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Audits failed to spur changes
Officials disagree on who was in charge of allotting $3 million for research
| Wednesday, Oct 10 2007 8:02 AM
Last Updated: Sunday, Dec 10 2006 2:55 PM
At the same time a Cal State Bakersfield research contract hit full stride in 2002 -- a deal now being investigated by forensic auditors and others -- an internal audit found a potentially disastrous money-handling system at the campus unit then overseeing contracts.
"Our audit disclosed conditions which, in our opinion, would result in significant errors and irregularities if not corrected," said the state university system's report, published in 2003, about the Cal State Bakersfield Foundation and other campus auxiliaries.
Yet poor oversight apparently persisted even as foundation staffers promised to tighten up.
The foundation's role -- and that of its bigwig-heavy board of directors -- regarding the contract between the university's former Applied Research Center and First 5 Kern will likely be highlighted in coming months.
That's because the private foundation, until last year, handled financial and administrative oversight of research contracts.
Questions have come up in recent media reports and public meetings about who was in charge of some $3 million in public funds paid by First 5 Kern for the faculty researchers' studies.
Some of the money went to a handshake-deal car allowance for former head researcher Kenneth Nyberg, to computers that can't all be located and to seaside retreats, a Californian investigation found.
Buck stoppers?
So far, neither Cal State nor First 5 officials have clearly stated who was in charge of contract oversight.
Several documents, however, show that on the university's side, responsibility fell to foundation staffers and Nyberg.
Documents also indicate policies crafted in the wake of two audits by the university system weren't always followed.
The 2003 audit of campus auxiliaries, which covered transactions from mid-1999 through October 2002, found, among other things, that Cal State Bakersfield Foundation staffers:
* OK'd payments even when the approval signature didn't match the signature on file;
* Failed to keep blank checks safe or adequately account for them;
* Lacked a policy banning officials from approving their own payments;
* Held certain money in trust accounts in violation of Cal State University policy;
* Didn't track some revenues and expenses at all.
Further, an internal audit of the Bakersfield campus' contract program published in 2002 found flawed financial safeguards.
"Insufficient control over project expenses increases the risk that funds will be expended for inappropriate purposes," the audit said.
In response, foundation staffers said they were creating a "project administration guide" that would be distributed to researchers and staff in fall 2002.
The guide's most recent version, from 2004, spells out where the buck stops.
"The ultimate responsibility for the successful completion of the scope of work and the management of research dollars rests with the principal investigator," the guide says.
In the case of First 5's contract with the research center, that was Nyberg, from spring 2001 until this past June.
What's more, the guide also says the foundation monitors spending "to ensure compliance" with various agencies.
Yet Nyberg and the man who wrote the guide, former foundation manager C. Randal Bye, did not always follow those rules.
Take the car allowance, for example -- a deal that was apparently never put into writing.
From about February 2002 to March 2005, First 5 paid the bulk of Nyberg's lease payments, totaling about $17,555, Cal State receipts show.
First 5 Kern's Executive Director Steve Ladd has said commissioners never voted on the deal and weren't informed of it. The lease is not spelled out in any contracts with the research center.
University and foundation officials have also never provided any paperwork documenting terms of the arrangement. (Ladd and campus officials have said the lease was cheaper than mileage payments, but a Californian analysis found mileage would have been cheaper for two of the three years.)
Bye's project guide, however, notes documentation is required for all expenses and says the paperwork "should be sufficient to stand alone when reviewed during an audit."
Further, one form Nyberg submitted for monthly lease reimbursements says it can't be used for travel costs. But the payment was nonetheless charged to a travel account, a university finance official confirmed.
Bye, who left the foundation last year, said Thursday evening he preferred "not to comment at this time."
Guidelines shrugged
The project guide also requires the chief investigator draw up a written agreement before an outside consultant is hired. Foundation staffers, it says, must approve the agreement before work begins.
Yet in the case of at least one staffer's spouse that seems to have never happened.
Kern Accounting Services was paid more than $29,000 of First 5 funds through the research center contract, invoices show, between April 2004 and March 2005.
The company, which had no certified public accountant on staff, performed bookkeeping tasks. It was registered to Duane Hilton, Bakersfield business license records show, and is no longer operational. Duane Hilton is married to Marilyn Hilton, the university's Sociology Department administrative coordinator who also worked extensively with Nyberg, a sociology professor, at the Applied Research Center.
Current foundation staffers have been unable to find a written agreement for Duane Hilton's services. Marilyn Hilton said in an October interview she also knew of no formal agreement for her husband's work.
Further, Nyberg and Bye appear not to have followed protocol for two dozen or so computers bought with First 5 money between November 2001 and March 2006.
University and foundation rules, according to Bye's guide, require property that costs $500 or more be tagged with a bar-code sticker by campus staff and tracked in a computerized system. If tagged property was moved, stolen or discarded staffers were to be informed.
The chief investigator was to make sure entries on the property list were accurate; the foundation was to inventory the list every two years, the guide says.
The Californian requested the research center's property list Nov. 1 but has not yet received a reply from the university.
The kahunas
Bye, as foundation manager, had oversight of day-to-day operations, said W. Michael Chertok, vice president for university advancement, in an October interview.
