UC Santa Barbara Audit Finds $800,000 Misused

A state auditor general’s report Tuesday accused the University of California, Santa Barbara, administration and the university’s main fund-raising organization of inappropriately spending or losing more than $800,000 over the last six years due to poor management.

University administrators and officials of the UCSB Foundation, a nonprofit corporation formed to raise private funds for the university, routinely ignored fiscal regulations, auditors concluded.

Kurt Sjoberg, chief deputy auditor general, blamed the problems on “lack of adequate attention by management.”

“The existing regulations, if followed, would have assured all the controls one needs,” he said in a telephone interview from his Sacramento office Tuesday. “So our recommendations were not to create new regulations but to follow the ones that already exist.”

The audit, conducted at the request of state Sen. Gary K. Hart (D-Santa Barbara), follows financial scandals involving former Chancellor Robert Huttenback and former facilities manager Holger Ferdinandson.

Huttenback and his wife, Freda, have been charged with embezzlement, insurance fraud and tax evasion, in part connected to the alleged misuse of university funds for remodeling of their homes. The Huttenbacks are scheduled to be arraigned on the charges April 16.

Ferdinandson last month pleaded no contest to three counts of embezzlement of university funds and supplies. Six Santa Barbara contractors and businesses are accused of being involved in kickback deals with Ferdinandson.

While much of the audit released Tuesday focused on the Huttenback and Ferdinandson cases, it also contained new revelations.

However, Santa Barbara County Assistant Dist. Atty. Patrick McKinley predicted that no new criminal charges will be filed as a result of the audit.

“Shoddy business practices aren’t a crime . . . ,” he said. “There are indications of conflict of interest in the audit, but it’s not as crystal clear as we would like . . . so we probably won’t prosecute.”

In their examination of the financial practices of the university, the auditors concluded that:

- “At least” $271,240 was inappropriately spent to “repair, remodel, improve and maintain” Huttenback’s personal residence. Last year a UC auditor had estimated the amount at $174,000.

- Ferdinandson embezzled about $250,000 from UC Santa Barbara, partly on kickbacks for work on Huttenback’s residence. The district attorney previously estimated the amount at about $220,000. As part of his plea bargain, Ferdinandson agreed to pay the university $100,000, plus interest, within 120 days of his release from prison.

- The university paid more than $70,000 for consulting contracts but “has no evidence that the work was actually performed.”

- The university paid more than $50,000 to four independent consultants who were spouses of UC Santa Barbara employees.

- The university paid inflated prices for construction and maintenance projects and for work not performed and paid salaries to two employees while they conducted private business at three other campuses.

The audit concluded that the 14-year-old UCSB Foundation, which operates independently from the university and raised an estimated $12 million last year:

- “Inappropriately” spent about $130,000 of its restricted and endowment funds for loans to faculty, staff, Huttenback and another $20,000 for political contributions to the campaign for Proposition 56, the successful education bond proposal on last November’s ballot.

- Lost more than $100,000 by not using accepted lending practices “related to security, interest rates, collections, late penalties” when making loans.

As an example of the inattention paid to fiscal procedures at the foundation, the auditors noted that Christian Kersten, former executive director of the foundation and an assistant chancellor at the university, told them he “did not believe that university policies and procedures were ‘meant to be taken seriously.’ ”

“That kind of disregard,” Sjoberg said, “indicates the kind of problems that were apparent.”

Neither Robert E. Bason, who headed the foundation from 1980 to 1984, nor Kersten, who quit the university two months ago, could be reached for comment. Foundation officials referred all calls to the university’s public information office.

Margaret Weeks, director of public information, said the university has recently instituted seven policy changes “which we think will strengthen fiscal control and the auditing process” for both the foundation and the university.

Number of Changes

University President David P. Gardner, issued a statement Tuesday saying that he is “in general agreement with the thrust of the audit” and that a number of changes have already been implemented at UC Santa Barbara. A more complete response to the audit will be released in a few weeks, a UC spokesman said.

Hart, chairman of the Senate Education Committee, requested the audit four months ago.

“I’m shocked at the widespread mismanagement and improper conduct uncovered by the auditor general . . . ,” Hart said Tuesday. “Taxpayers and contributors to the foundation have every right to be appalled at the way their money was squandered and the public trust violated.”