In the wake of the resignation of Athletics Director Kyle Brennan, Illinois State University said it planned a “full financial audit” of the Athletics department. ISU’s interim president said he hoped it could answer this question: Was a costly donor trip in 2021 a one-off or part of a larger problem?

ISU’s top leaders may already have a partial answer to that question, WGLT has learned. An audit of Athletics was completed less than a year ago, finding two-dozen problem areas – including prohibited or questionable purchases, a risky approach to travel, and sloppy or delayed record-keeping that would make it harder to detect issues.

ISU previously denied WGLT’s request to see internal Athletics audits, saying they’re legally exempt from disclosure. WGLT obtained a copy of the 2022 routine audit through other means. It covers the time of the $23,000 donor trip to Indianapolis that raised questions about department spending.

The report characterized Athletics’ audit risk as “High.” (Factors that influence audit risk include a department’s expenditures and revenues, impact to university operations, and other audit/compliance risk factors.) The report concluded that Athletics “needs improvement” – the middle of three tiers of conclusion, between “satisfactory” and “unsatisfactory.”

“We conclude that improvements are needed to further enhance internal controls and strengthen compliance with university policies and procedures,” wrote Audit Director Robert Blemler in a June 3, 2022, cover letter to Brennan.

The audit showed Athletics had numerous issues in policy and procedure that needed attention, and that some staff had a loose approach to documentation of receipts, reimbursements, and use of university or Foundation credit cards. The reimbursement submission habits of Brennan himself is even a specific finding in the audit.

In response, Athletics began work on 24 “corrective actions,” including staff training and changing the order in which Brennan’s reimbursements and expenses were processed. A few months later, Athletics provided Blemler’s team with a detailed update on progress toward those corrective actions, according to documents obtained by WGLT.

The report shows many top ISU administrators were aware of the findings even before WGLT began investigating spending on the Indianapolis trip. Copied on the 2022 report were then-President Terri Goss Kinzy, Vice President for Finance and Planning Daniel Stephens, Associate VP for Finance and Comptroller Doug Schnittker, VP for University Advancement Pat Vickerman and Advancement’s chief operating officer Jill Wilberg, and Assistant Comptroller Erika Jones. Interim President Aondover Tarhule, who succeeded Kinzy after she resigned, was not a recipient of the initial report. At the time, he was provost, which covers the academic side of the ISU house.

Kinzy acknowledged receipt of the audit, according to a June 7, 2022, email obtained by WGLT.

“There is a lot of good info here, and I am certain this approach will help make things run smoothly in Athletics,” she wrote. “It is always good to have processes to help everyone know how to follow our rules.”

It’s unknown how many of the 24 findings also were flagged on previous Athletics audits – as in, how many pre-dated Brennan’s 27-month tenure starting in January 2021. WGLT has not been able to obtain earlier Athletics audits to compare them. The 2022 audit covered July 2020 until June 2022. Athletics is typically on a 2- or 3-year audit cycle.

Limited resources may be partly to blame. Athletics cited staffing constraints in several of its responses to the auditor’s findings, hoping that additional hiring will “provide a pace and focus that allows for more attention to these details.” Athletics told the auditor it was “not straight forward” to track receipts from over 100 credit card users on staff – more than most departments on campus. The Athletics budget and employee headcount has grown substantially since 2006, but its six-person business office only added one position during that time, according to a May 2022 email from Athletics business chief Emily Newsome obtained by WGLT.

Brennan’s April 13 resignation announcement came as WGLT was preparing to publish its story about the donor trip to Indianapolis for the Big Ten football championship game in December 2021. Athletics spent more than $23,000 on last-minute tickets and hotel rooms as they tried to woo Aaron Rossi — suddenly a millionaire due to his booming COVID testing business — into making a hefty donation. Some on the trip visited a strip club.

The trip worked: Rossi made a $3 million pledge in January 2022 to support Athletics’ new Indoor Practice Facility, although it’s unlikely ISU will ever get that money. Rossi was indicted on fraud charges soon after and remains under federal investigation. A judge has restricted how he spends his money.

How audits work

An audit reviews university operations. It makes sure internal controls are in place and that a unit or department operates effectively and efficiently. There are four stages: planning, fieldwork, reporting, and follow-up on corrective action plans and department responses. Follow-up is conducted twice a year until all corrective action plans have been fully implemented, Blemler said.

