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UNM was vulnerable to criminal activity, AG's Office says

Copyright © 2019 Albuquerque Journal

Former University of New Mexico Athletics Director Paul Krebs is facing felony charges related to his role in a 2015 athletics fundraising golf trip to Scotland, but a new report says the university's financial controls are so loose it's hard to know if anyone else committed crimes.

The New Mexico Attorney General's Office on Wednesday issued a “financial risk areas” report on UNM that focused on how Krebs was able to use public funds to pay for private donor expenses in Scotland and also how the university failed to collect more than $400,000 in rental fees for Pit suites.

Attorney General Hector Balderas' office on Wednesday charged Krebs with five felonies in connection with the Scotland trip but said in the report that UNM's systems were so problematic “it is not possible to develop criminal intent or pinpoint with certainty” other individuals who may have potentially engaged in fraud, waste and abuse.”

Attorney General Hector Balderas

Attorney General Hector Balderas

“What is clear, is that the culture and environment at the management and oversight level of UNM during this time created a situation ripe for public employees to violate state laws and abuse public resources, without any ability to be tracked, identified, or ultimately held responsible,” the report said.

And, the report says, UNM knew about some of its risk areas as far back as 2010 but failed to act.

The report covers much of the same ground – and makes many of the same recommendations – as a special audit conducted in 2017 by then-State Auditor Tim Keller.

And an outside firm, KPMG, cited Pit suite documentation issues as an audit finding in 2011.

Balderas said Wednesday it's “egregious and horrific that a public institution that is tasked with educating our students – and most importantly, taking our public funds – wouldn't keep a strict inventory and a strict accounting of these public resources.”

A UNM spokeswoman did not answer a series of specific Journal questions about the report late Wednesday. In a brief statement, Cinnamon Blair said, “We are in receipt of the Attorney General's report that was issued today. After we review the document, we will issue an appropriate response.”

The report stems from a “formal inquiry” into UNM financial transactions that Balderas' office launched last May.

It says Krebs was able to use public money to pay for the Scotland trip in part because the Athletics Department did not have a chief financial officer and because Krebs could use any purchasing card in the department whether or not he had “proper access.”

Like Keller had in 2017, the report calls into question the independence of the UNM internal auditor to effectively monitor the university. The position is subject to direction from the executive vice president for administration/chief financial officer/chief operations officer – a role recently vacated by a retired David Harris – “who has the potential to direct internal audit away from potential violations.”

It also cited the complex flow of money between the university itself and related fundraising organizations – the University of New Mexico Foundation and the Lobo Club – as problematic for financial management and accountability issues and said it contributed to issues collecting Pit suite rental fees.

It makes a series of recommendations to segregate duties.

It also recommends UNM cut off employees' access to their UNM email accounts as soon as they leave their positions in order to properly preserve public records. The criminal complaint against Krebs notes occasions when Krebs urged others at UNM to delete emails so that they would not be publicly traceable. That includes a message to his wife Marjori, a UNM employee, after he had already retired.

UNM has attempted to address some of the issues uncovered during investigations into the Scotland and Pit suite debacles.

President Garnett Stokes and Athletics Director Eddie Nuñez recently proposed a restructuring plan for the Lobo Club they say would improve the lines of communication.

Upon Harris' retirement, Stokes downgraded the position he had occupied to senior vice president for finance and administration and narrowed the duties. Blair did not say whether it would still provide direction to UNM's internal auditor.

UNM is seeking a permanent hire for the role.