Athletics got an undue boost
Fresno Bee 1/28/07
University spokesman Mark Aydelotte said Fresno State halted the improper practice and began repaying money to academic programs in 2003.
Following questions by The Bee, the university in recent weeks also began notifying donors of the problem and called in outside auditors to review its handling of the matter.
But questions remain about whether the problem — which never has been made public — was more extensive than the university acknowledges.
One former Fresno State official said he was told that millions of dollars were misdirected.
It is "many times what the university is admitting to," said former Associate Vice President for University Advancement Barry Humphrey, who left the university in 2003.
University President John Welty and other top campus officials said they are not ready to discuss the matter further until they have reviewed documents requested by The Bee for the purpose of finding out the extent of the problem and who was responsible.
Meanwhile, the repayments — which have gone to areas such as the library and music department — have created a drain on an already financially-strapped athletic program. The program has axed sports and cut expenses in recent years to balance its budget.
The athletic program is being asked to repay only part of the sum because mistakes with matching gifts were made elsewhere in the university, Aydelotte said. Welty tapped other university funds, including unrestricted donated money, to make up the difference.
Some of the corporate gifts that were later misdirected were arranged by members of the Bulldog Foundation, a 57-year-old organization with about 5,000 members that raises millions of dollars annually for Fresno State athletic scholarships and recruiting.
The Bulldog Foundation is not responsible for directing corporate gifts to the correct campus department. But foundation officials worry their organization's reputation will be harmed as the university responds to questions about the gifts problem.
About 50 officials from the Bulldog Foundation and the university, including Welty, met Friday at the Save Mart Center to discuss the university's response to The Bee's investigation.
"From the Bulldog Foundation standpoint, the directors and trustees left that meeting with assurance that the mission of the Bulldog Foundation hasn't been compromised at all," said Bulldog Foundation Annual Fund President John Wallace, who attended the meeting.
Wallace said the Bulldog Foundation has done nothing concerning corporate gifts that would harm the organization's reputation or integrity. According to Fresno State documents, the foundation learned of the problem at least in early 2003.
Wallace said he asked Welty at the meeting whether the university sent the corporate gifts to athletics instead of academics "out of stupidity or deceit."
According to Wallace, Welty said the university didn't do anything wrong on purpose.
Fresno State officials blame human error, poor internal accounting controls and insufficient oversight. They said they've taken steps to correct the problem, including better employee training.
Mistakes occurred over four years
It isn't clear how human error could cause the university, with its system of accounting checks and balances, to mistakenly send academic donations to athletics for at least four straight years.
The misdirected donations identified so far came from companies matching donations by their employees or retirees. The matching funds were used in combination with individual gifts to qualify the donors for personal seat licenses or Bulldog Foundation memberships.
The license allows a fan to buy a season ticket for a seat in a premium location in venues such as Bulldog Stadium and the Save Mart Center. Proceeds from the seat licenses are used for Fresno State athletic facilities.
Corporations that provide matching donations typically ask the recipients, before they receive any money, to fill out a form on which restrictions are detailed. These restrictions often tell universities they may not use the corporate gifts for athletic programs.
Fresno State Advancement Operations Director Randy Larson, who oversees university fundraising accounting, said last year that the employees charged with handling the donations "probably just didn't scrutinize the details" of the forms. An auditor is "reading every word on the form. Obviously, that did not happen when the gifts were actually processed."
University officials also said some companies' restrictions weren't made clear.
In September, The Bee began investigating how the misdirection occurred. Fresno State gave The Bee a three-page audit report dated Feb. 27, 2003, on the problem. It was written by then-internal auditor Chris Robinson.
Robinson's audit covered three fiscal years, 1999-2000 through 2001-02, and part of 2002-03. He found that nearly $461,000 in restricted corporate matching gifts had been improperly sent to athletics.
The Bee obtained an unsigned, undated document from Fresno State through a state Public Records Act request showing that the university also improperly sent more than $154,000 in matching gifts to athletics in 1998-99.
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.
However, in a July 26, 2002, memorandum to university officials, Robinson suggested the problem might be bigger. He wrote that more than $1.45 million of matching gifts over the past eight years had been deposited into a university-controlled account. He said he didn't know how much of that money was from restricted corporate gifts sent to athletics by mistake.
"We need to follow up on this matter," Robinson wrote.
In a statement this week, the university said it has called in outside legal staff and auditors to re-examine the problem and may expand the scope of Robinson's original audit.
Former university Associate Vice President Humphrey said he thinks the total of misdirected donations may be larger than Fresno State has acknowledged. He said the donations were discussed in a series of meetings he attended with top Fresno State officials in 2002 and 2003.
Vice President for University Advancement Peter Smits told the group that some donors got suspicious about their money's fate and asked for audits, Humphrey said. Smits then ordered an audit of all misdirected donations, Humphrey said.
University officials have not acknowledged that this audit — apparently separate from Robinson's study — was performed. But Humphrey said it found millions of dollars of misdirected donations.
Humphrey said Smits told the group the money was spent by athletics, but did not say how athletics got access to the money or how it was used, Humphrey said.
Smits asked those at a meeting to come up with ideas for dealing with the problem, Humphrey said. At a later meeting, Humphrey said, Smits told the group that he and Welty had solved the problem by deciding to repay the money from funds with no restrictions over a period of time.
"From that point, it was made clear that there was to be no further discussion allowed on this subject," Humphrey said.
Humphrey resigned from the university in 2003. He now sells real estate in the San Luis Obispo area.
Payback time
Robinson's 2003 audit outlines a repayment plan focusing on the three audited years. The amount to be repaid included money from individuals whose donations triggered the corporate matching gifts, even though the individuals intended their money for athletic purposes such as scholarships.
This total was nearly $867,000. However, the university subtracted nearly $180,000 from this amount to arrive at a repayment total, saying the athletics program already had donated that amount to the library and music department during the period of Robinson's audit.
The reimbursement plan began with a lump sum payment in 2003, followed by four annual payments of more than $84,000 from athletics.
The final payment is to be made in the current fiscal year, which ends June 30. Fresno State has repaid more than $600,000 so far.
Other universities have misdirected matching gifts from time to time.
San Jose State, for example, discovered that three corporate matching gifts totaling $1,163 were incorrectly sent to its athletic department in the 2003-04 fiscal year, Nancy Bussani, the university's associate vice president for advancement operations, said in an e-mail.
But Tina Long, director of matching gifts at the Washington, D.C.-based Council for Advancement and Support of Education, said she isn't aware of another university that has had problems for as long as Fresno State.
Long said a nonprofit that discovers it misdirected matching donations has an ethical responsibility to research the problem to its beginning and tell each company what happened.
At San Jose State, Bussani said, "once we discovered the error, we met with each company, returned the matching funds and provided them with our new procedure to reassure them the issue would not occur again."
In a written statement to The Bee, Aydelotte said the donor companies weren't informed of the problem when Fresno State uncovered it in 2002. In December 2006, Aydelotte said, the university did contact the companies and told them how their gifts were being repaid to academic programs.
Companies will be reimbursed if they ask for their money back, Aydelotte said.