State Audit Decries Lobos’ ‘Tangled Web’

By Daniel Libit

A much-anticipated state audit investigation report describes the University of New Mexico’s athletic department as having an impenetrable fiscal system that has grown too convoluted for even university administrators to comprehend. And because of this, state money has been misappropriated and squandered, if not worse.

“No one at the university knows what is going on, because that’s how they set this up,” New Mexico State Auditor Tim Keller told NMFishbowl.com.

On Thursday, Keller’s office publicly released the findings of a three-month inquiry into how money is spent on UNM athletics. The investigation came on the heels of a series of scandals and embarrassing media reports this year, which have cast existential doubts on the accounting and financial practices of the school’s most recognizable department — and the university as a whole.

“A tangled web of transactions has made it difficult for the public, and even some of the financial staff at the University, to be able to decipher what is going on in the Athletics Department and the various supporting organizations,” Keller said in a statement that accompanied the release of the audit report.

Although the report does not necessarily contain any new, earth-shattering bombshells, it describes overarching negligence and spuriousness at UNM that should rightly alarm the public.

“The audit identified a range of weaknesses in internal controls,” the report states. “While these findings may appear to be minor or isolated, they are indicative of a historical tone-at-the-top that resulted in failure to address findings and improve controls, creating an environment susceptible to fraud, waste, and abuse.”

The report, while finding incidents of public and private funds being commingled and likely violations of the state constitution’s anti-donation clause, did not make any criminal referrals. It will now be up to the New Mexico Attorney General to determine on its own whether any individual crimes have been committed.

“The Office of the Attorney General will review the Office of the State Auditor’s audit and update the public once we have made a determination regarding the auditors’ findings and have incorporated them into our ongoing investigation,” James Hallinan, the AG’s spokesperson, told NMFishbowl.com in a statement.

In a statement, new UNM Athletic Director Eddie Nuñez said he had only been made aware of the OSA audit after he had taken the job, even though it had been widely reported almost two months before.

“While some of the criticisms were uncomfortable to read, the audit and recommendations for changes couldn’t come at a better time,” Nuñez said.

OSA notes that the athletic department has not had a financial chief for five years and contends that many of the problems it cites in its report could have been avoided if this position had been properly filled. The report calls into question the role of UNM Executive Vice President David Harris, who has largely escaped scrutiny amidst the cascading financial controversies under his watch. Looking beyond the athletic department, the audit report suggests that the many hats Harris now wears makes the university susceptible to impropriety or adverse incentives.

“Compounding the problems caused by vacancies in the Athletics Department is the structure of UNM executive financial oversight, which has combined into one position the roles of Executive Vice President for Administration, Chief Financial Officer and Chief Operations Officer,” the audit report states. “The lack of a dedicated CFO position creates the potential for improper segregation of duties or conflicts of interest and diffusion of responsibility.”

Speaking to NMFishbowl.com, Keller described Harris’ functional role as that of a city manager.

“In many ways, he is the centralized executive of the university,” Keller said. “I know, on paper that is not true – it’s the president – but he has accumulated all these roles, and it has probably been out of necessity…He has been the only steady point at the university.”

Consequently, the audit report notes, UNM’s own internal audit department has fallen under Harris’ jurisdiction, even though it is supposed to answer only to the school president and Board of Regents. The audit report says that, “given the broad authority of” Harris, “this creates the potential to direct Internal Audit’s focus away from high-risk areas like Athletics.”

Keller said that concerns about the internal audit’s independence was raised by UNM staff during interviews with OSA.

In a statement, Harris did not address the issues raised about his position and sought to project an air of control.

“We have already identified a number of ways to clear up inconsistencies and create processes that will be more effective and efficient,” Harris aid. “These changes range from large to small. We’re making improvements from top to bottom.”

At the top of its list of recommendations, the audit report implores the schools’ regents to grab hold of the reins of the athletic department, suggesting that university administrators have proven ill-equipped for its oversight.

