The Public Eye

Reports from the Bee's investigative team

August 24, 2010
CSU responds to audits of foundations, auxiliaries

California State University officials are concerned that they have erroneously mixed public and private funds in accounting for the foundations that support the system's 23 campuses, according to a report the California Faculty Association is releasing Wednesday.

The report is based on minutes from a series of closed-door meetings of CSU executives that a political researcher for the professors' union said she discovered online.

Minutes from a May 2010 meeting of the university's top business officials say they were trying to "clean up any mess before it gets to be bigger."

"There continue to be findings from the internal auditors that some campuses have monies held inappropriately by auxiliary organizations. The finding is that funds should be moved to the state side," the minutes say.

The faculty union has been fighting to bring more public scrutiny to CSU foundations and other auxiliary organizations that are considered private entities but closely affiliated with the public colleges. Such organizations hold about 20 percent of CSU's budget and are typically in charge of commercial practices on the campuses, from real estate deals to fund-raising events. But many have been caught spending money inappropriately - including an audit this year that said Sacramento State's auxiliary should not have paid for remodeling the university president's kitchen.

Last year Gov. Arnold Schwarzenegger vetoed a bill the union sponsored that would have subjected the auxiliary organizations to the California Public Records Act. A second version of the bill, SB 330, has passed both houses and is now on the governor's desk.

Today's report marks the second time in recent months that proponents of the bill have trotted out internal university documents to demonstrate what they say is the need for greater accountability. The last time was in April, when the bill's author, Sen. Leland Yee, held a press conference for Cal State Stanislaus students who said they found copies of Sarah Palin's contract to speak at their school in a campus Dumpster. Because the contract was with the foundation at Cal State Stanislaus, university officials had refused to release it to the public.

"Publicly, the CSU administration insists that the funds held in these organizations are privately raised and are not taxpayer dollars. However, as these documents detail, there is actually a commingling of state and private dollars in the funds controlled by the auxiliaries," says the faculty association's report.

Cal State officials responded by saying they were aware that some funds had been mixed and are working on fixing the problem.

The university's internal auditor had raised the issue and Benjamin Quillian, chief financial officer for the CSU, said he brought it to the attention of campus leaders.

"The campuses are already in the process of moving monies that need to be moved," Quillian said.

It's not uncommon for private and public money to get mixed when auxiliaries run campus functions, such as football games or conferences, he said. On some CSU campuses, an auxiliary organizes the game and takes the money from ticket sales, but has to pay the university for use of campus police.

"There have been some auxiliaries that have not been reimbursing the state in a timely fashion," Quillian said. "The internal auditor pointed this out and recommended the money be moved in a more timely fashion."

-- Laurel Rosenhall

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Welcome to The Bee's newest blog: Public Eye. In the coming months, you will see us breaking news here as well as following up on investigations we have published with tidbits, news breaks and behind-the-scenes descriptions of our news-gathering process. Know of a wrong we could right? Send our fraud squad your tips at: fraudsquad@sacbee.com.

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