Audit of Cal State L.B. Cites Poor Accounting; Fiscal Limits Stay On

While the president of Cal State Long Beach says a state auditor general’s report vindicates the university, the chancellor’s office says the audit will have no immediate bearing on budget restrictions placed on President Stephen Horn.

The auditor general’s report, released this week, found no evidence of illegality at California State University, Long Beach. But it said poor record-keeping made it difficult to determine how some funds were spent. It also said that there were a number of other deficiencies in the fiscal management of the university.

Horn was stripped of much of his fiscal authority last summer following a $1.6-million deficit that necessitated a $900,000 loan from the chancellor’s office to allow the campus to meet its financial obligations.

The auditor general’s report was requested four months ago by a legislative committee following allegations by faculty members that the university may have illegally diverted instructional funds for administrative purposes. At that time, the chancellor’s office curtailed Horn’s authority over most major spending decisions.

Louis Messner, assistant vice chancellor for budget planning, said this week that Horn’s fiscal authority will not be restored until the California State University Chancellor’s office is convinced that financial matters are once again “properly under control” on the campus. He would not say how soon that might be.

Horn said in a statement read by his assistant, Gene Asher, that he is “pleased . . . that the university has been vindicated” by the auditor general’s report.

“The myriad of unsubstantiated allegations which prompted the investigation produced very few findings,” Horn’s statement said.

But one critic said the report raises serious doubts about the president’s ability to make sound financial decisions.

“Public relations will not cover up the basic mismanagement,” said LeRoy Hardy, a recently retired professor and one of several faculty members who complained to state agencies regarding campus financial practices. “The heart of the problem is the ethos of the university--it’s being completely destroyed.”

The auditor general’s report detailed a number of areas that it said revealed deficiencies in financial management at Cal State Long Beach.

Lack of Documentation Cited

Among them is the accusation that the university failed to adequately document the use of funds budgeted for instructional faculty positions. The report says that lack of documentation raises the possibility that as much as $454,000 of that money may have been used for non-instructional purposes over the last two years.

The report also criticizes disbursements made by the California State University Long Beach Foundation--a private, nonprofit fund-raising entity--which are described as “excessive, improperly authorized, or inadequately documented.” Specifically, the report says, the foundation over the past two years has disbursed at least $9,000 for such non-educational purposes as:

Paying a disc jockey for work never performed after university administrators canceled a school dance due to potential gang violence.

Spending more than $400 to entertain the consul general of France at a lavish dinner for nine.

Providing $589 in travel expenses for the wife of an administrator flown to Long Beach for a job interview.

Spending more than $2,700 for computer equipment purchased without competitive bids.

In addition, according to the report, the foundation failed to adequately monitor the number of paid research hours worked by faculty members. In one case, the report said, that resulted in a professor exceeding the allowable limit of research time by 135 hours.

Unsought Stipend Provided

In another case, the report said, the university provided a $2,500 summer stipend to a faculty member who had not even applied for one.

In a nine-page letter released with the report, Horn conceded that there was inadequate documentation in some instances, and he pledged to improve procedures.

However, Horn disagreed with some specific findings. He said the implication that $454,000 had been diverted from instructional to non-instructional use is misleading because no evidence of such inappropriate expenditures was found.

The $2,700 spent on computers, Horn said, was actually part of a larger purchase involving both state and foundation funds in which competitive bidding took place through normal state purchasing channels but was inadvertently omitted from foundation records.

Each of the other foundation expenditures, he said, was a legitimate expense that benefited the university and was well within the purview of a university foundation that relies on private rather than state funds.

“The state auditor general has certain philosophical assumptions” that a university’s foundation should be run like its general fund, Asher said in an interview following release of the report. “We feel it should be broader than that. The foundation was created, in part, to make possible serving the educational mission of the university in ways that regulations governing general fund expenditures don’t make possible.”

Recommendations Offered

The report makes a number of recommendations to the university.

It recommends that the foundation and the university “develop an effective system to ensure that discretionary funds are used for purposes that are consistent with the educational objectives of the university and . . . that these disbursements are adequately documented and properly authorized.”

In addition, the report says, the university should spend only what is budgeted by the chancellor’s office and fully document the use of funds budgeted for instructional faculty positions.

Although the report’s recommendations do not have the force of law, said Claude Everhart, chief consultant to the Joint Legislative Audit Committee that initiated it, the Senate and Assembly Education Committees could intervene if it appears that budgetary problems are continuing at the Long Beach campus.

A spokesman for the auditor general’s office said that the budget situation at Cal State Long Beach would be reviewed by the auditor general in 60 days, again in six months and then in one year to see if recommendations are being followed.

While the university had said it has instituted a number of policies to prevent the kind of deficit that occurred last summer, it recently revealed that the football program--which was not covered in the auditor general’s report--is running $719,000 in the red.

Horn has given football supporters until Dec. 31 to raise $300,000 or see the program immediately dismantled.

University officials say they consider the football deficit a result of low community support not directly related to the campus’ larger budget problems.