CSU Audit: Sonoma Program Mishandled Millions

A CSU audit of the California Institute on Human Services (CIHS) at Sonoma State University turned up a collection of problems. As CBS 5 KPIX reports:

A California State University audit found nearly $2 million in un-reimbursable or questionable labor and contracting costs by the California Institute on Human Services at Sonoma State University.

The audit, released Friday, also found $520,000 of administrative payroll expenses and $200,000 of contractual operating expenses that did not have identifying funding sources.

Word of alleged financial irregularities in the CIHS at Sonoma State University surfaced in February. The institute's executive director and founder Tony Apolloni and its managing director George Triest were placed on paid administrative leave in June.

Here are the findings from the audit report's executive summary:

• Unapproved Labor Costs
• Labor costs of $624,277, which had not been approved by the principal investigator, were charged to the Family Literacy grant.
• Failure to Follow Competitive Bidding Requirements
• Competitive bidding requirements were not followed when a $300,000 contract under the Family Literacy grant was awarded.
• Non-Billable and Questionable Costs
• Labor costs of $20,771 and contractual services, supplies, and other expense costs of $403,160 were either questionable or non-billable to the Family Literacy grant and two other grants administered by CIHS.
• Expenses Incurred Without Identified Funding Sources
• Over $1 million in additional costs were, or will be, incurred by CIHS that either did not have identified funding sources or are needed to pay increased interest costs and costs related to an internal review/audit.
• Conflict of Interest
• CIHS administered a project at a property owned by the executive director where his family member resided in a care facility called My Home, Inc.
• The executive director and senior director of CIHS misappropriated funds from various grants to pay an employee who was actually performing work at My Home, Inc.
• The executive director channeled CIHS funds to an entity he helped create, the National Continuity Program, Inc., and from which he received payment for acting as its executive director.
• CIHS awarded paid work to the executive director’s supervisor at the Napa County Office of Education (NCOE), where the executive director had secondary employment.
• The executive director participated in making decisions to move CIHS grants to the NCOE, where he had secondary employment.
• Two CIHS employees may have violated conflict of interest provisions when a company they worked for/owned was awarded contract work by CIHS.
• Improper Contracting
• The CIHS executive director signed both a contract with a federal agency and memoranda of understanding with another California State University campus without the authority to do so.
• Administration of several CIHS service agreements was below acceptable standards.
• CIHS improperly allowed grant funds to be administered outside of the State Treasury.
• Refusal to Perform Duties
• The executive director and senior director refused to meet to answer questions related to this investigation.
• The executive director refused to answer any questions relative to a Statement of Economic Interests form he was required to complete.

The campus will have to borrow money to pay for this:

SSU Associate Vice President for Communications and Marketing Susan Kayshack said SSU will have to borrow money to repay some of the $2.9 million to $3.6 million misappropriated grant money.

Both Apolloni and Triest were "non-retained" from their positions effective June 30, 2007. Apolloni opted to return to faculty status in the political science department, then went for the faculty early retirement program. According to the audit report Apolloni "plans to teach in the SSU master of public administration program beginning in spring 2008." The ethics class in that program is listed as an elective.

Audit says millions misappropriated in SSU social service program (CBS 5 KPIX/Bay City News)
CSU Audit: Special Investigation 0791 Sonoma [PDF]