Audit Finds Financial Mismanagement in UNM Athletics

Financial mismanagement may have cost the University of New Mexico's athletics department hundreds of thousands of dollars in just the past three years, and State Auditor Tim Keller said those problems will continue unless the school designates a full-time financial officer and requires better accountability of the athletic department and its fundraising arms.

He called the current setup an "ungovernable ball of organizations" that improperly mixes public and private money.

A special audit of UNM's athletics department and affiliated fundraising operations found UNM has received $256,000 less than it should have from its athletics marketing contractor, Lobo Sports Properties. It also detailed the previously reported $432,000 in uncollected revenue from Pit suite sales - about 40 percent of which UNM acknowledges it will likely never see, in many cases because contracts for the suites were either never signed or invoiced.

The audit, released by Keller's office Friday, also found that the university had provided donor-related perks to 23 people who had made no monetary contributions to UNM or its fundraising arms, overpaid three coaches and mistakenly paid for a women's basketball player's scholarship with money donatedspecifically for the ski team.

The findings come amid great financial challenges within Lobo athletics. The department has failed to make budget in nine of the past 11 fiscal years and carries a $4.7 million debt that has been covered through the years by the university's central reserves.

What the audit did not find, although it wasn't specifically looking to draw legal opinions, was any indication of criminal wrongdoing.

"We did not find fraud," Keller said in an interview. "We didn't find millions of dollars missing. We've had a lot, but more or less, they've been able to contain general accountability as a whole, but specific accountability is nearly impossible."

UNM did not dispute most of the findings and said the school was already addressing many of them.

The 58-page audit report did make multiple references to apparent violations of the state's anti-donation clause, which prohibits private individuals from receiving gifts paid for with public money. That would include the 2015 golf junket to Scotland for which now-former athletic director Paul Krebs, who retired in June, and Lobo Club Executive Director Kole McKamey, who on Tuesday announced his forthcoming resignation, acknowledged using public money to pay for three donors' golf packages.

That and other concerns helped spur the special audit in May and also led New Mexico Attorney General Hector Balderas to announce his investigation into any potential wrongdoing regarding the department's finances. The attorney general's spokesman on Friday said the office would review the new audit report "and update the public once we have made a determination regarding the auditors' findings and have incorporated them into our ongoing investigation."

New UNM Athletic Director Eddie Nuñez said he took Friday's report - findings he had anticipated, though said were at times "uncomfortable" to read - as a positive.

"I want people to know that we're owning this," Nuñez said. "This is a great opportunity for us to take this (report and) to move forward to work alongside the Foundation and the Lobo Club to make this institution better. We want to make UNM one of the best institutions in the country and to do that, we have to start now."

He added the report comes at a good time. Since he is in his first month on the job, he is trying to evaluate current staff and identify changes he would like to implement.

"A lot of the things here," Nuñez said, "we're already in the process of correcting and getting things right. We're not 100 percent on everything, but we're heading in the right directions."

UNM problem

While some of the athletics issues are specialized, Keller said the audit's findings symbolize larger problems at UNM. He stressed the "tangled" financial and operational relationships among UNM, the University of New Mexico Foundation - which considers itself a private not-for-profit organization - the Lobo Club (chief fundraiser for UNM athletics) and even the UNM Alumni Association.

Under the setup, UNM "comingled" donations raised by the Lobo Club and booster clubs with public funds and then used the money for donor perks that "are not appropriate uses of public funds," according to an auditor's news release.

The auditor also expressed concern that UNM as a whole has no stand-alone chief financial officer position - just "one-third" of a CFO. The CFO responsibility is concentrated with David Harris, who also serves as the university's executive vice president for administration and its chief operating officer.

Oversight is also complicated at the lower levels; the athletics department has a vacant CFO position, while the Lobo Club has no designated treasurer's role. Keller also said each individual sport's booster club should have its own treasurer as well.

Without that, it's hard to hold anyone in particular accountable, Keller said.

"I really believe if they do not fix these structural issues, UNM is susceptible to this forever," Keller said. "If they do not change some of these things, we could do the same audit next year and it's probably going to say the exact same thing."

His office is recommending the UNM Board of Regents create some agency - like an ombudsman office for compliance and ethics - that has a measure of oversight and authority for UNM and its component units.

Change in structure?

It's not clear from UNM's response whether it will heed that specific suggestion. Regent President Rob Doughty did not immediately return a Journal message Friday, but did have a statement in a UNM release that said in part, "As regents, we feel it is our responsibility to set the highest standards within athletics to ensure the best experience for our student-athletes and Lobo fans."

Interim President Chaouki Abdallah, meanwhile, did not express any immediate plans to alter Harris' three-part role at UNM. He said in a written statement that UNM's management structure has been in place for many years and "for the most part, this model has largely accomplished its objective." However, he noted that the forthcoming leadership change - Gar-nett Stokes will assume UNM's presidency on March 1 - will "undoubtedly" mean reviewing the structure for its efficacy.

But the university, as Nuñez alluded to, is already working to fix some problems identified in the audit - many of which the media had reported prior to Friday's audit release.

UNM is, for example, revising and updating the memorandum of understanding that governs its relationship with the foundation and the Lobo Club. The edit aims to "clearly define the roles and responsibility of all parties to the agreement," according to the audit report.

Abdallah, who will continue in the role until March, said in a letter to Keller provided to the Journal that the university is already taking corrective actions in many of the areas the audit flagged.

"It is apparent from the observations and findings contained in this report that the Athletics Department must in the future operate under closer financial and managerial supervision," he wrote, adding that the arrival of Nuñez and Stokes and the audit findings provide "an opportunity to move into a new era for Lobo Athletics."

Missing paperwork

UNM must pay for the audit and the $90,000 bill covers about 900 hours of work by the Office of the State Auditor. But that's just because of an established cap: staff likely worked twice that many hours, Deputy State Auditor Sanjay Bhakta said, though he has not yet calculated the total time.

The audit, announced in late May, examined transactions between July 2014 and June 2017, but Bhakta acknowledged that it likely did not encompass everything, partly because there was so much missing paperwork.

"It could have been more. This is not all inclusive. Just for example this (uncollected Pit revenue number is) based on what they gave us," he said. "We verified that, however we don't know for sure that's all inclusive."

Among the problems:

Lobo Sports Properties underpaid by a total of $256,000 over the past two fiscal years. Lobo Sports Properties holds UNM's multimedia and sponsorship rights under a contract that extends through 2020 and pays the university $4.5 million annually. It also pays a fee to use and sell the Dream-style Stadium's nine luxury suites and pays rent for its employees' workspace on UNM property.

"UNM Athletics has not effectively monitored contract compliance for executed contracts," the report said.

UNM agreed with the finding, according to the report, and has changed its contract administration standards and intends to bill Lobo Sports Properties for the outstanding balance.

There aren't comprehensive policies or oversight on "perks" given to donors, contributing to the identification of 23 people who received donor perks such as flights, meals and hotel accommodations despite not having made any monetary contributions to UNM.

Rather than so routinely mixing public money with private donations in the same pool of money, the athletics department "should implement procedures that allow the tracking of non-public funds that may be used for purposes that public funds cannot." Online

To see the state auditor's report on UNM, go to ABQJournal.com

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