and money from the sale of gift certificates, making it impossible to reconcile accounts.

Associated Students, Fresno State's student government, failed to reconfirm that students who qualified for grants when they applied early in the year remained eligible when payments were issued later in the year.