Sac State’s audit of CapRadio is closer to a cover-up that refuses to name names | Opinion
A deep “forensic” audit by Sacramento State of its Capital Public Radio station raises more questions than answers, mainly why the review is so uninformative to its listeners to the point of withholding the names of the key players who were subject to the investigation.
The audit, performed by CliftonLarsonAllen, an accounting firm, found hundreds of thousands of credit card expenses that the radio station paid on behalf of the unidentified “Subject #1” without receipts or any documented substantiation. Missing entirely is what the listeners’ money was spent on. And the university is mum on whether the findings in its mind rise to civil or criminal wrongdoing, other than to say Subject #1 had hired an attorney and refused to be interviewed and that law enforcement is investigating.
The most glaring omission in this audit is how the investigators failed to ask Sacramento State the fundamental question about a radio station headed toward financial insolvency after deciding to leave campus and relocate into expensive leased office space downtown. Why did the leadership of Sacramento State think this was a good idea? And why didn’t they insist that the university’s radio station stay on campus?
The Sacramento Bee on Monday requested the names of board members and “subjects” not named in the audit. So far the university has not provided the information. A university spokesman directed The Bee to request the information via a Public Records Act request portal on its website.
“Sac State and CapRadio are dedicated to sound fiscal stewardship of public and donor funds,” the university said in a published statement upon releasing the audit. “We are committed to transparency, ensuring that our stakeholders are duly informed every step of the way. Both entities are cooperating with law enforcement related to an ongoing investigation.”
University President Luke Wood, in a separate statement, said, “If you are like me, you will find the facts presented in CLA’s report deeply concerning. It is absolutely unacceptable that any public organization — particularly one connected to our university — could be so poorly mismanaged.”
The radio station is a decades-long “auxiliary organization” that had been overseen by its own board of directors in partnership with the university, which holds the station’s license. After signing leases to move downtown prior to the COVID pandemic and the subsequent economic downturn, the university had to step in with funds intended for education to keep the station afloat.
The university took direct financial control of the station last September after an initial audit by the California State University system, which prompted this deeper “forensic” examination.
In its report, auditors stated that they conducted public record searches as part of their investigation, but then produced a report that keep key public information secret about spending and potential conflicts of interest.
Credit cards and Subject #1
Auditors found credit cards being paid by the radio station, yet had no idea who were the beneficiaries. “Sacramento State was unable to determine who was truly the user for any of these cards,” the audit said.
Our mysterious Subject #1, however, appears to have been the clear owner of an American Express card that the radio station automatically paid every month. The station paid $127,552.08 to cover credit card purchases for about 17 months in 2021 and 2022. Then Subject #1 started paying off the credit card balance personally and submitting requests for reimbursements.
All told, the audit found more than $774,000 in potentially questionable spending. Subject #1 spent $460,800 “without corresponding evidence of expense reports and/or receipts.”
In an email Tuesday answering questions from The Bee, a university spokesperson said, “Certain details, including individual identities, are withheld to protect the integrity of the ongoing law enforcement investigation and witness privacy.” How does shielding Subject #1’s identity change a shred of evidence? That the audit doesn’t identify anybody, particularly board members who are not under law enforcement investigation, basically speaks for itself.
Board members and conflicts
The audit found that the radio station purchased furniture for the new downtown office from an unnamed business who was also a radio board member. The amount of money involved? Kept secret. Along with the identity of “Board Member 2,” for no apparent public reason.
The same secrecy holds true for three contracts with vendors. The audit “determined that a CPR Board member was either a founder or employed by the vendor. As such, the contracts with CPR may have provided a financial benefit to the Board members associated with each vendor. No discussions of potential conflicts of interest were identified in the board minutes.”
As The Bee had previously reported, the audit found that another board member was related to ownership of one of the downtown properties being leased. The Bee has reported her identity, local developer Katherine Bardis-Miry, who has since resigned from the board. The audit refers to her as Board Member 1. Her marriage to a partial owner of the building “demonstrates at least the appearance of a potential conflict of interest,” the audit said. “The spousal relationship was not noted in the Board meeting minutes.”
The university is withholding the audit’s multiple attachments and exhibits.
The missing question
Audits can do more than examine documents. They can review decisions. The fatal one for Sacramento State, made during the presidency of Robert Nelsen, was to go along with this expensive idea for CapRadio to leave its long-time campus location for downtown. Failure to step in and put the brakes on this grandiose scheme has proved extremely expensive for the university, far more than the credit card balances of Subject #1.
Asked why the audit did not examine university leadership, the university emailed the following: “Our focus now is on addressing current issues and ensuring that CapRadio’s future is robust and financial controls are effective.” This deeper followup audit, he said, was based on the initial audit.
There is a saying about learning the lessons of history to avoid repetition. The university’s incapacity to embrace a little introspection here is worrisome.
Wood inherited this mess when he became Sacramento State’s new president last year. His decision to step in and manage the station’s finances essentially saved CapRadio for its listeners. To produce a forensic audit with more holes than Swiss cheese, however, is a step in the wrong direction.
CapRadio, based on its slogan, is where “facts matter and stories inspire.”
Its parent, the university, is keeping a truckload of facts from its listeners. And that doesn’t inspire that kind of confidence necessary to help move this vital radio station past a disastrous financial chapter.
A previous version of the column had attributed a university quote directly to President Luke Wood.
This story was originally published August 7, 2024 at 5:00 AM.