Blemler has headed the audit department for the last seven years. There are three other senior auditors in the office who take charge of reviews. In planning, they look at what the operations are and try to understand unique risks for the organization. Then they do the fieldwork, or examination of documents and interviews with staff. Blemler spoke with WGLT about audits in general, though he declined to address the specific case of Athletics.

“Our typical departmental or unit audit will look at the management of the organization. It will look at the accounting and reporting processes and procedures, revenue, and receivables, if they have revenue. On the expenditure and purchasing and expenditure, we look at that. And then typically also, you look at property equipment and inventories as well as IT and data management,” said Blemler.

The reporting stage is the conclusion – a report to management of the unit and higher up the university chain outlining observations and making recommendations. At that stage, the unit responds with corrective action plans. How deep these go depends on the unit. After the response period, Blemler’s department issues a final report, and that gets copied up the organizational structure of the university as well.

“I meet regularly with the president, and we review audit status and audit results, as well as with the other vice presidents on campus,” said Blemler.

In an audit, investigators ask department staff about their process and specific documents or transactions. The size of the data sets varies by department size and complexity.

“One of our common audit observations is a lack of documented procedures within the department. How do we receive checks in the mail? What do we do with them? Do you have documented procedures for how that gets received, how it gets processed, and how it gets deposited?” he said.

Blemler said those documented procedures are there to protect the department’s institutional memory as staff and leaders come and go over time.

State law requires the department to do a two-year audit plan every year to assess risk for units on campus.

“There’s hundreds and hundreds of departments across campus. We typically budget for about 10 to 12 planned audits a year. Then we also have flexibility to address management needs as they come up,” said Blemler.

Special requests

As part of the planning for those 10-12 audits, Blemler’s department solicits input from around the university about which units might need a look. There are also an average of one or two special requests for an audit per year outside the usual plan, he said.

When something like the administration’s special request for an audit of Athletics comes along, the process is slightly different. Athletics was already on the schedule for Fiscal Year 2024, so Blemler said they are starting earlier than planned.

“I would say whether it’s publicly or if we have information that there could be some discrepancies or irregularities, that may change the depth that we look at units,” said Blemler.

In a regular audit, they do not look at every transaction, but a sample of them. The extra depth might expand the sample sizes, Blemler said, or spread it out to other types of expenditures.

He said there is no one standard sample size. It depends on the department and the number of transactions they have in the regular course of business. The scope of Athletics is unique, as one of ISU’s largest, most public-facing departments and a $30 million budget and 400 student-athletes.

A key part of the controversy in Athletics is reimbursement for expenses, either submitted through receipts or charged to a university credit card. They are called P-cards at ISU, for purchases. Blemler said it is standard across campus that the unit processes the reimbursements, and they go to a central administrative office for further processing, places like the university Comptroller, University Advancement, payroll, or Human Resources, depending on the kind of transaction.

There are different approval standards depending on the unit’s nature, such as Advancement or the ISU Foundation (the university’s fundraising arm).

“Some state statutes apply on the university side that may not apply on the Foundation side. Alcohol would be one example that is payable on the Foundation side that university funds are not allowed to be used for,” said Blemler.

Whether auditors turn up something serious that needs correction varies from year to year. Blemler said they turn up one or two significant weaknesses or control issues each year, though that varies depending on the type of the unit audited.

“It is hard to determine. It may be significant to the unit we are auditing or significant to the university. We have to take both of those into perspective,” said Blemler.

That includes both a process that is weak and a transaction that should not have happened.

The next Athletics audit is in the planning stages. Because Athletics is a large department, Blemler said it may take 2-3 months to complete, instead of the usual month and a half. Because it is a special audit, it may look at different things than the 2022 one and whose findings are detailed below.

