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Originally published March 22, 2013 at 9:34 PM | Page modified March 22, 2013 at 9:33 PM

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Audit: CWU wrongly used student fund to cover basic costs

Central Washington University in Ellensburg erred when it charged a student-activity account $1.3 million for basic university operations over the past two years, according to the state auditor.

Seattle Times higher education reporter

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Central Washington University violated the intent of state law when it charged $1.3 million in administrative expenses to a fund meant for student activities, the state auditor has found.

Auditors say CWU was charging the student fund to pay for basic operations of the Ellensburg university, including public safety, groundskeeping and alumni relations, rather than using the fund exclusively for expenses directly related to student activities.

“They were spending money out of this fund they shouldn’t have, and probably charging too much,” said Matt Miller, deputy state auditor.

The letter that auditors sent to CWU President James Gaudino was welcome news to a handful of CWU students who have been battling the administrative fees for more than two years.

“This whole issue, it was like going against Goliath,” said student Isa Loeb, who helped lead the fight.

University administrators say they will probably refund some of the money, but say it’s still proper to charge administrative overhead to the mandatory fee collected for student activities.

Both Western Washington University and Eastern Washington University also charge students an administrative overhead fee, although they say the charge is directly related to administering student activities. Both charge students less than a third of what CWU is charging this year.

Neither the University of Washington or Washington State University charges administrative overhead.

“What the university was doing, in my opinion, was just flat wrong,” said Jon Ferguson, a retired former deputy state attorney. Ferguson, who lives in Ellensburg, began assisting the students pro bono beginning in 2011.

$200 a quarter

Every student who attends a state university or college in Washington pays a services and activities fee, also known as the S&A Fee, which is regulated by state statute.

Students at CWU pay about $200 a quarter. The fund raises $6 million to $7 million a year, and it helps pay for the bond measure that built the Student Union and Recreation Center. It supports the Early Learning Center for child care, pays for the campus radio station and provides money for a host of smaller expenses meant to enhance student life, including student concerts and clubs.

In 2011, after CWU’s funding was slashed by the state in a wave of budget cuts during the recession, the university switched to a kind of accounting that required every department to pay a portion of administrative overhead, said Lind Schactler, executive director of public affairs for the university.

As part of that, the university also began leveling an administrative overhead fee against the S&A fund — a $790,000 fee in 2011-12 that calculated usage for each of a number of categories, and a $571,000 fee in 2012-13 that was based on a percentage of salary and benefits from 17 different departments in the university.

Ferguson said he believes Central shouldn’t have charged these costs to the student fund because “it has nothing to do with the real cost” of administering the student programs.

In their investigation, auditors said CWU didn’t comply with state statutes in 2011-12 when it charged $328,000 to the student fund for such basic university operations as police and fire protection.

And it questioned the basis of $507,000 in charges for such things as public relations, facilities management and alumni relations.

“We consider these normal maintenance and operation functions of the college, not student activities,” auditor Chuck Pfeil wrote in a letter to the university.

In fiscal year 2013, the university shifted to a percentage-based method of calculating the costs and charged students $571,167.

But the auditor’s office said this was no better — the basis for all of those charges were either questionable or not in compliance with state law.

The administration believes many of the costs will turn out to be justified once a careful accounting is completed. “What the attorney general and auditor agree on in principle is, it’s fine to charge administrative overhead costs,” Schactler said.

For the coming school year, the university already has filed a budget request with students for administrative overhead. The amount: $448,000.

Student opposition

Students say they are being overcharged.

“We never had the stance that we shouldn’t be paying at all, I just disagree with the way they’re calculating it,” said Loeb.

Former CWU student Mike Merz, who was a legislative lobbyist for students before he graduated in December, likened the fee to a tax on the student fund. He said students were already paying for maintenance and operations — through their tuition.

Merz said he didn’t buy the university’s argument that it made sense to use a corporate model of accounting since Central isn’t a corporation — it’s a public institution for higher education, supported by the state.

Student Dustin Waddle-Ford said he was at first sympathetic to Central’s argument that students should pay their fair share of overhead. But he came to believe the university’s method of figuring the administrative costs was not legal, and that administrators should be working harder to reduce costs.

“It’s this idea that we’re going to charge you extra, instead of making any attempts to make it up on our (the university’s) end first,” he said, noting the cost of tuition has gone up by double-digit amounts for the last few years and many students are struggling to pay for their education.

Miller, the deputy auditor, said his office is working on an accountability audit, but that the office is not yet ready to release it.

“It’s safe to say there might be a finding here, to explain why we’ve taken issue with this for a couple of years now,” he said.

Katherine Long: 206-464-2219 or klong@seattletimes.com.

On Twitter @katherinelong.

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