The 58-page report said the Office of the State Auditor launched its investigation after having “received multiple communications from concerned citizens related to the University of New Mexico,” and it revisits many of the controversies unearthed by journalists over the last two years. Among the previously reported trouble spots OSA reviewed were: failures in collecting suite revenue at University Arena; a controversial 2015 Scotland golf trip for Lobo boosters; purchasing card (P-Card) activities of athletic department employees; accidental overpayments to UNM coaches; and a curious contract arrangement with a former athletic department official.

The audit also made some discoveries that have either not yet been reported or added important new insight into previous media accounts. These include:

  • About half the money UNM student activity fees has been used to pay down the  debt service of The Pit.
  • A third unnamed UNM coach had inadvertently been overpaid. NMFishbowl.com previously reported that former basketball coach Craig Neal and current baseball coach Ray Birmingham had also been overpaid.
  • UNM provided “donor perks” to 23 outside individuals who did not actually make any monetary contributions to UNM or its related entities within the last decade.
  • Some donations were used for purposes other than what the donor intended, including money earmarked for ski team equipment and endowments that instead went to provide a scholarships for a women’s basketball player. This revelation may seem all the more inflammatory given the athletic department’s recent efforts to cut the skiing program on account of its affordability.
  • Over the last two fiscal years, UNM has received $256,000 less than it was supposed to from its marketing and licensing agreement with Learfield subsidiary Lobo Sports Properties, LLC. (Earlier this year, I filed a public records lawsuit against Lobo Sports Properties.)

In a May 2016 UNM internal audit report, the school claimed former men’s basketball operations director Cody Hopkins had failed to properly reconcile $63,000 in charges to his university-issued purchasing card. Earlier this year, NMFishbowl.com published a lengthy account giving Hopkins’ side to the story, in which he insisted that the school’s P-Card problems went far beyond him. The OSA report reaffirms Hopkins’ assessment, finding multiple other irregularities during its credit card reimbursement test work, which it ultimately blamed on “insufficient supervision and/or employees’ lack of understanding policy, laws, rules, and regulations.”

OSA took up the concern addressed in a February NMFishbowl.com report, about the university’s decision to hire former Assistant Athletic Director Tim Cass on a contract basis, after he left the school to take a job with the United State Tennis Association. The audit report claims that Cass “appears to have a conflict of interest” because his current full-time job may overlap with his work for UNM. In its response, the university vehemently pushed back on this claim, arguing that since it does not have a professional services contract with the USTA, there is no conflict of interest. UNM vigorously defended Cass’s current part-time role with the athletic department, saying that he has been instrumental in helping the university raise $500,000 in donor funds over the last 21 months.

As of October 31, the university confirmed to OSA that it still is owed $200,777 in uncollected Pit suite revenues, of which it says $32,415 “may be collectible”. At the very least, that would still leave $168,362 that can not be collected “due to the absence of valid written suite sale agreements, insufficient records related to ticket disbursements, and/or Suite Holders who are no longer in business or who have left the area,” the university said. UNM insists that it has revised its standardized suite agreements and is updating its memorandum of agreement with the UNM Foundation and the Lobo Club, to prevent future collection issues.

The question now is how seriously the university will take this formal upbraiding. Internal control problems are not exactly news for UNM’s athletic department, which has repeatedly been chastised, internally and externally, for its failures to keep its financial books straight.

But Keller says he has “cautious optimism” that real reform will take place time. The auditor says that interim UNM President Chaouki Abdallah has been “very committed, at least with us.” He also thinks that recent hiring of a new UNM president, Garnett S. Stokes, will pave the way for OSA’s recommendations to be implemented. Stokes is set to start her job in March.

“If I am the incoming president and I read this audit, I would try and make these recommendations,” Keller said. “They are now on public record to make five changes and if they can make half of those it would make a big difference.”

Still, Keller notes the limits to what the audit can do to root out potential corruption.

“What we were able to do with our limited resources is test for compliance, and that is just what auditors do,” Keller said. “We can’t give a legal opinion with respect to criminal activity. It was not a forensic audit, meaning we didn’t subpoena bank account for individuals. It was a compliance audit. But the one thing we did is we confirmed a high likelihood of anti-donation clause violation. Basically, we think that they did.”