SFSU's cash crunch
Alleged embezzlement and fiscal mismanagement add to the school's money problems

By A.C. Thompson

Falefasa Tagaloa, a former San Francisco State University administrator, will face trial in early 2004 on charges he siphoned some $350,000 from school coffers over the span of four years.

Apparently, ripping off SFSU has become trendy.

Tagaloa is one of 22 people who've been charged in the past year with stealing from the school and its affiliate organizations in two unrelated schemes. Investigators believe they've pocketed a total of $537,000.

Obviously, the half-million-dollar embezzlement spree hasn't helped the money woes of the chronically underfunded university, which serves nearly 30,000 students.

But a Bay Guardian review of numerous SFSU audits shows that, in some ways, the school was asking for it.

"Our audit disclosed conditions, which, in our opinion, could result in errors and irregularities if not corrected," outside financial investigators with the California State University system wrote in 2001. "Specifically, the campus did not maintain adequate internal controls over the following areas: purchasing, fixed assets, and trust funds."

University officials say they've cleaned up such fiscal screw-ups. "If we have found problems, we've worked aggressively to rectify them," spokesperson Ligeia Polidora told us.

But even SFSU's probe of Tagaloa suggests the school isn't serious about curbing financial waste, considering it only made a cursory glance at another account holding tens of thousands dollars that Tagaloa had access to.

• • •

Tagaloa, 45, was employed as a grants and contracts administrator in SFSU's Office of Research and Sponsored Programs. The office helps faculty members get outside funding for research projects.

Prosecutors say the scheme boiled down to this: Tagaloa instructed the Accounts Payable Office to cut a long string of stipend checks to his wife, Tolotea Etuale, who wasn't employed by SFSU. He'd deposit the checks, which ranged from $1,200 to $6,500, in a credit union account on campus and withdraw cash from an ATM. In some cases, prosecutors allege, Etuale endorsed the checks; in other instances, Tagaloa forged her signature on the checks.

Tagaloa and Etuale, who has also been indicted, have both pleaded not guilty.

Apparently, one reason it took SFSU years to catch on to the alleged scam is that stipend checks aren't scrutinized as closely as normal paychecks.

Documents we obtained indicate Tagaloa also had access to another account that school officials, by their own admission, say was poorly supervised and regularly misused. This second pot of money was an honorarium fund used to pay faculty members for special lectures given outside their normal classes.

An internal SFSU audit done in 2000 shows Tagaloa authorized more than $44,000 in questionable – though not necessarily illegal – honorarium payments to educators during a one-year period. Auditors at the time rebuked Tagaloa and other school officials for keeping sloppy books, routinely flouting university rules for paying teachers, and allowing professors to essentially write checks to themselves.

"In general," auditors complained, "none of the offices that should be reviewing honorarium forms are effectively performing their monitoring function."

At this point there's no evidence to suggest Tagaloa sucked money out of the honorarium fund. We contacted three educators at random – Professors Gloria Soto, Stanley Goldberg, and Jean Rocchio – who were supposed to have gotten hefty honorarium payments authorized by Tagaloa. All said they had in fact done the work and received a check.

Still, Tagaloa's involvement with the honorarium fund raises the possibility that more loot may be missing from school coffers. So far, though, sources tell us, SFSU police detectives and auditors haven't pored over the books to make sure Tagaloa didn't embezzle from the honorarium fund. The faculty members we interviewed had never been contacted by auditors or SFSU police.

SFSU auditor Jim Van Ness says he's not slacking. "We did a pretty thorough review. There was no evidence that anything was amiss with the honorariums," he told us.

But Van Ness admits his staff "did not go out and audit every account" the indicted administrator had his fingers in. He says he doesn't need to study the flow of honoraria on a check-by-check basis because anything strange already would have been spotted by the account's regular bookkeepers.

(That theory isn't so convincing: it took the people minding the stipends four years to notice $350,000 had been given to a nonemployee.)

"I'm concerned that these types of fraud schemes are happening at the university," said assistant district attorney David Pfeifer, head of the Special Operations Division, the district attorney's white-collar crime unit, which is handling the alleged stipend scam. "We take these kind of cases very seriously because there's public money involved."

Attorney Jonathan Rutledge, who represents Tagaloa, was unaware of the honorarium fund and wouldn't comment on the specifics of the case. "My client is innocent unless proven guilty," Rutledge said. "He's a great guy. He was very well liked and respected out there."

• • •

Fiscal mismanagement at SFSU goes way beyond Tagaloa's office. During the spring of 2002, outside auditors from the California State University system concluded the school was ripe for plundering, uncovering nine major flaws that could allow grant money to be misspent or stolen.

"Certain project expenditures lacked sufficient written approval and supporting documentation," auditors wrote.

In some cases, auditors wrote, staffers were reimbursed for expenses despite a lack of "receipts to support the charges."

Another audit, compiled in 2001, documented even more problems, some minor, others significant. Among the flaws:

• Staffers using school credit cards didn't bother to submit "original receipts or detailed invoices" justifying their purchases.

• The Accounts Receivable Office was a mess. "Formally documented policies and procedures for the receiving department did not exist," auditors wrote.

• There was a lack of paperwork adequately explaining what had happened to assets that were supposedly sold, given away, or stolen.

• The Oracle-powered accounts-receivable database was "subject to uncontrolled user access," meaning it could have been tampered with by employees out to steal school property.

• Property inventories were incomplete and out of date.

According to Van Ness, the problems – some of which had been identified at least two years earlier – were fixed promptly after the 2001 review. He said, "99.9 percent of the people do their jobs the best they can and are cognizant that they're handling assets on behalf of the public. But humans are not perfect."

The university's money troubles, Van Ness argues, aren't out of the ordinary for CSU schools. "If you look at the other campuses, you'll see similar [problems]," he said.

Of course, that's little comfort to cash-strapped students grappling with overcrowded classrooms and ballooning tuition costs – up 30 percent this year, on top of a 10 percent increase last year.

E-mail A.C. Thompson