An independent accounting report commissioned by Fresno State found that from 1986 until 2003 the university had benefited from up to $2.9 million in company matching gift funds which it was not qualified to receive based on restrictions in the companies’ contribution policies.

All affected companies will be offered repayments of their donations, according to University President Dr. John Welty. 

He said he was pleased that the independent report also reaffirmed that the university had successfully eliminated the problem through matching gift safeguards established in 2003.

“To resolve this problem, and to underscore the importance of the university’s integrity and commitment to transparency, I am directing that the funds in question be repaid unless the companies involved waive this repayment,” Welty said. “These repayments will not come from state funds or designated donor funds.”

Welty said the matching gifts problem was an aberration and represented a fraction of the gifts made to the university to promote excellence in academics and athletics.

“Fresno State and its auxiliary organizations administer hundreds of millions of dollars in revenues, assets and gifts and do so responsibly and under nonprofit integrity guidelines and the oversight of their respective boards,” Welty said.

In addition to the accounting firm’s comprehensive review of the matching gifts program, a separate report from outside legal counsel provides Fresno State with a series of “best practice” recommendations to avoid similar problems in the future. 

“The university will follow the recommendations outlined in the best practices report to ensure the on-going proper operation of our fund development programs,” Welty said

Matching gifts are donations from companies that match employee and retiree gifts to the university.  Some companies place restrictions on which gifts of employees may be matched, often barring contributions to athletic programs or those giving the employees a direct benefit, such as game tickets.

The report found that Fresno State had successfully eliminated the problems in its matching gifts program in 2003 by establishing and enforcing guidelines to ensure that the intentions of companies were followed in directing matching gifts.

The problem with Fresno State’s matching gifts program occurred when university officials mistakenly assumed that employee contributions could be made to athletics, even if that was not allowed by a company’s policy, as long as the company’s matching gift went to an academic program.

University officials erroneously believed that the university was satisfying this requirement by contributing the matching funds to the Athletic Department’s academic counseling program.

The report notes that, “Although we did not find evidence pointing toward fraudulent intent in the establishment of the Academic Counseling account, we do believe its establishment was the result of a poor decision based on faulty analysis and interpretation of company matching gift policies.”

Peter Smits, vice president of University Advancement, apologized to the university community and its corporate donors.

“I am sorry I did not detect this problem earlier. That this failure in our system continued to perpetuate itself for 17 years troubles all of us,” Smits said. “We are, of course, pleased that the report reaffirms that the corrective measures we implemented in 2003 are working and we thank our valued corporate partners for their continued support of the university’s important work.”

Since 2003, all matching gifts received by the university are carefully checked to ensure they are fully qualified and the university’s process has passed examination by the accounting firm.

Overview                                                                               

The findings of the accounting review looking into past problems in Fresno State’s matching gifts program, as well as the separate best practices report, are now available to the public.

The comprehensive examination of the matching gifts program was prompted by the university’s review of various documents gathered in response to a Public Records Act request.

The independent report was prepared by the Price, Paige and Company Accountancy Corporation, a Clovis accounting firm, which has handled many audits of nonprofit organizations.

The accounting report outlines a series of actions for the university and its related auxiliary organizations to remedy the matching gifts problem. The independent review analyzed university matching gifts transactions back to 1986; that year was chosen because it marked the year a fund called “Academic Counseling” was established to receive the matching gifts funds now determined to be incorrect. 

The academic counseling account was established as a budget cost center for counseling, tutoring and other academic support services provided to Fresno State student athletes.  At the onset of the program, university academic counselors were reassigned to the Athletic Corporation to implement the program.  The review back to 1986 is well beyond the time frame required by law for correcting erroneous gift transactions.

The separate best practices report, which outlines a series of recommendations to improve the university’s development program, was prepared by the Law Offices of Stephen C. Nill, of Rancho Santa Margarita, California.  The law firm has extensive experience in issues related to private giving in higher education and nonprofit organizations.   

Nill said, “It is my hope that our report, ‘Prescription for Best Practices in University Fund Development,’ will be received in the spirit in which it is offered: as a proactive, forward looking action plan for the bright future of fund development at the university.”

Key Findings:

The key findings of the independent accounting report are these:

• The 1986 decision to establish the Academic Counseling fund to accept corporate matching gifts was an error in judgment. It was believed at that time that creating a separate account in the Fresno State Foundation for academic counseling purposes would enable matching gifts made by Bulldog Foundation members to be eligible for receipt and distribution to academic counseling activities for student athletes. The report indicates that such an arrangement was the result of faulty judgment since the underlying donations to the Bulldog Foundation did not meet the eligibility requirements for a corporate matching gift.

• Since 1986, the total dollar amount of gifts received by the university that did not comply with company matching gifts policies totaled $2,893,435.  The reviewers found the error resulted from an erroneous management judgment in the early stages of the matching gifts program. The problem was prolonged because of faulty internal certification processes, a lack of communication between the entities and poor monitoring by management.

• Included in the dollar total, the review also identified $445,600 in ineligible matching gifts used to pay for personal seat licenses in the Athletic Corporation for football, baseball and softball and in the Association for the Save Mart Center.  Ineligible personal seat licenses (PSLs) were erroneously certified by University Development because university management failed to recognize that these gifts did not meet the corporate conditions of the matching gifts program.

University’s Response

In response to the findings of the report, President Welty said the university will repay the entire $2,893,483 to matching gift companies, unless those companies waive repayment.  That repayment will include all of the $445,600 in ineligible matching gifts used for PSLs. Payments will not be made from state or designated donor funds.

Welty said he is pleased by the strong, unified support his repayment decision has received from campus development organizations including the Fresno State Foundation, the Bulldog Foundation, the California State University, Fresno Association and the Fresno State Athletic Corporation. “Each of these organizations and their leaders are fully committed to this solution, which resonates with the dedication to integrity and transparency of these outstanding organizations.”

President Welty also said the university will fully implement the report’s recommendations. The specific remedies are outlined in detail in the report, and center on the following recommendations:

Adopt common core values for university philanthropy;

• Commit to the highest standards of ethics practice, accountability and transparency;

• Affirm board governance responsibilities;

• Affirm key competencies of executives, senior managers and staff involved in development activities at the university and its ancillary organizations;

• Provide ongoing and continuing training for development staff;

• Enforce a seamless standard of donor interaction;

• Establish a development coordinating council

• The reviewers also made a series of “ad hoc” recommendations, such as standardizing the use of development terminology, and providing training in how to handle errors and respond to potential legal and regulatory implications of donor transactions.

For more information contained in this release, please go to the following Web sites:

Matching Gift Investigation Report

Best Practices Document