What they found in 2022

In the 2022 audit of Athletics, there were 24 findings requiring corrective action, varying in importance. Here are some notable examples:

• The Athletic director’s reimbursements and expenses were being submitted to the Comptroller’s office and University Advancement before obtaining approval from the president, who is the Athletics director’s boss. As a matter of efficiency, Athletics should instead get presidential approval before final processing, auditors said. Athletics initially responded that a change would create inefficiencies for its team, but they would find out the president’s preferred method. By January, Athletics had conceded the point.
• Prohibited P-card purchases. For 11 of 55 P-card purchases tested, there were prohibited or questionable purchases that included alcohol, excessive tips, in-hotel room movies, and personal items such as gum, Chapstick, and Tylenol. In one example, alcohol was purchased on a workday during lunchtime during an unofficial unemployment recruiting visit.
• P-Card weekly statements were not approved by the department’s card manager/budget officer and sent to the Comptroller’s office for payment in a timely fashion. That forced the Comptroller’s office to pay off credit cards without access to approved transactions and supporting documentation, like receipts, running the risk of a “reactive approach to identification and resolution of questionable purchases.” Sample testing showed documentation for 55 of 55 P-card transactions was submitted more than 30 days after the transaction date.
• Not all Athletics employees were using required trip summaries or vouchers to document travel-related details and costs. They often used P-card or Foundation credit cards instead. This makes it difficult to track costs, charges, sources of payments, and/or reimbursement for away games or donor events and whether those are appropriate expenses.
• A detailed receipt with adequate supporting documentation was not submitted for 21 of the 85 university-funded transactions tested, and 2 of the 18 Foundation-funded transactions tested. For 15 of those 23 exceptions (e.g.: hotels, restaurants, food deliveries, Uber rides, etc.), a signed affidavit was provided in lieu of a receipt – essentially an employee personally vouching for the expense. Risks include non-compliance with ISU policy or federal/state regulations, process inefficiency, and potential inappropriate transactions. The auditors recommended forcing submitters to request receipt copies from the businesses they bought from, and that repetitive use of affidavits by the same person be more closely monitored.
• Insufficient documentation of a business purpose for a purchase on 42 of 85 university-funded transactions tested and 4 of 18 Foundation-funded purchases tested. Auditors noted numerous transactions for meals at local restaurants without a documented business purpose.

The other audit findings appear to be less related to the potential problems on the Indianapolis trip. Some predate Brennan’s tenure by many years:

• Lack of purchase order documentation. For 2 of the 16 university-funded, non-credit card transactions tested that were over $5,000, there was no documentation of the required purchase order or requisition before the purchase.
• No timely completion or documented review of account reconciliations by the budget officer.
• No schedule to update business and ops procedures. Ones in use date to 2011 and are out of date.
• Lack of timely deposits of checks.
• No reliable process to track gifts-in-kind.
• Lack of invoices and packing lists documenting receipt of goods and services such as Office Depot.
• Lack of timely payments to those owed money.
• Non-compliance with ISU policy or government regulations in onboarding materials for new employees.
• Bringing an individual to campus for employment opportunities that have not been posted.
• Lack of documentation of outside employment for Administrative Professional staff.
• Documented access reviews for software that can jeopardize confidential information.
• Lack of procedures for managing and operating social media accounts.
• Four issues involving sports camps related to: ISU staff contracts for such camps, naming conventions, use of university resources and employee time on camps, and lack of liability waivers for camps that protect ISU.

How to raise concerns

Robert Blemler, the auditing director, is also ISU’s chief ethics officer. That entails ethics training, various requirements under the state ethics act, dealing with complaints and employee concerns. He said they try to keep the auditing and ethics functions separate, though he said some complaints that come to him as ethics officer may spark an audit, and vice versa. Other universities may structure the auditing and ethics functions differently, though Blemler said it is fairly common to do what ISU does.

“Sometimes it is located in audit, sometimes it might be in a general counsel, or sometimes it may be its own office. It just varies from university to university,” said Blemler.

Neither audit reports nor ethics complaint investigation results are public. In high-profile cases, such as with Athletics, it may be in the interests of the institution to say something.

“There’s stuff that you are bound by, legal statute, but certainly, general statements about moving forward. The president has already talked about some of the things that are being done,” said ISU spokesperson Eric Jome.

Blemler said it is useful for the public to know that there are ways to file concerns and complaints. In the past it was in person or by email. Starting last October, the Ethics office and Office of Equal Opportunity and Access set up a third-party provider to do intake of some complaints if people feel more comfortable with that gateway.

“You can either do it through a web intake form, or there is the traditional hotline number. A third-party service takes the complaints and then they are forwarded into our office for review and triage,” said Blemler.