Internal audit finds 'significant issues' in how OSU spent appropriated money
About a month after the surprising resignation of Oklahoma State University President Kayse Shrum, an internal audit released by OSU after an open-records request found 'significant issues in the allocation and management of legislatively appropriated funds' at the university.
Among the findings of the audit – released Wednesday, two days before the next meeting of the OSU/A&M Board of Regents – were that the university did not properly account for $41 million in legislatively appropriated funds between July 1, 2022, through Jan. 15, 2025, a time during which Shrum was serving as president.
The scope of the audit was limited to an amount of about $55.5 million for fiscal years 2023 to 2025, and sought to try and understand the specific restrictions and intended uses of the appropriated funds. It did not include all legislative appropriations during that time.
According to the audit's executive summary, the $41 million in funds 'were not properly restricted and in some instances were co-mingled with other funds, leading to expenditures that were not aligned with the restricted purposes.' The improper handling of funds, the audit said, included unauthorized transfers to the OSU Innovation Foundation, one of Shrum's favored projects, which was rebranded in 2023 from its former name, the Oklahoma State University Research Foundation.
'Such actions in some cases violated state laws and policies, thereby posing financial and reputational risks to the institution,' the audit said.
Shrum has not returned messages seeking comment since her resignation became public and OSU officials have remained mum as to the 'why' of her decision.
OSU officials kept the situation so secret that the OSU/A&M Board of Regents didn't officially announce Shrum's resignation until two days after it took effect, neglecting to give a heads-up to key state higher education officials, including Chancellor Sean Burrage and Dennis Casey, the chair of the Oklahoma State Regents for Higher Education.
Less than a week after Shrum resigned, regents named Jim Hess as OSU's interim president.
'OSU remains focused on its land-grant mission to provide accessible education, conduct groundbreaking research, grow the state's workforce, and deliver high-quality health care for Oklahomans,' OSU spokesman Lance Latham said in a statement Wednesday. 'Newly appointed Interim President Dr. Jim Hess is taking swift action, along with the OSU/A&M Board of Regents, to address these matters.
'Dr. Hess has underscored that while the financial decisions and transactions which occurred are concerning, they were isolated and do not impact OSU's overall financial foundation, which remains the strongest among Oklahoma's institutions of higher education.'
According to its website, the Innovation Foundation's mission 'is to maximize the impact of OSU's excellence in aerospace and advanced mobility, energy, agriculture, and One Health by translating innovative applied research into products and services, facilitating strong partnerships with aligned industry and regional partners, and investing in the development of emerging companies — all for the benefit of society.'
Another finding in the audit was that the Innovation Foundation lacked 'independent funding' and 'is not operating with financial independence and has inappropriately utilized legislative appropriations intended for OSU. The audit found the Foundation 'relied on inappropriately transferred legislatively appropriated funds intended for OSU special projects to support 96% of (its) operating costs.'
The Innovation Foundation's executive director, Elizabeth Pollard, resigned soon after Shrum. Pollard told the Tulsa World, 'The Innovation Foundation followed University policy and procedures, including financial reporting into University systems.'
The audit also found that between 2023 and 2025, $55.5 million in legislatively appropriated funds from the OSU Medical Authority was not fully presented to the OSU/A&M regents' board for budgetary approval, something required by both the board and the Oklahoma State Regents for Higher Education.
The audit said $41 million of that amount had been transferred from the Medical Authority to OSU. It also said OSU transferred $11.5 million in legislatively appropriated funds to the Innovation Foundation – money provided through OSUMA and intended for the University.
'Failure to obtain Board budgeting approval for the legislatively appropriated funds undermines the Board's governance of the institution and its ability to conduct fiscal oversight and ensure accountability,' the audit said.
Part of the problem, the audit said, is that seven OSU executive leaders, including Shrum, served simultaneously with OSU, the OSU Medical Authority and the Innovation Foundation 'related to the transfer of legislatively appropriated funds from OSUMA to OSU and then to the Innovation Foundation, Inc.' That, the audit said, 'created a conflict of interest and a lack of segregation of duties. Further, the multiple roles blurred the lines of governance.'
Late Wednesday afternoon, the university issued another statement, from OSU/A&M Regent Jennifer Callahan, the chair of the board's Governance Review Task Force.
'The OSU/A&M Board of Regents has a responsibility to ensure the financial integrity and oversight of its member institutions and has procedures in place to fulfill that responsibility,' Callahan said. 'The board and OSU administration are committed to transparency and to taking swift action that protects the university's commitment to students.'
This article originally appeared on Oklahoman: Internal OSU audit finds significant issues with how funds were spent
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