More gift questions emerge at CSUF
Fresno Bee 3/4/07
But it did -- to dozens of corporate donors over the next decade.
New York Life Foundation, the philanthropic arm of New York Life Insurance Co., contacted Fresno State in late 1994 to express concerns that its matching gifts were being misdirected to athletics, according to documents and interviews.
It took eight months, but New York Life and Fresno State resolved the problem. About $8,800 was transferred from athletics to academic scholarships. The incident even inspired Fresno State to strengthen its matching gifts policy in 1997 to ensure such problems wouldn't reoccur.
Yet, despite the New York Life wake-up call, Fresno State soon was again misdirecting matching gifts to athletics -- almost before the ink was dry on the new rules.
Fresno State said it viewed the New York Life problem as a one-time incident and did not investigate whether other corporate matching gifts were being misdirected.
Some eight years later, the matching-gifts issue came back to haunt Fresno State, and the consequences still reverberate through the university.
In 2002, a Fresno State internal investigation revealed that nearly $461,000 in matching gifts had been improperly funneled to athletics in the prior three fiscal years. The investigation was not made public for nearly five years, until The Bee published an article about the problem on Jan. 28.
A document provided to The Bee by Fresno State in January shows the amount may be more than $773,000 over six fiscal years beginning July 1, 1997. The latest revelation raises the possibility that the amount may be larger still.
Even later matching gifts from New York Life may have been misdirected after the 1994 incident. Other documents provided to The Bee by the university show that about $14,200 in New York Life donations from 1997 through 2001 are described as "problem" gifts for athletics.
Peter Smits, who oversees the university's matching-gifts program as vice president for university advancement, said the New York Life inquiry was the only one of its kind that he knows of in his 13 years at Fresno State. He said Fresno State responded to New York Life's satisfaction.
Smits said the matching-gifts problems uncovered in 2002 were errors of omission, not commission.
The people charged with processing the matching gifts "weren't trained right, we weren't watching them right and the controls weren't what they should be," Smits said. "That does not automatically lead to some dark motive."
He said Fresno State has made a good-faith effort to fix the problems.
Welty, in a commentary published Friday in The Bee, said the university should have been more open with the public on the matching gifts problem when it was uncovered in 2002. He pledged that "our work at the university, within the laws with which we must operate, will always be open and we will be responsive to questions and issues."
Smits gave several reasons why the New York Life problem did not prompt Fresno State to take an in-depth look at its matching gifts program in 1994.
He said the university's Development Office staff, charged with ensuring that matching gifts are correctly processed, was very small in 1994 and Fresno State didn't even have an internal auditor at the time.
He said Fresno State's auxiliary organizations also had recently switched to a new accounting system, making it difficult to research how previous matching gifts had been spent.
The Fresno State Athletic Corp., which oversees athletics fiscal policy, and the Fresno State Foundation, where many matching gift checks are deposited, are auxiliary organizations.
Smits said it was all the university could do in 1994 just to handle the New York Life issue.
"Back in those days, to be able to gear up to look into New York Life and to satisfy New York Life and to revise our policy, that was pretty good," Smits said. "Did we actually pluck apart every matching gift from everybody else? No. The focus was on New York Life because those were the ones who inquired."
The luxury of hindsight may suggest the university should have looked at the overall matching gifts program, Smits said: "Things look differently when you're right in the middle of it. We were right in the middle of responding to New York Life and revising our policy."
New York Life spokesman William Werfelman said Fresno State handled the issue "to our complete satisfaction."
After The Bee began asking questions about corporate donations last fall, the university asked an outside attorney and auditors to review its handling of the money. University spokesman Mark Aydelotte said the lawyer is Stephen C. Nill of Rancho Santa Margarita.
On his Web site, Nill describes himself as "the outsourced general counsel to nonprofits" who gives clients "timely legal advice -- before things get out of hand."
The university recently completed restoring nearly $461,000 in matching gifts that had been misdirected in fiscal years 2000 through 2002. Concerned that individual contributions that triggered those gifts also might have been bound by the corporate rules against use in athletics, Fresno State also restored about $405,000 in donations given by boosters.
The university said most of the individual donations came from members of the nonprofit Bulldog Foundation, athletics' main money-raising booster group.
Much of the restoration money came from a cash-strapped athletics program that over the past decade has had to cut sports such as wrestling and men's soccer to help balance its budget.
Correspondence volunteered to The Bee by the university shows that Fresno State's resolution of New York Life's concerns was not a simple matter.
In a matching gift program, an employee or retiree makes a contribution to a nonprofit such as a university. The company or its philanthropic foundation then matches the gift, sometimes 2-for-1.
Brian C. Loutrel, New York Life assistant general auditor, wrote Fresno State in November 1994 to request information about how the university was spending matching gifts, which can't be used for athletics.
Loutrel said there was "some indication from our audit process" that Fresno State over the previous 18 months had spent matching gifts on counseling for student-athletes. He said New York Life, prior to 1993, had already declined to match a number of individual gifts to Fresno State because the money would have gone to athletics.
In December 1994, Jon Shaver, then-executive director of Fresno State Auxiliary Services, wrote Smits to say that about $8,800 in New York Life matching gifts over the past two fiscal years had been spent on counseling for student-athletes.
In January 1995, Welty wrote Loutrel to say use of the gifts for the counseling of student-athletes violated New York Life's rules, and athletics was shifting the money to an account for nonathletic scholarships.
"I regret that we have not complied with your policies, and trust that these actions will remedy this situation," Welty wrote.
In June 1995, in response to a letter from New York Life Foundation President Carol J. Reuter, Welty wrote Reuter to say he would "certify" that certain actions would be taken on future New York Life matching gifts by Fresno State and its affiliates.
These actions included an assurance by Welty that university employees processing New York Life matching-gift forms would "truthfully and accurately" certify that donations would be spent according to program guidelines.
In July 1995, Reuter wrote Welty to say the foundation looked forward "to continuing to be able to match eligible gifts to your institution."
Fresno State has said the later matching gifts problem identified in 2002 was due to poor internal controls, lack of managerial oversight and insufficient employee training. The university also said Development Office employees didn't read the donor forms restricting matching gifts to nonathletic uses.
These matching gift forms are different for each company and their restrictions are not always clear, university officials said. But each company's form serves essentially the same purpose as the New York Life forms that Welty promised in 1995 would be closely monitored by Fresno State employees.
The university has said a 2002 internal investigation of another accounting problem in athletics led to the uncovering of the misdirected matching gifts problem. No outside entity forced the internal investigation, the university said.
Chris Robinson, then the university's internal auditor, conducted the 2002 investigation and wrote a report in early 2003 that outlined a plan to restore the misdirected money to academics.
Robinson, now the university's controller, covered only three full fiscal years in his audit. He said his other university duties prevented him from expanding the investigation's scope and three years is standard for such audits.
Fresno State said Thursday that Welty and Smits "made Chris Robinson aware" of the New York Life matching gift problem in 2002. Robinson's February 2003 matching gifts report does not mention the New York Life incident, however.
Smits said the new review by outside auditors of matching gifts may go back to 1994, when New York Life made its inquiry.
Smits said the university now has a "double-decker" process for handling matching gifts involving athletics. It begins with Bulldog Foundation officials ensuring that the companies' forms allow matching gifts to be used for athletics. If not, Smits said, the forms are returned to the Bulldog Foundation member.
Forms that survive this check also are reviewed by at least two employees in the Development Office, Smits said.