Figures Don’t Lie, but Liars Often Figure- are Accounting Firms in on the Abuse of Public Funds in our High School Sports Programs ?

Postings on Rivals.com by FUBO recently increased our site traffic by over 500 hits per day and generated hundreds of emails inquiries.  Most were startled to learn that the Section Commissioner and her small staff take almost a million dollars per year- the majority of CCS funds – for their own salaries, benefits , retirement, car allowances, telephones and management decisions, yet the total given to athletes and coaches annually is a mere $3,000. CIF is not much better. Many believe the Section and CIF have forgotten who they serve. While the Commissioner is enjoying her big TV deal making , the numbers suggest she may be over her head in  managing CCS finances. And everyone from Rivals.com was stunned to learn Section officials are a far cry from the volunteers they  believed them to be. In addition to salaries, expenses and retirement all of the CCS staff  receive generous vacation time, medical benefits, travel allowances and an ability to give jobs and contracts to their closest circle of friends and family.  The Section Commissioner alone is paid more than any superintendent of any school district in the Section.

In 2010 , the Section Commissioner retained an accounting firm to conduct the 2009 Section Financial Audit. The numbers in that audit tell part of the story, but not all of it:

The accounting firm Lautze and Lautze was retained by the Section Commissioner to audit the Section, as required by CIF, for the financial year 2009. In the opening cover letter the firm specifically states that the financial statements they review are the responsibility of the Section, and that the firm’s responsibility is to “ express an opinion on these statements based on our audit”.

True, the audit stated the opinion that all the numbers appeared to be in order. BUT those numbers are generated and reported by the CCS Management. So while the numbers may all add up on paper, Lautze and Lautze neglected  to address critical aspects of CCS finances that may serve to expose member schools, families and athletes to significant financial risk:

  1. Failure to properly manage the business finances of the Section. Everything from the $88,000 per year the Section spends on leases  to the $100,000 for computer and telecommunication equipment , the Section has done little to control  their expenses despite the economic climate  and budgetary issues faced by member schools. For example, CCS has committed to a 3 year office lease and the audit describes the lease is “ Non- Cancelable”. However, if managed properly it would be reasonable to expect the CCS office spaces could be renegotiated to lower the expense burden on the Section. It is hard to understand why vast office space is needed at a premium price when 80% of the surrounding commercial spaces are vacant . In this economy, nothing is “non- cancelable”. Also, the audit failed to note if any conflicts of interest may exist  related to these leases. Is it a buddy of a staff member , could there be kick backs to someone’s kids?
  2. Potential Loss of Tax Exempt Status- True, the audit reports the Section pays no taxes under the Federal Income Tax Code 501(c) (3) and state code 23701d. BUT the auditors fail to address requirements for an organization to operate and maintain that  tax exempt status. Since such a huge portion  of CCS finances benefits only  the CCS Commissioner and staff, it is possible that the Section is in violation of these tax codes and such should certainly be addressed in an audit. If the Section is not in compliance with these requirements, it could jeopardize the tax exempt status of the Section in the future. Loss of this status would mean additional tax burdens and potential loss of donor funding.
  3. Failure to Contain Excessive Salaries and Retirement for CCS Commissioner and her staff. True, the Audit reports that the Section management benefits from the Section participation in CalPERS, a retirement plan for public employees which the Section contributes 22% of the payroll . In 2009 the Section paid  $95,000 dollars which went only to the Commissioner and possibly 2 other full time staff members.  BUT the audit fails to address the overall burden this places on the Section in the future. The burden to provide retirement to CCS officials may simply be too great to be sustainable.  Is it fair to give the Commissioner full retirement when most coaches and teachers  are unpaid and have no retirement?????? AND….At the same time this audit was rubber stamping the Section , a CalPER Audit found a number of significant issues and exposed numerous financial problems  in the Section accointing and reporting. These included an unreasonable number of late payroll reports, inaccurate reporting, and double dipping. In a response to the CalPER audit the Commissioner states the staff is not capable of keeping up and current with all requirements. Yet isn’t that what they are expected to do for the member schools they serve? How much would the Section have to pay to get someone capable of managing their own retirement benefits properly if $1,000,000 for four people is not enough to get it done?  The Commissioner was also supposed to report further on this matter to the various governing CCS committees and simply failed to do so. The Commissioner was also suppose to set up a special budget committee to review these issues and failed to do so.  An independent audit should expose these issues as potential for financial misconduct. A truly independent audit would evaluate conflicts of interest in the Section and how those could pose financial risk. It should also expose the potential for embezzlement or other  misconduct that could have criminal and civil inplications.
  4. Failure to Contain Excessive Professional Fees- True, the 2009 Section audit did not find professional fees out of line. However, immediately following the CalPERS audit the Section expenses for legal and accounting fees began to soar. Excessive legal fees are usually an indication of much larger problems. 400% increase in legal fees in recent months is a major red flag.  Also did the 2009 audit serve the public interest as it should? 

Maybe it is time to insist these audits not only count the numbers but provide further insight into the story behind the numbers. Maybe it is time to ensure Section money goes for athletes and sports programs rather than excessive salaries, retirement and benefits for a very  select few individuals.

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About ccswatchdog
Grassroots organization providing information to ensure fairness, transparency and accountability of CIF's Central Coast Section.

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