Fraud Friday:Cross-country road trip, Guns N’ Roses show and phantom dinner guests turn up in Cal State San Marcos audit

Auditors and fraud investigators are the (too often) unsung heroes of organizations. They take fragmentary, incomplete evidence and through painstaking hours of analysis and investigation, develop and report on a vast array of improper acts. Their reports, when acted upon, serve both a detective and preventive purpose against fraudulent activity.

Last week, the excellent professional audit staff at the California State University Office of the Chancellor released a comprehensive investigative report detailing what can only be called an egregious misuse of public funds. It was heartening to see that the report generated a significant amount of media attention. From the San Diego Union-Tribune:

A former Cal State San Marcos dean submitted dozens of fraudulent hospitality claims, filed duplicate expense reports and made up dinner guests to collect improper reimbursements, a long-awaited investigation released Thursday concludes.

On one day he attended an NFL game and watched a Guns ‘N Roses concert, calling it college business, the report said.

In total, Michael Schroder racked up at least $41,000 worth of unallowable expenses between July 2017 and June 2019, investigators at the California State University Chancellor’s Office said.

His dismissal by the university was announced late Wednesday.

“We investigated allegations that the dean of extended learning at California State University, San Marcos inappropriately used his expense account for personal meals and events, claimed business expenses for meals with individuals with whom he never met and spent excessively on international travel,” the report states.

“We substantiated all of the allegations.”

The 28-page investigative findings lay out a sweeping breach of Schroder’s fiduciary duty to safeguard and steward public funding. But the CSU report also limited its review to the former dean, who was not alone in spending university money on lavish meals, personal drivers and five-star resorts.

The San Diego Union-Tribune reported last year that former President Karen Haynes and several other senior administrators also stayed at foreign hotels costing as much as $760 per night, hired chauffeur-driven limousines and used school resources for expensive dinners and fine wines.

The Chancellor’s Office declined to answer questions Thursday about why spending by other Cal State San Marcos administrators was excluded from its eight-month investigation — or whether Chancellor Timothy White would seek to recover any of the allegedly misspent funds.

Cal State San Marcos spokeswoman Margaret Chantung said in a statement that the campus’ own investigation had included a review of one year’s worth of spending by Haynes and other administrators.

“The scope of the (Cal State San Marcos) internal review included all reimbursements from vice presidents and presidents during the 2018-19 fiscal year,” she wrote. “While we discovered instances of travel spending that fell outside CSU policy, we did not find any evidence of fraud.”

She also said school officials have not decided whether to try and recoup any funds from Schroder — or others — or whether the university would refer the case to criminal prosecutors.

“We will be reviewing all of our options,” she said.

Schroder has declined to respond to multiple requests for interviews about his travel expenses.

https://www.sandiegouniontribune.com/news/watchdog/story/2020-02-13/cross-country-road-trip-guns-n-roses-show-and-phantom-dinner-guests-courtesy-of-cal-state-san-marcos?fbclid=IwAR1PjI_rkPzVbYed0Cas-VLWgfGekncrV5IpbAC-RDgsdcWKQ24ZJCDj7a0

Link to investigative Report: https://www2.calstate.edu/csu-system/transparency-accountability/audit-reports/Documents/special-investigation/2019/19203SpecialInvestigationSanMarcos.pdf?fbclid=IwAR1qYMTQWCBWrbSIwgIyOqJkbzR6QaKMwxNiAd-Nns035YO7orsljfCw_m0

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