Fayetteville State University administrators violated policy and acted unethically in landscaping contracts worth nearly $2 million, a state audit investigation shows.
The North Carolina Office of the State Auditor investigated the “fraud, waste, and abuse allegations” and presented the findings in a report released Wednesday.
The report concluded that the contracts did not get required approvals per university policy and that one administrator circumvented the rules to move them forward. The report revealed incomplete policies, administrators’ lack of knowledge and a failure to “demonstrate a commitment to integrity and ethical values” at FSU.
“The risks are higher, given the behavior of these two members of management, that there may be other issues going on at the university that’s just not been discovered yet,” State Auditor Beth Wood said in an interview.
Unethical decisions and incomplete policy
Wood’s office spent about 470 hours and $50,000 investigating alleged wrongdoing. In one case, a $1.48 million landscaping maintenance contract was not reviewed by the appropriate authorities, including the UNC System president and the State Division of Purchase and Contract.
In a separate case, the report says FSU’s Associate Vice Chancellor for Facilities Management broke a $235,000 contract into four pieces so it wouldn’t cross a $100,000 threshold and need approval. He eliminated some of the services listed in the original contract and then made three additional deals for those same services for the same time frame, all under $100,000.
“This act sent a message to employees that behaving unethically is acceptable,” the report says. “As a result, the University subjected itself to a higher fraud risk as employees may believe it is acceptable to break the rules.”
“In addition, unethical behavior could diminish the public’s, donor’s, and student’s confidence and trust in University management,” the report says.
The audit found that the university’s policy was outdated since 2015 and incomplete. Both contracts were paid almost entirely with federal funds, which meant the approvals were not actually required. In both cases, university management did not know the contract approval requirements or the funding source for the contracts, the report states.
“You have a person over business and finance who doesn’t understand the contracting terms and then another person in management who is trying to circumvent the rules,” Wood said.
It doesn’t matter if these actions are in higher education, state or local government, this is not good for any organization, she said.
“You have to stop and think, well what else?” Wood said.
How the university is responding
The state auditors’ office investigates fraudulent spending and abuse of spending and receives several calls throughout the year that tie back to universities.
This investigation into FSU was spurred by tips made through the office’s hotline.
Wood’s office made several recommendations in its report for FSU Chancellor Darrell Allison and his administration, including:
▪ University policies should reflect all requirements and exceptions.
▪ Those responsible for reviewing, approving, and executing contracts should be familiar with approval requirements and exceptions.
▪ The Vice Chancellor for Business and Finance, the Associate Vice Chancellor for Facilities Management and the General Counsel should have the knowledge, skills and abilities to carry out assigned responsibilities.
▪ The school should consider disciplinary action against Parsons for his “unethical act in his effort to circumvent approval requirements.”
▪ Ethics training for all facilities management employees.
FSU said it is “committed to take into consideration” Wood’s recommendations.
The allegations were first brought forward in 2019, before Chancellor Allison was at the helm of the historically Black institution. He came into the position earlier this year amid campus controversy and skepticism from students, faculty and alumni about how he got the job.
When he took office and learned of this issue, Allison asked the university General Counsel to do a full assessment of policies and processes, according to FSU. He also created a new unit called the Division of Legal, Audit, Risk and Compliance to support that work and hired a new compliance and risk management officer.
The university plans to provide increased training in policy and compliance this fall that will continue throughout the academic year.
“We are evolving and placing more emphasis on university-wide training and compliance,” university spokesperson Joy Cook said in an emailed statement. “Under this administration, we have set systems in place and a path forward to ensure compliance is at the forefront of all the work that we do.”
FSU leaders ‘minimize’ findings, Wood says
Typically, an organization Wood investigates will respond to the report agreeing to fix what’s wrong and how employees will be held responsible, she said.
But this case was different.
The university’s response, signed by Chancellor Allison in August, “made several statements that attempted to obscure issues, mislead the reader, and minimize the importance of OSA’s findings and recommendations,” the report says.
Related to the $1.4 million contract, the university agreed the purchasing policy should be reviewed and updated, but referenced a Memorandum of Understanding between the system and the Division of Purchasing and Contract as a related policy. But the details of the MOU are not written out in the university’s policy. And, if the language had been included, then university staff would have known the appropriate rules and the investigation would not have been necessary.
The university also said management was aware of the funding source utilized for the contract. But “that is not accurate,” the report says. The school’s Vice Chancellor for Business and Finance never mentioned the exemptions of approvals related to these contracts and said the lack of signatures was an oversight, according to the report.
Regarding the contract that was unethically divided up, FSU said it did an internal review that found no “ethical or integrity issues were involved with the way the contract was executed.” The university’s response said it removed services, then solicited bids for those services separately, then ended up going with the original company because it was the lowest cost.
But the report says that is misleading.
The Associate Vice Chancellor for Facilities Management told the investigators that the scope of work did not change from the original contract proposal and avoiding approvals “played a role” in his decision to revise the original contract, which would expedite the process.
The university did not provide any evidence that her report was incorrect, according to Wood.
“I’m not wrong in my report,” Wood said. “So to mislead or minimize is disconcerting.”
Wood said it’s not typical to get this kind of pushback and she doesn’t understand how the university can say there was no ethical problem.
This story was originally published September 08, 2021 5:38 PM.
