Chronicles VII: Points of Difference
We appreciate the CFO’s graciousness in addressing the Academic Senate recently to clarify matters surrounding the California Institute on Human Services (CIHS). We understand that it was difficult for him to speak to this group about sensitive, confidential matters that are generally “handled in private and with discretion.” This painful performance was not, however, what we had requested in our Special Edition. The Chronicles, in fact, have always said that we know little about the internal operation of CIHS and nothing about the conflict of interest allegations; what we do understand and have questions about is the interface between grants and contracts, including those of CIHS, and Administration and Finance (A&F). Rather than addressing these important questions, the CFO spent his time allotment rehashing the published allegations against CIHS directors. This rendition has confused our legitimate request for accountability from his office with a defense of the CIHS directors’ alleged criminal actions.
While the CFO would have us believe that “there has been little discussion of these troubling items,” we know that many on campus have been subjected to less-than-discrete, closed-door lectures on the criminal activities of our former colleagues. The CFO’s new allegations regarding the storage locker and server are stunning as these are matters still under investigation; does the CFO have any evidence to back up his insinuations? Are we to believe that the individuals we worked with for so many years are now driving around Rohnert Park in a black sedan, dressed in camouflage with bolt cutters in their back pockets, destroying and stealing government property?
Before moving to a discussion of the five areas where there are “points of difference” between A&F and the Chronicles, taking our lead from Faculty Senate President Elect Miller, we have a few comments on the CFO’s introduction.
· The CFO cited CSU Executive Order (EO) 819 as authority for his reporting responsibilities; EO 819 refers, in fact, to a miscellaneous course fee for CSU Dominquez Hills.
· The $300,000 Head Start subcontract was signed by an individual in A&F who also should have known that a competitive bid or sole source justification was required.
· In light of the recent disclosure of the 34 individuals within A&F who provided institutional support to grants and contracts (G&C) including CIHS for a cost of $1.2 million in FY06-07 alone, how can A&F continue to portray Academic Affairs (AA) as the site of oversight responsibility for the grants in question?
· In his summary of the charges, the CFO conveniently left out all of the qualifiers in the investigation reports he cites, such as “appears to,” “may have been,” “subject to further investigation.”
· No charges have been filed against CIHS former directors, much less proven in court. SSU has trampled the sacred “presumption of innocence” principle and may yet be entangled by the “unclean hands” doctrine.
For each of the five points of difference (IDC recovery, delegated authority, post-award grant administration, criminal investigation, further audit), we will provide the section from CFO’s address and contrasting statements in side-by-side columns, followed by our position on the topic.
Indirect Cost Recovery
CFO Address / Chronicle Data“I have never made a “deal” to provide 50% of whatever IDC was earned by CIHS back to CIHS. Such an arrangement may have been made by a former Provost, but if it was, I was never part of such a discussion, nor did I agree to it or approve of it.” / Agreement dated 3-9-99 signed by B. Goldstein, R. Arminana, and T. Apolloni titled “Memorandum of Understanding Office of Research and Sponsored Programs”: “Under a separate agreement with Academic Affairs, CIHS will be allowed to retain 50 percent of the IDC it generates for internal use in administering its programs. Funds thus allocated to CIHS will be used to support CIHS development, administrative or other appropriate costs.”
Revised Plan for Allocation of Indirect Cost Recovery (8-11-00): “CIHS Administration (50% of IDC generated). IDC retained by CIHS to perform administrative services called for under CIHS business plan with SSU (50% of IDC earned).”
“You have been told that CIHS was set adrift in 2006-2007 with no funds to operate. This is not true. CIHS began the year with reserves of $700,000 and an understanding that the CIHS Business Office personnel would be funded from IDC funds. $700,000 is more than sufficient to cover the expenses in CIHS not directly related to grants or related to its business office operations. And importantly, at no time during the 2006-2007 year did either CIHS or Provost Ochoa speak to me about the need for additional resources for this academic unit.” / Memo to E. Ochoa and L. Schlereth from T. Apolloni dated 3-25-2005: “Provide information from A&F to CIHS as to when and how much IDC CIHS will be allocated so that CIHS can plan and perform rationally. CIHS has fixed administrative costs that must come out of IDC. CIHS has not been receiving its agreed share of IDC forcing it to rely on reserves. This pattern cannot continue indefinitely. Recently a financial plan for post award was presented to the Campus Reengineering Committee that does not appear to consider CIHS administrative costs and calls for borrowing to meet the working capital at a rate that would seem to make CIHS operations unsustainable.”
