During the performance of routine audit follow-ups, Florida A&M University’s (FAMU) Division of Audit initiated inquiries on April 5, 2019, regarding components of an implemented corrective action plan related to the
The Division learned additional non-athletic Auxiliary transfers to Athletics had occurred and reviewed documents and made further inquiries. The University’s vice president of Audit reported these findings to
FAMU entered into an agreement with an independent accounting firm, Carr, Riggs & Ingram, LLC (CRI), on June 20, 2019, to provide financial-related investigative services for the period of July 1, 2015, through June 20, 2019.
The investigation was related to the use of University Auxiliary funds to offset FAMU’s Divisionof Athletics ’ deficit contrartyto a Board of Governors regulation. CRI released its report on August 5, 2019.
“At FAMU we recognize the paramount importance of ensuring that all University operations, including the use of funds, are conducted in accordance with appropriate guidelines. The University will use the findings and recommendations outlined in the report to enhance our businesses processes in the stewardship of the resources entrusted to us.”
Below is a list of frequently asked questions, which contains a
Frequently Asked Questions
What is an Auxiliary Service?
Pursuant to Board of Governors Regulation 9.013(3), “Auxiliary services are integral activities of a university that furnish to its faculty, staff and student goods and/or services that are necessary or desirable, but not readily available elsewhere in terms of costs, quality, quantity, timeliness, convenience, or other similar considerations.”
Revenue is generated from the provision of these goods and services or from activities such as research and royalties. Examples of auxiliaries include athletics, parking services, food services, housing, day-care center and the copy center.
Why can’t non-athletic auxiliary funds be used to support Athletics?
Pursuant to Board of Governors Regulation 9.013(3), “Each institution may determine whether its auxiliary services will be self-supporting on an individual or collective basis, except for athletics, which shall be a self-supporting entity.”
Why are payments required from Athletics toother Auxiliaries?
As a result of a finding by the State Auditor General’s Office, the University was found non-compliant with Board of Governors Regulation 9.013(3). A FAMU staff analysis conducted in 2016 revealed that between 2008 and 2016 a total of $7,014, 034 had been transferred from other auxiliaries to support the Athletics budget shortfalls.
In 2016, FAMU developed a 12-year auxiliary repayment Pl n that was presented to the Audit and Compliance Committee of the Florida Board of Governors. In addition, the University made a commitment to operate in compliance with the Board of Governors Regulation 9.013(3) and establish a requirement that any such transfers must be approved by the Chief Financial Officer (CFO) and the President. To date, the University has met the obligations of the repayment plan.
What actions were taken by the University to address the transfer of non-athletic auxiliary funds to Athletics?
Why did FAMU hire an accounting firm to review the transfer of auxiliary funds to Athletics?
During the performance of routine audit follow-ups, FAMU’s Division of Audit and Compliance initiated inquiries on April 5, regarding components of an implemented corrective action plan and the auxiliary fund repayment plan. The Division learned that additional non-athletic auxiliary transfers to Athletics had occurred, and reviewed documents and made further inquiries. The University Chief Audit Executive reported these findings to President Robinson on June 7.
At the direction of President Robinson, in coordination with Board of Trustees Chair Kelvin Lawson, FAMU’s Division of Audit and Compliance sought support from independent external forensic professionals to:
- Compile a timeline of relevant events.
- Identify pertinent transactions including transfers and auxiliary repayments.
- Recompute the amount owed to auxiliaries.
- Identify how the non-athletics auxiliary transfers occurred.
- Determine whether the non-athletic transfers violated requirements.
- Identify any weak internal controls.
- Make recommendations to further prevent improper transfers.
- Make recommendations to improve budget management.
What are the key findings?
- During the period July 1, 2015 to June 20, 2019, CRI identified six transfers of non-athletic auxiliary funds totaling $2,687,768.66.
- CRI determined that four of the six transfers of non-athletic concession auxiliary funds to Athletics totaling $453,763 were made with the President and CFO approval relying on Attorney General’s Opinion 072-193.
- CRI found that two of the six transfers of non-athletic auxiliary funds totaling $2,234,006 to Athletics were conducted outside of University processes through management override of controls. Approval by both the CFO and the President was required to transfer non-athletic auxiliary funds to Athletics.
- CRI found that two of the six transfers facilitated by the CFO and the Controller were not approved by the President.
- “Per the supporting documentation obtained, which included PeopleSoft approval logs, retained email correspondence, and interviews, no evidence was identified that indicate President Robinson or any representative of the Board of Trustees had knowledge or were involved in the approval of these transfers,” the CRI report stated.
- Three payments totaling $754,903.88 were made to non-athletic auxiliary services as required by the 2016 repayment plan. CRI determined the current amount owed to non-athletic Auxiliary Services is $8,946,898.78.
- The primary weaknesses identified by CRI, in the controls over transfers of auxiliary funds to Athletics, were in oversight and monitoring.
- The budget management process needs improvement.
- While CRI’s work was not focused on detecting fraud, auditors “found no evidence of individual personal gain from the transfers.”
What are the recommendations?
CRI recommends the design and implementation of systems-based controls within the University’s PeopleSoft system to better mitigate the risk of non-athletic auxiliary funds transfers to Athletics.
“The use of system controls, properly designed and implemented, could limit the ability for an improper transfer to be processed; require system logged approval of all required approvers to conduct a transfer that could potentially be unallowable or provide automatic notification to pre-determined individuals that a potentially improper transfer was recorded, prompting further oversight or investigation.”
CRI also recommended budget process improvements.
What actions have been taken by the University?
The University is developing supplementary system controls to prevent the transfer of non-athletic auxiliary funds without presidential approval and without notification of the Division of Audit and Compliance.
Additionally, the University is implementing data-driven approaches to formulating the Athletics budget.
What will happen next?
- The report has been circulated to the FAMU Board of Trustees and staff is providing updates.
- CRI will keep oversight boards informed through briefings and presentations.
- The University will formulate a plan to address the amount owed to non-athletic auxiliaries.
- The University will formulate policy changes to make the budget monitoring and oversight procedures more robust and transparent.
A copy of the CRI report can be found at http://bit.ly/2KwlIdC