K-State Audit Shows Big Issues

((HT: KCStar/Helling, Kraske, Williams))

A scathing audit of Kansas State University reveals a pattern of undisclosed payments, conflicts of interest, poor accounting and possible tax problems for the school, several of its former employees and its athletic department.

The audit, released by the Kansas Board of Regents on Friday, describes thousands of dollars paid to companies owned by current and former university employees. They include head football coach Bill Snyder; former athletic director Tim Weiser; and Bob Krause, a former vice president for institutional advancement and former athletic director.

Auditors found that some of those payments could result in additional tax liability for the university and may violate Internal Revenue Service regulations. But the report stops short of concluding that any payments or other irregularities were illegal, and notes that virtually all the money came from private donations, not taxpayers.

The new K-State president, Kirk Schulz, said he welcomed the regents’ decision to release the audit, which is dated April 27. The board discussed it in closed session Friday.

“There is nothing we can do about the past,” Schulz said in a news release. “However, steps have been taken to ensure these situations do not happen again.”

K-State officials and regents said the audit, prepared by Grant Thornton LLP, would be the basis for a thorough examination of the university’s financial controls. Schulz is expected to make recommendations to the regents by October.

The 34-page report details a $2.4 million shortfall in the university foundation’s scholarship fund in 2007. It also found questionable spending on fees, travel and fringe benefits, plus a $500,000 loan from the athletic department to Weiser in 2008 that he was not required to “justify or explain.”

Thirteen payments totaling $845,000 to Snyder, Weiser, Krause and others had no supporting documentation, auditors said.

The report was prepared as an “exit analysis” of former K-State president Jon Wefald, who left this year. Similar audits are under way for the University of Kansas and Pittsburg State University, whose presidents also recently departed.

Auditors made several recommendations to improve oversight of the athletic department at K-State and other entities affiliated with the university to improve “structure, formality and transparency.”

Wefald said Friday that he was most troubled by the lack of documents for the $845,000 in payments.

“I think we should do everything we can to uncover that,” he said.

Wefald added that he gave Krause too much authority, a decision he now regrets.

“He did do a lot of good,” Wefald said. “But Bob had too much to do. I probably delegated too much authority to him. I wouldn’t do that again.”

Krause could not be reached for comment. He recently resigned from his job on the university’s Olathe Innovation Campus following revelations of previously undisclosed contractual obligations of more than $3 million to a company owned by former head football coach Ron Prince. Kansas State is now suing to declare that agreement — which was not mentioned in this audit — void.

Weiser, now deputy commissioner for the Big 12 Conference, declined to comment on the audit until he could read it.


“I was not aware they were going to release that,” he said from the College World Series in Omaha, Neb.

Snyder was traveling on Friday and said he wanted to thoroughly review the report before commenting.

Here's the financial analysis...
And here's the accompanying press release...