Email from L. Schlereth to T. Apolloni et al. dated 11-16-06: the PRHB for “CIHS should be charged to the CIHS fund balance. This will cause the fund balance…. to fall to a negative $368,443.” …. and “make it not possible to allocate any ‘discretionary’ IDC in 2006-2007.”
Journal entries and various financial worksheets: A&F withheld CIHS’s administrative funds between winter of 2005 and March 2007. A&F distributed funds after they had taken control of the institute.
Fiscal Integrity Unit Site Visit Report (5-15-07): SSU “discontinued indirect cost sharing with CIHS which had an adverse financial impact.” [This is the “federal audit” referred to by the CFO. It is saying SSU harmed CIHS by withholding its cost sharing.]
Chronicle Position
The CFO withheld CIHS administrative funds from the winter of 2005 through February 2007, when they took control. During this time CIHS depleted their reserves with no indication that additional funds would be forthcoming. As stated by the Federal reviewers above, this had an adverse impact on their operations and we believe lead directly to the problems. It is neither a coincidence nor a conspiracy that mistakes occurred during this time.
The distribution of IDC and the CFO’s interpretation of EO753 (recently superceded by EO1000) are central issues and where many of our questions reside, yet the CFO gave it sparse treatment in his address, choosing instead “to take these matters up in a comprehensive fashion in the upcoming CRC meeting on December 7.” This committee is chaired by the CFO with minimal faculty participation. While not included in the written version, the CFO’s address seemed to indicate that such matters were outside of the understanding (and purview) of faculty.
Since the G&C program moved to A&F in 2000, the CFO has cited EO753 as his rationale for increasingly shifting IDC shareback from AA to A&F. EO753 mandates that indirect costs be allocated to cover the costs of sponsored programs. IDC costs are divided by the Federal government into four areas: facilities (e.g., IT, utilities), general administration (A&F), departmental administration (Schools), and project administration (centers, institutes) (OMB Circular A-21). At SSU costs for facilities and general administration (A&F) take precedent over costs in departments and projects (AA). In choosing to fund facilities and general administration to the exclusion of departmental and program administration, the CFO forces the programmatic, overarching day-to-day management of sponsored projects to operate without financial support. IDC continues to evaporate into the General Fund as reimbursement to A&F. This is in spite of the fact that the Federally negotiated IDC rate includes the administrative work done outside of A&F in its calculation. These funds are reallocated: the big question is where?
This situation is not unique to G&C; Housing, Extended Education, Parking, Associated Students, Student Union, and Sonoma State Enterprises all reimburse A&F for “all overhead costs” as set by the CFO under EO753. In addition, Housing and Enterprises each pay $70,000 in rental fees for annual debt service obligation for the Green Music Center (GMC) Hospitality Center, while Extended Education pays $400,000 in annual debt service for the GMC. Meanwhile, A&F “operates the Academic Foundation without reimbursement in recognition of their contribution to the SSU academic program” (Budget 101, 10-20-06).
We request an accounting of all IDC funds for fiscal years 05-06 and 06-07 and of EO753 charge-backs for all affected units, including the Foundation, for all years since 2000.
