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State Auditor Releases Audit Of UNM Athletics

on November 13, 2017 - 6:12am
State Auditor Tim Keller
ALBUQUERQUE  State Auditor Tim Keller released a special audit of the University of New Mexico (UNM) Athletics Department Friday and its related institutions including the UNM Foundation and the Lobo Club.
The Office of the State Auditor (OSA) initiated the audit in May after receiving multiple complaints from concerned citizens. The audit reviews transactions from July 2014 through June 2017 and finds a structure lacking adequate transparency and accountability for financial decisions; and makes recommendations for improving financial accountability and oversight.
“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. “Decades of decentralization and the maze of structures has clouded financial transparency at our flagship university. This structure has historically allowed boards and management to defuse direct responsibility when it comes to important issues. We appreciate the University’s recognition of the problems we’ve highlighted and for their stated desire to get things fixed.”
The special audit contains 10 findings and highlights systemic problems, including:
  • Money mismanagement. A lack of financial controls and confusion about responsibilities among staff and entities resulted in the University spending considerable effort to recover money lost through poor management. ​
    • Over $432,000 in uncollected revenue from luxury suites and club suites at Dreamstyle Arena (the Pit), for over half of which UNM had issued no contracts or invoices (over $238,000 of which remained uncollected as of September); over $250,000 in uncollected revenue from a contract with Lobo Sports Properties, LLC (a subsidiary of Learfield Communications); and $185,000 in overpayments to coaches which needed to be recouped.
  • Problematic “perks.” The audit identified a range of problems with perks.
    • Booster clubs and the Lobo Club raised money that should not have been commingled with public funds. These funds were used for meals and alcohol, hotels, golf outings such as the UNM Scotland Golf Tour, and other uses that should have been purchased with Foundation funds but are not an appropriate use of public funds. The lack of clear policy and sources of funds leads to an appearance of impropriety at best and violations of the anti-donation clause of the New Mexico constitution at worst.
    • The audit identified 23 recipients of perks who had not made any monetary contributions to UNM or its related entities. Giveaways or disproportionate perks create a lack of confidence among donors, students, and the public.
  • No clear lines of accountability.
    • The Lobo Club, and dozens of similar organizations lack a requirement for a treasurer position, a vital best practice; the Athletics Department has not had a Financial Officer for the majority of the past five years; UNM has combined the following roles into one position: Executive Vice President for Administration, Chief Financial Officer and Chief Operations Officer (EVP/CFO/COO); and, a lack of clarity about UNM’s Internal Audit communications to UNM’s EVP/CFO/COO instead of reporting solely to the President and Regents as intended.
  • Circular flow of money. Funds flowing back and forth between organizations make individual accountability for financial decisions nearly impossible. See the chart above.
In the audit, the OSA recommends a number of governance reforms to increase accountability and transparency among the entities that UNM and the Board of Regents can take immediately, including:
The annual reporting between the Foundation, Alumni Association, Lobo Club and UNM should be expanded to include information on benefits or perks given to employees and donors so that UNM can identify issues like excess donor benefit and conflicts of interest.
The mandate of overlapping individuals should be expanded to more clearly discharge UNM’s fiduciary duty to establish high standards of transparency and ethical responsibility, especially for UNM Athletics.
UNM Internal Audit’s mandate, which is set by the Regents, should be expanded to expressly cover the operations of the related entities, with a specific focus on the Athletics funding and programs. Internal Audit currently has the right to demand information from the related entities as part of various agreements, but the Regents’ Policy on Internal Auditing and Compliance does not address the related entities, such as the Foundation, Booster Clubs and Alumni Association. Furthermore, Internal Audit should report directly to the President and the Regents as described in existing policy.
Alternatively, UNM and its related entities may establish a centralized office of the ombudsman with the authority to address inter-component unit compliance and ethics concerns related to the dealings among the University, Foundation, Lobo Club and Alumni Association, especially with respect to Athletics. This can be accomplished without compromising the independent governance necessary in each entity.
UNM should consider separating the Chief Financial Officer position from the Executive Vice President for Administration and Chief Operating Officer roles in order to achieve better segregation of duties. Lack of a dedicated CFO, whose sole purpose is financial management of University dollars, for a University system the size of UNM, dilutes lines of financial accountability and oversight and can cloud fiduciary duty. 
Keller continued, “So tangled are the lines of financial accountability that without the implementation of these recommendations, it is likely these types of issues will continue to occur and it will be increasingly difficult for the University to restore the confidence of the public, donors, students, and the Legislature.”
UNM provided responses to each audit finding and the responses are included in the report. The audit report is available here:
The Office of the State Auditor helps government work better by providing transparency and accountability for government spending; informing policy choices; and tackling fraud, waste and abuse. OSA is an independently elected executive agency responsible for examining the use of public dollars in New Mexico.