July 23, 2009

Several years ago, Fresno State found that some matching gifts from corporations intended by donors to support the university’s Athletics program weren't eligible for that purpose.

Once this mistake was found in an internal investigation, the university moved quickly to rectify the error by directing the incorrectly assigned matching gifts to completely appropriate academic purposes.

Fresno Bee news reports and columns continue to convey a theme and false impression that the university diverted existing academic funds to athletic purposes.  This theme is inaccurate.  A corporation’s matching contribution is supplemental money that was transferred in error to Athletics.  The university had mistakenly applied those funds to the Athletics programs but then rectified the error by restoring such amounts to be used for honors scholarships, the music program, the library and other academic programs.

The university took swift and prudent action four years ago to properly reapply matching contributions.  Since the university was an eligible entity to receive the matching funds, we restored the funds to academic uses and did not contact granting agencies at the time of the 2002 review.

The university is taking the additional step of conducting a review of this matter with the aid of outside legal staff and external auditors to review what has been done and determine if further action is necessary.

It’s unfortunate that the Bee has portrayed this years-old problem so unfairly. We know this may have been unsettling to those of you who so generously support Fresno State financially and to our students, faculty, staff and alumni. We are committed -- from the university president on down -- to continuing our mission of transforming Fresno State into one of the nation's premiere regionally engaged universities, dedicated to training the leaders to meet Central California’s challenges.

Following are some questions you may have about this issue and explanations to help you understand what happened:

Question. We’ve read about a misappropriation of funds. Is there money that is missing or was stolen?

Answer. No, there never was a question about money being missing. The university has admitted there was an incorrect allocation of matching gifts money to Athletics. We resolved the error by restoring the money in question to honors scholarships, the music program, the library and other academic purposes.

Question: This is all about matching gifts. Can you explain how matching gifts work and what the problem was?

Answer: Many businesses offer corporate matching gift programs and will often match contributions made to nonprofit organizations by their employees and retirees.

The problem occurred in this way: The Bulldog Foundation had a long-established program for members to make matching gifts to support athletic scholarships. The Bulldog Foundation’s annual fund drive matching gift effort had the purpose of using the personal and employer’s matching contribution to fund athletic scholarships.

The problem arose when the university received the corporate matches.  Though the university was eligible to receive matching gifts, in many cases those corporations specifically did not allow their matching gifts to be used for athletic purposes, even scholarships to student-athletes.

Question: So the university violated rules about matching gifts?

Answer: Yes, we internally found in 2002 that we had not correctly followed guidelines. We admitted to errors in certifying requests for matching gifts, and promptly took action to restore the funds.

Question: How did the problem happen?

Answer: The university’s development office incorrectly certified requests for matching funds from corporations that did not allow the use of matching gifts funds for athletic purposes. We did not have sufficient communication or coordination. We had not adequately trained our staff and there were oversight problems in the department that processes the donations.

Applying matching gift donations is a very complex matter. There are more than 4,000 companies in the U.S. that make matching gift donations and their eligibility rules are varied and change frequently. 

Question: What did the university do to correct the errors?

Answer:  We are now more vigilant in the conduct of our matching gifts program. To address problems, personnel actions were taken and the university boosted management controls and procedural guidelines. Given the confidential nature of personnel actions, we cannot provide details, but they were direct and appropriate.

Question: I read that the problem went on for several years. Isn’t that unusual?

Answer: Unusual, yes, but understandable in light of the many and ever-changing variations in corporate policies, and the different steps and offices involved in processing the gifts and the matches.

Question: Has the university conducted an investigation of the situation?

Answer: Yes, and our internal investigation did not find any purposeful errors. The university has taken the extra step of using outside legal and accounting  professionals to review this matter further.

Question: Why was there an additional incentive agreement for some boosters?

Answer. In 2001 the Athletic Corporation offered “credits” to the 2001 Football Seat Option Task Force, which was composed of Bulldog Foundation members, as an incentive for new seat option sales. Those credits could be applied to use on trips with the Bulldogs, seat option purchases, Bulldog Foundation pledges, ticket purchases or a paycheck, subject to employment taxes.  Hank Smith, a Bulldog Foundation member, had an additional incentive agreement for matching gifts received from the Kellogg Company. 

Question: What actions were taken relative to the additional incentive agreement?

Answer: In 2003, the company contributing the matching gifts related to Smith, the Kellogg's Company, was notified of the additional incentive situation by letter.  The letter to the Kellogg's Company informed the company how the money had been restored, and the corporation was offered reimbursement.

Question: Is there somewhere I can read Fresno State’s reports about this matter?

Answer. Yes, you can read the documents and a letter from President Welty at www.fresnostatenews.com/2007/02/presidentmessage.htm