Delegated Authority
CFO Address / Chronicle Data“Post award grant administration has been delegated from the President to Administration and Finance for many, many years. I subsequently delegated to CIHS certain aspects of this function including, as Bob Karlsrud mentioned, processing payroll, accounts receivable, and invoice paperwork, along with the overall activities of the CIHS Business Office. The job descriptions of these two key CIHS managerial positions provide written clarification of the President's expectations in this regard.” / EO1000 states: “The campus President is delegated authority and responsibility for effective oversight of all state funds held by the campus and all funds held in a fiduciary capacity. The campus Chief Financial Officer shall be the primary campus financial official in respect to administration of these delegations of authority and responsibility. The campus President shall:… Ensure that expenditure commitments do not exceed available resources and that budget plans are fiscally sound and sustainable. Ensure that appropriate internal controls are in place for the safeguarding of assets and the reliability of financial reporting. …Ensure the propriety of all expenditures and the integrity of the financial reporting made by Auxiliary Organizations …”
EO890 states: “The president shall require that the University and the Auxiliary operate in conformity with applicable law and the policies of the CSU and the campus when proposing and administering Sponsored Programs. Sound management and administration of Sponsored Programs requires coordination among organizationally separate units and individuals on campus, and therefore the campus president should identify for each area of policy the campus official responsible for implementing that area of the policy.”
According to SSU policy #2003-2: “The Associate Vice-President for Administration and Finance has been delegated responsibility for post-award activities by the Vice President for Administration and Finance and Chief Financial Officer under the authority of CSU Executive Order 890 (letter on file at ORSP).”
Email from M. Mansi (A&F, 3-13-00): “It must be understood that financial authority [for payroll] ultimately rests under the University CFO and his staff. Should it be deemed necessary to make changes to your accounts for any reasons, adjustments will be made from this office.”
Memo from L. Coate to T. Apolloni (2-2-05): “Billings will be prepared by cost centers in the financial billing module and supporting documentation will be reviewed by grant accounting. Upon grant accounting approval, cost centers may print and mail invoices. … Interim and final financial reports must have institutional review and signature. Reports prepared and supporting documentation will be reviewed by grant accounting.”
CSU Policy Manual for Contracting and Procurement, pg 8: “Should campus Presidents choose to further delegate their purchasing authority, campuses must maintain documentation of such delegation.”
Email from L. Schlereth to editor of the Star (4-28-07): “CIHS operated with delegated authority for the management of its financial, human resource, and procurement activities. As such, it operated without the oversight of Administration and Finance in these areas.”
Email from L. Schlereth to Chancellor’s Office investigator (6-20-07): “There was not a written delegation of authority provided to CIHS from the President or me related to post award grant administration in the area of procurement, fiscal and human resource activity.”
Email from former CIHS manager (identity protected) to B. Karlsrud (11-9-07): “I can’t tell you what it was like reading the stories that presented us this rogue operation, when I know we went through university processes for everything (procurement, fiscal management, human resources, everything).”
Chronicle Position
The CSU issues Executive Orders in which it authorizes campus Presidents to undertake certain activities, including purchasing and subcontracting. These activities may be sub-delegated. These delegations are always made officially, in writing with signatures to indicate clear chains of authority. Delegations of authority must be documented and the documentation must be preserved; verbal delegations are insufficient, for obvious reasons. Likewise, job descriptions do not supply these high-level official delegations and do not come from the President. Many individuals on campus have job descriptions that reference procurement. The “Position Description Checklist” to the Guide for Staff Recruiting at SSU (July 2004) includes it as an example: “Administering procurement and contracting in accordance with state and federal guidelines.”
CSU audits of the G&C programs at both CSU Fresno and Sacramento have found that the campuses did not have delegated authority letters on file (CSU Audit Report 07-14, Aug. 07; CSU Audit Report 7-15, Sept. 07). Both universities were found to have not adequately trained grant personnel. SSU has clearly been put on notice by their recent audit by the same group that delegations and training were also inadequate at this campus. Hence, the recent session for Principal Investigators, who should be very careful in signing “PI confirmation” statements that make them responsible for activities over which they have neither control nor understanding.
There was no written delegated authority to CIHS, as admitted by the CFO. There were operationalized day-to-day assumptions in place for many years, in which CIHS undertook certain bookkeeping and accounting tasks that would otherwise have been accomplished by A&F. The CFO never gave CIHS delegated authority to function without oversight from his office, as claimed repeatedly by the CFO to the media and outside investigators. There is also no evidence that AA had any role in oversight of CIHS’s business affairs. Campus policy identifies the CFO and AVP as having the delegated authority for post-award G&C activities and there is overwhelming evidence to show that this is how it worked in practice.