State Prepares for Audit to Answer Claims of Financial Abuse at Long Beach Campus

The state auditor general’s office moved a step closer this week to initiating an audit of financial practices at California State University, Long Beach, following allegations of serious fiscal mismanagement at the 32,000-student campus.

State Assemblyman Art Agnos (D-San Francisco), chairman of the Legislature’s Joint Audit Committee, has sent letters to the committee’s 14 members calling for the independent audit, which is expected to take two months. If no committee member objects within five days, according to Kurt Sjoberg, chief deputy auditor general, the audit will begin immediately. Otherwise, he said, the matter will be discussed at a full committee hearing after the Legislature goes back into session Monday.

“It is quite rare for an audit to be denied” even after a hearing, Sjoberg said. Although his office handles an average of one special audit a year of a state university campus, he said, he could not recall one involving allegations as serious as those leveled against the Long Beach administration, which has denied the charges.

Initiated by Assemblyman

The audit was initially requested by Assemblyman Richard Robinson (D-Garden Grove), a member of the committee, who sent a letter to Agnos on June 26 stating that “serious accusations have been made by several members of the faculty of CSULB concerning the administration of the school.”

“More specifically,” Robinson wrote, “the CSULB administration has been accused of misappropriating funds intended for educational programs” to be “illegally used for administrative purposes.”

Contacted by telephone at his Garden Grove office, Robinson would not say specifically which faculty members he was referring to in his letter, nor would he outline the charges. But the charges, he said, were “substantially the same” as those leveled in a two-page document sent to Agnos earlier this year by Leroy Hardy, a recently retired political science professor who in 1984 resigned as chairman of his department because of what he characterized as gross mismanagement by the administration.

“I got tired of waiting,” explained Hardy, a Long Beach professor since 1953, who said he had sent 150 pages of documented accusations to the state university chancellor’s office nearly 1 1/2 years ago with scant results. “I gave them (the university system) a chance to clean it up and they ignored it.”

Jeff Stetson, acting director of public affairs for the chancellor’s office, confirmed that the office had received communications from Hardy. But the ones he had seen, Stetson said, were “rambling and incoherent.” And none of the professor’s allegations, he said, had been borne out by routine periodic reviews of the university’s administration.

Allocations Diverted

Hardy’s most recent criticisms include allegations that:

- State budgetary allocations have been improperly diverted to special programs without regard to the state-mandated formula by which money is to be divided according to the number of students enrolled in each recipient program;

- University funds have been improperly used for private job-seeking trips by administrators;

- The university is failing to meet its legal obligation to teach by allocating an inordinate amount of money and personnel to research;

- The university’s business office, extended education program and foundation are grossly mismanaged;

- The administration obtained state money under false pretenses by proclaiming the need for a new library despite the fact that 20% to 30% of the space in the existing library is being used for “administrative or public relations” rather than library purposes;

- One administrator--whom Hardy identified in an interview as Eugene Asher, executive assistant to the president and director of university relations--obtained a personal loan from student body funds. Asher denied the charges in an interview this week.

‘Tired Old Charges’

University President Stephen Horn, said by his office to be away from the campus, could not be reached for comment.

But Asher denied Hardy’s allegations, characterizing them as the “tired old charges . . . circulated by Hardy for years.”

“None of them have a grain of truth in them,” Asher said. “It seems to me that what Mr. Hardy is alleging is deliberate and knowing mismanagement, and I categorically deny this.”

While Asher admitted obtaining a $10,000 personal loan, he said it came from the 49er Shops, a private, nonprofit entity contracted by the university to operate the campus book shop and food services, which are entirely self-sustaining and do not rely on student funds.

The loan was obtained in October, 1984, he said, to help defray the costs of an applicant for a Federal Communications Commission license to operate commercial radio station KIFM in San Diego on an interim basis. In exchange, he said, the applicant--Niki Mike--agreed to provide internships in broadcasting for CSULB students and to turn over a portion of the station’s profits to university radio station KLON, a public, nonprofit entity that falls under Asher’s bailiwick as head of university relations. FCC rules for interim station operators, Asher said, require the successful applicant to donate its profits to a nonprofit entity.

Paid for License

Asher said Mike was urged to apply for the interim license by a representative of KLON. Mike and several partners won the interim operating license and took control of the station July 1.

Asher said he chose to pay for the transaction himself rather than ask the university to pay for it because “my feeling was that the university is not in the business of risking money like this.” Asher is paid about $70,000 annually as a university administrator. He said he has an agreement with Mike that her group will reimburse him for the money he borrowed and expects to repay it by June 30, 1986, in one lump sum. His agreement with 49er Shops, he said, calls for the money to be repaid upon demand at the prevailing interest rate, which is currently about 8%.

Roman Gulon, controller of 49er Shops, confirmed that the loan had been made but said it was approved by his agency’s board of directors (whose nine members include four students) only after review by an attorney and outside auditors. Though such personal loans are not common, he said, the company decided to make this one because of its potential benefit to university students.

Rick Lewis, general manager of KLON, was on vacation this week and unavailable for comment. But Ken Borgers, the station’s program director, said KLON stands to gain as much as $200,000 over the next several years as a result of the agreement with the San Diego operator. “I think it was a good gamble,” Borgers said of the arrangement, which he characterized as unusual but not unprecedented in radio circles. Regarding the promised internships, he said, “It’s a great opportunity for the students.”

$900,000 Shortfall

This week’s call for a legislative audit of the university followed an estimated $900,000 shortfall in the campus budget that recently prompted the chancellor’s office to strip Horn of much of his budgetary authority pending the outcome of an internal investigation.

In an interview last week, Horn said he accepted full responsibility for the shortfall and endorsed the chancellor’s efforts to “clean it up.”

According to Robyn Mack, director of the campus budget, the deficit occurred because of an “over-optimistic” prediction of revenues for fiscal 1985-86, which ended June 30. Specifically, she said, the university lost about $271,000 in expected revenues as a result of a change in student fee structures that allowed some students previously considered full-timers to pay the reduced rates of part-timers. She also said the university failed to save about $600,000 in salaries paid to employees who normally retire or resign in a given year. Last year’s attrition rate was significantly lower than usual, she said, probably due to recent salary increases that have been higher than in previous years.

While in the past, Mack said, the university’s budget has contained a reserve of unallocated money specifically to guard against just such year-end shortfalls, last year’s surplus was spent on instructional materials at the beginning of the year in response to an enrollment increase of 700 full-time students.

Don’t Expect a Repeat

“We don’t expect (the shortfall) to happen again,” she said, adding that the university now plans to go back to its previous system of maintaining emergency budgetary reserves. “There’s a lot to learn from this. I think the experience will make us a better and stronger institution.”

But Nicholas P. Hardeman, a history professor who has worked with Hardy and endorses many of his allegations, said the recent shortfall is only the tip of the iceberg in a system that has been mismanaged for many years. “I think it’s necessary,” Hardeman said of the impending legislative audit. “I think it’s going to take something like this to shake this thing out. Too much has gone on for too long.”