Campus points to booster in probe
Fresno Bee 2/7/07
The investigative report and supporting documents were posted on a university Web site with a letter by campus President John Welty.
The posting came in the wake of a Jan. 28 story in The Bee that reported the university funneled at least $615,000 in corporate donations to athletics over four years despite donor rules limiting the money to academic programs.
But the booster named in the investigation was not responsible for determining how the donations were allocated on campus. And the response does not address questions about how the university mishandled donations for years — or whether the university has uncovered the true scope of the problem.
Fresno State officials say they discovered the misdirected donations problem, which they blame in part on poor oversight, in 2002 and have nearly finished restoring the money.
According to documents provided by Fresno State, the university misdirected at least $615,000 from 1998 to 2002 to athletics. The money came from companies matching individual donations on condition that the funds be used for academic programs.
The university's response identifies Hank Smith, president of the Bulldog Foundation annual fund drive in 2006, as a participant in what the university calls an "unusual" business deal nearly a decade ago involving corporate matching donations.
University documents show Smith received benefits worth nearly $62,000 from athletics.
However, nothing in the posted documents indicates that Smith did anything wrong or that the deal was actually executed. Smith has declined to comment.
Bulldog Foundation Annual Fund executive director Pat Ogle said in a statement Monday that Smith's deal described on the university's Web site was unknown to any foundation official and not connected to foundation activities.
A 2003 report by then-internal auditor Chris Robinson, provided last month to The Bee and posted on the university Web site last week, said Smith proposed a plan to the athletics department in 1998. Under this plan, Smith would arrange $20,000 in individual donations from himself and others for Bulldog athletics.
Smith is retired from cereal-maker Kellogg Co., which had a 2-for-1 matching gift policy for qualifying nonprofits. According to Fresno State, the deal would generate $40,000 from the company.
The deal then called for Fresno State to pay $30,000 in "costs" — $17,000 to Smith and $13,000 to what the investigation called "unidentified consultants."
The report states that Smith did donate a total of nearly $14,000 in 1998 to athletics, and Kellogg donated more than $27,000 in October of that year. But the report does not state whether these donations were connected to the alleged deal or whether Smith received any benefits as a result of them.
The documents do make clear that there were two problems with the alleged arrangement:
Kellogg policy does not permit an individual donor to receive any benefits from the company's matching gifts. (Robinson's report does not specifically identify any violations of this policy committed by Smith.)
Kellogg also does not permit its matching gifts to be used for athletics. Fresno State's Web posting acknowledges that the university did misdirect Kellogg matching gifts to athletics.
The company declined to comment.
Robinson, now Fresno State's controller, wrote a six-page report describing the alleged Smith deal in great detail.
In the end, Robinson did not hold Smith to blame for anything other than allegedly violating Kellogg's matching gift policy.
Also missing from Robinson's investigation was any explanation of how Kellogg's matching gifts, restricted only to academics, ended up in athletics. Robinson notes that matching gifts to athletics or the Bulldog Foundation may violate the company's mandates.
"That issue has been addressed in a separate report and has been appropriately resolved," Robinson wrote.
Robinson wrote a three-page, unsigned report earlier in 2003 on misdirected matching gifts for fiscal years 1999-2000 through 2001-2002.
It outlines a repayment plan but does not explain how the problem occurred.
Robinson said in an interview last fall that his audit covered only three full years because his time was limited and a three-year period is typical for such audits.
The university said last month that it has called in outside legal staff and auditors to re-examine the problem and may expand the scope of Robinson's original audit.
The university's Development Office is responsible for directing matching gifts to the correct department, not individual donors such as Smith.
In the deal described by Robinson, Smith wouldn't have been eligible for cost reimbursements from the Fresno State Athletic Corp. if the Development Office had sent Kellogg's matching gifts to academics, as required, instead of athletics.
The Athletic Corp. is a university nonprofit auxiliary that oversees the athletic program's finances.
Robinson, though, focused his investigation on Smith, rather than university officials who sent Kellogg's matching gifts to the wrong department. Fresno State's Web posting acknowledges that the university misdirected more than $125,000 of Kellogg matching gifts during a three-year period ending June 30, 2002, more than three times what Smith's deal was supposed to get from the company.
Fresno State officials have not explained how, despite the university's extensive system of accounting checks and balances, it misdirected so much money over such a long period of time.
They have pointed only to unspecified failures in the Development Office, human error and poor managerial oversight. The university said it uncovered the problem in 2002 during an investigation into another accounting problem in the athletics department.
The university and the Athletic Corp. have repaid more than $600,000 to academics, mainly to the library and music department, and will make the final payment in its repayment plan in this fiscal year ending June30.
Robinson's report on the alleged Smith deal does shed some light on Fresno State's athletic fundraising policies.
It wasn't unusual for people to get compensated for raising money for Fresno State athletics. Robinson stated that six people, including Smith, were part of the 2001 football seat option task force who received credits for selling seat options. The credits could be used for things such as trips with Fresno State teams.
Robinson stated in his 2003 report that Smith had received nearly $62,000 in benefits from athletics from Oct. 15, 1998 to June 20, 2002. The report does not explain what Smith did to receive these benefits, but does say most of them were "generally consistent" with expenditures allowed to seat option task force members.
But some of Smith's benefits, totaling less than $9,300, weren't consistent with what was allowed to seat option task force members, Robinson wrote. These included reimbursements for the purchase of two San Francisco 49ers football season tickets and assorted San Francisco Giants baseball tickets.
What did Smith do wrong?
"I didn't see a policy violation, per se," said Robinson.