Bye and the foundation's former contracts and grants officer, Denise Bell, would have been in charge of approving the research center's receipts and invoices, Chertok said.
Bell, who now works in Long Beach, was out of town and not available for comment as of Friday.
Above the foundation staffers are, technically, the ultimate bosses: the board of directors.
The group is about 40 members strong and reads like a who's who of Bakersfield, including Californian publisher Ginger Moorhouse.
It meets quarterly and is responsible for the operation of the foundation, Chertok said this week. The foundation, a nonprofit private entity, is focused on philanthropic work, he said.
Directors review annual budgets, employ staff, read audits and deal with internal controls.
But they don't deal with minute details such as looking over receipts from the Applied Research Center, Chertok said.
"The board does not get involved in reviewing an expense reimbursement," he said.
The Letter
On Nov. 8, county lawyers representing First 5 Kern sent a letter to university and foundation officials asking for proof Cal State Bakersfield researchers had done their jobs.
The viability of data collected by the Applied Research Center, at a cost of $3 million from First 5 Kern, has been called into question by three faculty members who took over the project in June.
Kenneth Nyberg, former director of the research center, oversaw the project from its start in 2001 until this summer. He entered an early retirement program, campus officials say, and won’t teach until January. As of Friday evening he did not respond to an e-mail request for comment.
Cal State has hired an outside consultant to investigate the data, said David Cherin, who oversees contracts at the university. Cherin expects a report to come out in mid-January or so. He hasn’t named the investigator, saying the deal hasn’t been finalized.
So, what happens if investigators determine the Applied Research Center gave First 5 a bad product?
“That’s a decision for the commission,” said Bernard Barmann, the county’s top lawyer, referring to First 5 Kern’s oversight commission.
County attorney Steve Schuett serves as general counsel for First 5 Kern, a public agency that hands out state tobacco-tax money to local service groups.
CSUB FOUNDATION: THE BOSSES
The board of directors of the Cal State Bakersfield Foundation, with some key ties to involved parties noted.
Officers
Chairman of the board: Ben F. Stinson, owner, Stinson’s Stationers
Vice chairman of board: Rogers Brandon, vice president, American General Media (Married to Esther Brandon, a First 5 Kern commissioner)
Secretary of the board: Horace Mitchell, president, Cal State Bakersfield
Members
Melvin Atkinson, president, M.D. Atkinson Co. Inc.
Sheryl Barbich, president, Barbich Consulting
Kenneth Beurmann, president, CSUB Associated Students Inc.
Greg Bynum, chief executive officer, Gregory D. Bynum & Associates, Inc.
Morgan Clayton, president, Tel-Tec, Inc.
Thomas DeNatale, partner, Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, LLP (The law firm is on retainer for First 5 Kern)
Brent Dezember, owner, Structure Cast (His father, Ray Dezember, is on The Bakersfield Californian’s board of directors)
Bruce Freeman, president, Castle & Cooke California, Inc.
Judy Fritch
Barbara Grimm-Marshall (Grimmway Farms’ General Counsel Jeff Green is a First 5 Kern commissioner)
Geoffrey B. King, partner, Barbich, Longcrier, Hooper & King
Mikie Hay, vice president of community affairs, Jim Burke Ford
Dr. Patrick Leung, physician
Joseph C. MacIlvaine, president, Paramount Farming
Bruce Maclin, chairman of the board, San Joaquin Bank
Robert C. Marshall, chief medical officer, Memorial Hospital medical staff
Christopher Meyers, professor of philosophy and religious studies, Cal State Bakersfield
Ginger Moorhouse, publisher and chairman of the board, The Bakersfield Californian (The newspaper is investigating oversight of work by the Applied Research Center, which was under the Foundation’s control)
Vince Rojas, chief executive officer, Kern Schools Credit Union
Kevin Stockton, vice president, operations, State Farm Insurance
E.L. “Skeet” Varner, Varner Brothers Inc.
Gene Voiland, chief executive officer, Aera Energy LLC
Warner M. Williams, vice president, Chevron North America Exploration and Production Co. San Joaquin Valley Business Unit
Milton Younger, attorney, Chain Younger Law Firm
Life members
Bruce F. Bunker, attorney, Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, LLP (The law firm is on retainer with First 5 Kern)
Warren G. Carter, chairman, Kern Farming Corp. and Watson Corp.
Joan Dezember, homemaker (Her husband, Ray Dezember, is on The Californian’s board of directors)
Edwards Hopple, president, KMAP Inc.
Robert W. Karpe, chairman, Karpe Real Estate Center
David R. Martin, retired chief executive officer, Occidental Oil & Gas
George Martin, attorney, Borton, Petrini & Conron
Margaret E. Moore, homemaker
Jerry Stanners, principal, Charter Consulting Services, Inc. (former chief executive officer of The Bakersfield Californian)
Honorary member
Robert Bennett, farming
Ex-officio members
W. Michael Chertok, vice president for university advancement, Cal State Bakersfield
Michael Neal, vice president for business and administrative services, Cal State Bakersfield
Douglas Wade, foundation manager, Cal State Bakersfield Foundation
Source: Cal State Bakersfield Foundation Web site