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July 16, 2002

Cal State San Marcos Begins Internal Examination of MBA Program Following CSU Investigation Report

California State University San Marcos President Alexander Gonzalez announced that the campus will begin an internal examination of an Extended Studies (ES) Master of Business Administration (MBA) program that operated between 1995 and February 2001. The action follows a recently completed investigation by the CSU Office of the Chancellor that found that the program had not followed campus and CSU policies. Today San Marcos offers a state-supported MBA program and no longer offers the ES MBA program.

Gonzalez requested the investigation in fall 2001 after he discovered irregularities in the way the ES program was structured and funded. “When I heard of the possibility of inappropriate activity within the MBA program, I initiated a series of actions. This investigative report is one of the final outcomes. We have already discontinued the program operated through Extended Studies, replaced a number of administrators, created a new state-funded program with more administrative control, and cleaned up the procedures that allowed this situation to develop. We most want to emphasize that while there were problems in the way faculty were compensated for teaching the MBA program, the quality of instruction delivered to our students was not affected. The original MBA program and the new MBA program offer high-quality instruction,” Gonzalez said.

The internal investigation, Gonzalez said, will determine “whether any additional action is necessary” in light of the investigation report.

The investigation found that:

  •  “Faculty and campus administrators… acted collectively in disregard of various laws, regulations and CSU policies” regarding creation, oversight and operation of the MBA program.

  • “From the inception of the ES MBA program in 1995, CoBA (College of Business Administration) and MBA program leadership and certain prior campus administrators acted in an economically wasteful manner with respect to their administration of CSUSM academic resources. It appears that this was done with the intent of maximizing remuneration of certain CoBA faculty.” The investigation did not find that any administrative pay was inappropriate.

  • The Extended Studies MBA program was funded with a blend of state and non-state money rather than being totally self-supporting as required by law.

  • “The MBA program offered exclusively through ES… supplanted a state-supported regular session MBA program.” CSU regulations require that state-supported programs take precedence over self-support programs.

  • Faculty members teaching MBA classes were paid above normal salary schedules without presidential approval.

  • The report concludes that during a period of six years, approximately $300,000 from an inappropriate fund source (Continuing Education Revenue Funds) was allocated as grants to CoBA faculty.

  • “CoBA faculty was often paid under special consulting contracts to perform duties that are typically included within regular faculty responsibilities.” For example, “CoBA hired student advisors while, elsewhere at CSU San Marcos, this responsibility was assigned to departmental faculty.”

  • Discretionary funds made available to faculty, “the majority… used for travel,” “were not sufficiently supported and appropriately approved.” Controls over other discretionary expenditures were also “inadequate.”

  • “Since the inception of the ES MBA program, hundreds of contracts and grants (to certain CoBA faculty), amounting to thousands of dollars annually, were offered as additional compensation. Generally, we found that support, evidencing a tangible deliverable or product of service from these expenditures, was lacking.”

The report did not name individuals. As an administrative investigation, it was intended to evaluate organization, operation and procedures of the CoBA and MBA program. The report has been forwarded to the Joint Legislative Budget Committee, the State Auditor, and the Department of Finance.

In its response to the investigation, the University listed a number of actions already completed:

1.      The publicly offered MBA program in Extended Studies has been discontinued.

2.      A state-supported MBA program has been implemented.

3.      An appropriate fee structure for any future Extended Studies MBA program has been formulated and submitted to the campus for formal approval.

4.      Policies have been established ensuring that Continuing Education Revenue Funds are expended in accordance with Education Code requirements, and training has been scheduled for administrative staff and faculty.

5.      Special consulting contracts that pay faculty for duties typically included in their teaching responsibilities have been discontinued.

6.      Pay for hours worked by faculty on grants now correlate to actual pay rates.

In addition, a number of changes are underway. Most are expected to be completed by November 2002:

1.      Policies and procedures will be implemented to ensure appropriate controls over expenditures and workload in the College of Business Administration.

2.      Rigorous academic governance policies and procedures for the College of Business Administration are being developed and implemented.

Bob Sheath, Provost and Vice President for Academic Affairs who arrived on campus in July 2001, is responsible for implementing the recommendations and actions taken in response, said “We have already taken numerous actions and other actions are underway and will be implemented as soon as is practical. Most of the faculty in our College of Business Administration were not implicated in any inappropriate activity. We continue to have an academically strong MBA program through the normal state-supported route. Students will continue to receive a quality MBA education that will prepare them for success in their chosen fields.”

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Note: The full report is available at http://www.calstate.edu/Audit/SpecialInvestigations.shtml