University Enterprise Inc., a nonprofit organization affiliated with Sacramento State, is one of four auxiliaries in the California State University system being audited by the state Department of Justice for possible mismanagement of donations.

On Nov. 5, 2009, Attorney General Jerry Brown requested financial, governance and other documents relating to loans for Sac State President Alexander Gonzalez dating back to 2002. The request included: copies of the original bylaws, Articles of Incorporation, fiscal policies, IRS forms, investment policies, copies of all board minutes and all documents showing the source of the money loaned to Gonzalez.

The investigation began after the attorney general’s office received a letter in early July from California Faculty Association President Lillian Taiz. The letter urged for the investigations of various nonprofit auxiliaries affiliated with Sonoma State, Fresno State, San Diego State and Sac State.

“This is no time to allow the questionable actions of these foundations to continue,” she said in the letter. “The CSU needs every penny in donations that the foundations receive.”

Universities do not benefit from loans made to high-ranking officials, Taiz said, adding that CFA does not support such loans. She said there have been many controversial issues regarding the mismanagement of donations by auxiliaries in recent years. The letter cited the following examples:

· A Sonoma State academic foundation made hundreds of thousands of dollars in loans to a board member. University officials are unable to explain how the unpaid loans came about.

· A Fresno State foundation improperly used more than $450,000 toward athletics and had been doing so for various fiscal years.

UEI also came under fire for loans made to Gonzalez in 2003. The loans added up to more than $260,000 and were used for his relocation and housing as well as the remodeling of his kitchen in his Sacramento home. A $27,000 loan was used toward the purchase of a commercial stove and hood for Gonzalez’s home. Taiz said she questioned the auxiliaries’ loans and whether they were “acting in the public’s interest.”

John Kepley, special assistant to Gonzalez, said since Gonzalez took office, there have been record levels of private fundraising due to his hospitality. Kepley attributed much of the success to his ability to host donors in his home, which wouldn’t have been possible without a remodeled kitchen.

“It was really just a food safety issue,” he said, adding that many of the guests Gonzalez hosts are private donors. “This way the food could be prepared there, instead of having it prepared at campus catering and driven out there.”

He said as a result of private fundraising, community members have made significant donations. He added that most of the money donated has gone toward student scholarships.

UEI Director Jim Reinhart agreed.

Reinhart said the remodeling of the kitchen was necessary due to number of university guests Gonzalez hosts at his home.

He noted that auxiliaries and foundations have various audits within a three-year span and go through a lot of scrutiny.

According to Taiz’s letter, the data collected by the CSU chancellor’s office stated that 20 percent of the system’s budget, or $1.34 billion, is managed by auxiliaries and foundations with very little public oversight.

Nallelie Vega can be reached at [email protected].