Cal State Fullerton audit shows past fiscal abuse

Cal State Fullerton’s business operations were rife with mismanagement and waste, including an instance in which husband and wife administrators oversaw millions of dollars in spending involving a corporation he owned stock in, according to a state audit.

The audit found that from January 2001 through December 2004 there was “waste and abuse,” poor record-keeping, shoddy business practices and financial mismanagement. The audit found that employees feared retaliation if they reported waste, fraud or abuse.

“There was no excuse for any of those things, and some of them were very inappropriate,” Cal State Fullerton President Milton A. Gordon said Thursday. “What we’ve done now is try and correct them to make sure these things don’t happen in the future.”

Gordon said that since he learned of the problems in late 2003, he has taken steps to bring order to the school’s financial practices and has increased oversight. At least three employees have left the school because of alleged misdeeds outlined in the latest audit, Gordon said.

University spokeswoman Paula Selleck said there were no criminal investigations.

The university has a budget of more than $230 million and a history of fiscal problems. A 1999 audit accused the university of mismanaging funds, spending scholarship money on meals, entertainment and carwashes and circumventing hiring and contracting procedures to give work to friends. A 2001 report found thousands of dollars were inappropriately spent on items such as wedding and baby showers, a retirement dinner and sympathy flowers.

The audit, dated Oct. 11, was requested more than two years ago by California State University Chancellor Charles B. Reed, who heads the 23-campus system, after campus employees complained of improprieties.

The most serious allegations involved a husband and wife who were directors of the enterprise computing and the business and financial affairs departments, respectively.

Enterprise computing worked to streamline document management through technology; business and financial affairs oversaw contracts, budgets and other fiscal matters.

The wife spent more than $116,000 in university funds to buy and maintain software created by a company affiliated with a corporation the husband had retired from, according to the audit.

The husband owns stock in the corporation, although the couple said he had not received shares since he joined Cal State Fullerton, according to the audit.

At the university, the husband directed the spending of $3 million on consultants to improve the software, hired consultants he previously worked with, endorsed the software on the company’s website, contacted potential clients on behalf of the corporation and traveled to Japan to market the software, according to the audit.

Gordon said he learned of the problems in early 2004, and the husband stopped working for the university within a month. The wife resigned.

Gordon said she was not fired because he was uncertain how much she knew about her husband’s connections to the corporation.

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seema.mehta@latimes.com