UNM Downplays Audit to Accreditor

By Daniel Libit

University of New Mexico interim President Chaouki Abdallah told the school’s accrediting agency last month that UNM has been “immediate and cooperative” in responding to ongoing investigations by the New Mexico State Auditor and Attorney General into Lobo athletics.

Abdallah’s Sep. 14 letter to the Higher Learning Commission, UNM’s regional accreditor, came a month after the HLC warned the university that the outside inquiries into the athletic department could adversely impact the university’s accreditation status.

NMFishbowl.com recently obtained Abdallah’s six-page response through a public records request.

In it, Abdallah attempts to downplay the severity of the outside inquiries while arguing that UNM has already made a number of strides to correct bookkeeping issues in athletics.

Interestingly, Abdallah specifically cites the resignation of former Athletic Director Paul Krebs as one of the moves the university has made to address “concerns regarding financial mismanagement.” But that portrayal flies in the face of how Abdallah publicly described Krebs’ departure two-and-a-half months ago.

“Paul has tried to retire several times over the last year, and now I finally have reluctantly agreed to accept his retirement,” Abdallah said in a statement in early June.

The final report for the state auditor’s “special audit” into Lobo athletics is expected later this month but, in his letter to the HLC, Abdallah suggests that he doesn’t expect any earth-shattering revelations.

“It is anticipated that the special audit by the State Auditor will most likely identify breakdowns in the university’s internal control structure and non- compliance with UNM policies and procedures, in processing financial transactions by the athletics department,” Abdallah wrote.

Abdallah further states that based on “verbal feedback” from the state auditor, the special audit “may not materially impact the university’s annual financial statements audit currently being conducted” by two state-approved, independent auditors. He noted that the previous annual financial statement audit, from the fiscal year ending last June, failed to identify any significant control problems or financial mismanagement in the athletic department.

But as NMFishbowl.com explained back in March, there is virtually no way the annual university-wide audit could suss out specific failures in the athletic department, since it comprises such an insignificant portion of the university’s budget. Athletics officially accounts for only $33 million, or less than two percent, of the university’s $2.1 billion total operating expenses. In essence, every single dollar in the athletic department could be swindled and it would still not “materially impact the university’s annual financial statements audit.”

Abdallah also appears to take some liberties when emphasizing the reform efforts the university has so far undertaken, in light of the special audit. The interim president noted that on July 10, he delegated Chris Vallejos, UNM’s associate vice president for institutional support services, to be the temporary financial overseer of athletics. Abdallah then lists 14 different corrective actions that he says UNM has put in place.

Of them, Abdallah highlights the fact that the university has implemented Chrome River business management software to “notify administrators regarding P-Card transactions and reconciliations.” However, according to an email obtained by NMFishbowl.com, the school announced its implementation of the Chrome River software program back in January 2016; it was slated to take effect last July.

As part of a “new monthly process,” Abdallah wrote, the athletic director will now conduct monthly reviews of the purchasing card activities of his executive assistant — a measure of basic oversight that would traditionally be expected of superiors over their subordinates.

Most curiously, Abdallah writes that the school is currently in the process of creating a business office policy manual for the athletic department, due to be completed by the end of next month. The absence of a “written comprehensive finance operations manual” was highlighted in the May 2016 internal audit report by UNM for the purchasing card activities of former men’s basketball operations director Cody Hopkins. Indeed, as part of that internal audit report, the school said it had solicited feedback from other Mountain West Conference members in order to consolidate its existing policies and procedures into a single document. The targeted completion date for the manual was May 31, 2016 — 18 months before it is now supposed to be complete.

In his letter, Abdallah acknowledges to the HLC the university’s scandal regarding uncollected fees for suites at men’s basketball games. Abdallah writes that UNM has since revised its suite agreements in order to “strengthen the contract” and implemented tracking reports for suite revenues.

The renting of the suites has, in the past, fallen under the jurisdiction of the Lobo Club, a 501(c)3 non-profit that supports Lobo athletics, but claims to be distinct from the university. After the six-figure suite shortfall became public this summer, Vallejos suggested that, going forward, the university’s ticket office might take over the responsibility of collecting suite revenue.

Abdallah tells the HLC that UNM is currently revising the Memorandum of Agreement between the athletic department and the Lobo Club, so as to “define and clarify roles and responsibilities.” Moreover, he writes, the school is also in the process of transferring all “enhancement accounts” into the management authority of the Lobo Club. Those accounts, which comprise of funds donated to athletics via the University of New Mexico Foundation, have until now been overseen by the coaches of the individual UNM teams the money is earmarked for.

Abdallah said the university plans to “comply fully and immediately” with any recommendations made by the state auditor in its special audit report, and that it would send an amended letter to the HLC informing it of additional corrective actions.

Attached to Abdallah’s letter are almost 900 pages of publicly available documents, including past university audits; annual “Agreed-Upon Procedures” reports the UNM athletic department submits to the NCAA; and various financial reporting exhibits previously submitted by UNM to the New Mexico Higher Education Department.

As NMFishbowl.com reported last week, NMHED has since become the third state authority to formally scrutinize the spending of the UNM athletic department. New Mexico Higher Education Secretary Barbara Damron wrote to Abdallah on Oct. 3, informing him that she had placed the university under an Enhanced Fiscal Oversight Program.

(Featured image by Enrique A. Sanabria / Flickr)