When it comes to big-money hospitality, California State University at San Marcos and its so-called auxiliary organizations don't stint, and that's become more than a minor problem, according to a report released June 17 by Cal State's vice-chancellor and chief audit officer Larry Mandel.
Like most if not all California public universities of late, San Marcos has ramped up a mega-million-dollar fundraising drive to counter cutbacks in taxpayer support, staging an elaborate gala for well-heeled donors of the sort that has increasingly raised questions of propriety and accountability.
Last September, the university put on a lavish kickoff event to launch its $50 million fundraising effort, "attended by approximately 200 key donors, community leaders, alumni, students, faculty and staff in the University Student Union ballroom."
Says the school’s website: "This campaign, undertaken at this pivotal moment in our University and regional history, is not just inevitable — it's imperative. We must succeed because we know just how impactful our accomplishments will have on individuals, families and communities." As of March 31, $38 million had been raised, the university says, with no mention of fundraising costs.
When California State University auditors sought to determine how the school and its nonprofit corporations were actually raising and spending their cash, they encountered a paucity of information.
"We reviewed 20 hospitality expenditures dated from September 2014 to December 2015, and we found that none of the expenditures were supported by a listing of attendees and a documented business purpose," an audit of the university's nonprofit foundation revealed.
Besides those transgressions, the document says, "the Foundation commercial fund‐raiser/fund‐raising counsel used for its phonathon program was not registered with the Attorney General’s Registry of Charitable Trusts," as required by state law. “A commercial fund‐raiser/fund‐raising counsel not registered with the Attorney General’s Registry of Charitable Trusts results in noncompliance with Government Code," says the report.
Auditors also examined paperwork for "30 gifts‐in‐kind received from April 2013 to November 2015," discovering that six of the donations "that were either sold at auctions or given out at opportunity drawings were not supported by documentation showing the names of the winners and corresponding winning prizes.” On top of that, according to the audit, "the Foundation did not always maintain endowment agreements, and endowment agreements did not always delineate management fees."
Similar examples of insufficient record-keeping were unmasked in the offices of the university’s Associated Students, Inc., another CSU San Marcos–related nonprofit, ostensibly devoted to student welfare.
"We reviewed ten hospitality expenditures dated from January 2014 to December 2015, and we found that a variety of items such as office supplies, parking meter expenses, contractor fees, and group sporting event tickets were classified as hospitality expenditures, but ASI did not have corresponding policies and procedures to define the types of hospitality expenditures considered appropriate and the associated documentation requirements."
In addition, the Associated Students group was tagged for being too loose with its cash, raising the specter of loss and embezzlement.
"Specifically, seven cash receipts with totals from $500 to $4,999.99 were deposited from 6 to 80 days after receipt," according to the audit findings. "In two instances, deposits were not supported with sufficient supporting documentation. Untimely deposits and lack of sufficient supporting documentation increase the risk that collections will be misplaced or misappropriated."
The Associated Students travel account was also called into question.
"We reviewed ten travel expenditures dated from January 1, 2014, to December 31, 2015, and we found that...in two instances, Request for Travel and Per Diem forms were completed after the travel end date.” In three other cases, the required travel request forms were completed "two to four days before the start of travel, which did not provide enough time for timely pre‐approval."
Two post-travel expense claims weren't signed by the traveler, and three others arrived late, said the auditors. "Delays ranged from 55 to 163 days after the travel end date."
The university and its related nonprofits acknowledged the validity of the findings and agreed to finish addressing all of the problems called out in the audit by October.
The foundation’s board features a stellar roster of North County business and academic types, including chairman Jack Raymond, an Escondido real estate proprietor, and Stone Brewing co-founder Steve Wagner, along with university president Karen Haynes and Christian F. Tresse, vice president of Bernstein Global Wealth Management.