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Auditors find financial errors at CSU auxiliaries

Arvind Balaraman/freedigitalphotos.net

Auditors for the California State University reviewed several auxiliary organizations at four campuses last year and found some had failed to adequately document credit card expenditures, bid competitively for projects and protect information security.

The auditor reviewed CSU auxiliary organizations at San Diego, Pomona, San Jose and San Marcos campuses as part of a system-wide effort to ensure adequate oversight. California universities’ auxiliary organizations are not subject to the state public records law and in many recent cases have hidden questionable deals from public scrutiny.

CSU Internal Auditor Larry Mandel reported to the board [PDF] of trustees yesterday that in addition to the four campuses whose auxiliary organization audits are complete, two more audits are waiting for campus response, and auditors are finishing up the report for a seventh campus. Mandel estimated his office will audit 32 auxiliary organizations this year.

In the 2010 reports, auditors identified a number of significant findings that could cause errors, irregularities and in some cases, misappropriation.

At San Jose State University's Tower Foundation, for example, auditors found some cash disbursements were not appropriately authorized or supported by sufficient documentation. In one instance that required competitive bidding, the foundation did not get price quotes from three or more vendors as required, and the organization had no documentation explaining why it had not obtained these quotes.

The foundation provided a travel reimbursement for a club sports trip even though the organization had none of the required air travel release forms or signed waivers for the 20 students who traveled by air. One check for more than $5,000 was not signed by two individuals as required by university policy.

In a response to the audit, the Tower Foundation controller blamed the failures on oversight and a lack of awareness of the student travel policy.

San Jose State UniversityFlickr photo by roarofthefourAuditors found accounting errors at San Jose State University auxiliaries.

At the Student Union of San Jose State University, auditors found the organization had failed to adequately document several corporate credit card purchases.

In February 2010, for example, the foundation had no receipts for 11 purchases totaling $2,345. In the audit response, the union's associate director of administrative services said the problems occurred because the union had hired temporary staff when the accounts payable clerk was out on maternity leave.

The audit also identified key weaknesses in three other auxiliary organizations: Spartan Shops, Associated Students San Jose State University and the Student Union of San Jose State University.

At San Diego State University [PDF], auditors found the Campanile Foundation did not maintain adequate control over fees, revenues and receivables. Specifically the foundation did not independently reconcile gift receipt information with its accounting system to protect against “inconsistencies, misunderstandings, and loss or misappropriation of funds.”

The report also concluded that the San Diego State University Research Foundation was not properly tracking or monitoring security on certain computer equipment that could contain personal, confidential information – increasing the risk that someone would misuse resources or breach information security.

Auditors found the same thing at the Cal Poly Pomona Foundation, Inc. [PDF] and at the San Jose State University Research Foundation [PDF].

At CSU San Marcos [PDF], auditors found the San Marcos University Corporation’s agreements with the Center for Children and Families and the University Village Apartments did not adequately indemnify the CSU trustees, the campus, and the state, leaving room for liability.

The CSU San Marcos University Auxiliary and Research Services Corporation lacked adequate control over a number of compliance and cash handling processes.

For example, the daily cash receipts at the organization’s dining operations were not verified by a supervisor or independent person before being transferred to the food services office for deposit, a standard business practice that helps guard against misappropriation of funds.

In each of these cases, the foundations responded that they would implement the auditor’s recommendations.

Meanwhile, trustees heard a report [PDF] Tuesday on the philanthropic productivity of its auxiliary organizations. The CSU received about $265 million in gift commitments in 2009-10, a 27 percent decrease from the previous year.

Assistant Vice Chancellor for Advancement Services Lori Redfearn attributed the drop to the economic climate. “We’re truly fortunate to have private giving, but as you can see the prolonged recession has had a significant impact on our results,” she told the trustees’ committee on institutional advancement yesterday.

Redfearn said the university system had been insulated from the recession the previous year, when a $29 million mega-gift to CSU Fresno buoyed the overall fundraising figures.

Four campuses – Fresno, Long Beach, San Diego and San Luis Obispo – brought in nearly half of all the money donated to CSU. The charts below show the campuses with the largest gift commitments. CSU campuses in Fresno, Pomona, Los Angeles and Sonoma saw the steepest declines in gift commitments from last year, as the second chart shows.

CSU Philanthropic Support 2009-10    
Top five campuses by gift commitments  
Campus 09/10 Total Gift Commitments    
San Diego $60,871,388    
Long Beach $28,945,371    
San Jose $20,404,957    
San Luis Obispo $19,120,243    
San Francisco $16,179,665    
Largest decreases in gift commitments  
Campus 08/09 Total Gift Commitments 09/10 Total Gift Commitments % change
Maritime Academy $3,995,020 $1,093,858 -73%
Fresno $50,714,107 $15,350,698 -70%
Pomona $26,971,180 $9,168,427 -66%
Los Angeles $26,142,519 $10,525,846 -60%
Sonoma $7,621,206 $3,513,931 -54%


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