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The Atlanta Journal-Constitution
November 4, 2003
Unfair or balanced: UGA audit pored over
A blistering report on University of Georgia President Michael Adams' use of donated UGA Foundation money was unusually subjective, inconclusive, laced with innuendo and nitpickingly petty.
Or it was fair, its wording and tone adequately couched, and no different than most such reports.
Those are the opinions of accounting experts who, at the request of The Atlanta Journal-Constitution, reviewed the DeLoitte & Touche report on Adams and the UGA Foundation.
Their divisiveness mirrored reactions by others to the report that was released last week.
Three accountants --- including two from outside Georgia --- said the foundation report appeared biased, just as Adams and his defenders have complained. Two others found it evenhanded, as Adams' critics maintain.
Opinions on both sides run to the extreme. One accountant found the report so innuendo-laden as to be unprecedented in his accounting experience.
"I've never seen a report prepared like this, ever," said Michael Kessler, CEO of the Manhattan-based Kessler International, which specializes in forensic accounting, which combines traditional auditing and investigative research. "There's such nitpicking here. There's a lot of innuendo."
The accountants also were divided as to whether DeLoitte & Touche's accounting team should have handled the Adams report in the first place, given that the firm gets a regular paycheck to audit the foundation's books.
Kessler and two other accountants said the report's credibility is hurt by that dual role.
He said the temptation to deliver to the foundation a report it wants would have been great. "Obviously, they would try to please [the firm's] regular employer," he said.
Philadelphia accountant George Miller, a partner in Miller, Coffey & Tate, also questioned the arrangement.
In the wake of a series of accounting scandals at companies like Enron and WorldCom, Miller said, federal lawmakers have strictly limited accounting firms' ability to feed at more than one end of a company's trough.
The accounting conflict-of-interest bans included in the new Sarbanes-Oxley law don't apply to nonprofit organizations like the UGA Foundation, but "under Sarbanes-Oxley, I don't think they could have done what they did here," said Miller.
"It happens all the time. But they shouldn't have done it," he said.
A spokesman for DeLoitte & Touche referred calls on Monday to the university foundation board, which did not return calls for comment.
DeLoitte's report, though, says the foundation addressed the "the possibility of bias" by hiring a team of DeLoitte accountants different from the foundation's usual auditors.
$135,000-plus expense
The Adams report that exploded into the public eye Oct. 29 was nearly four months in the making and cost the foundation more than $135,000 in lawyers' and auditors' fees, according to foundation records.
It nicked UGA's president on a number of alleged improprieties, including a pricey, foundation-funded party for his son's graduating law school class; alleged failure to control an expensive project in Central America; an allegation that Adams exaggerated the benefits of a competing job offer; and an allegation that he improperly gave sports tickets to friends and family.
Allegations of bias surfaced as soon as the report did. Both Adams and the state Board of Regents criticized the report's tone, scope and timing, suggesting it was essentially a hatchet job motivated by Adams' decision not to renew the contract of UGA Athletics Director Vince Dooley, a football coaching legend revered by many supporters of the Athens university.
Defenders of the foundation's report say otherwise.
Jacob Frenkel, a former Securities and Exchange Commission attorney and now a Washington-based lawyer with the Atlanta firm Smith, Gambrell & Russell --- and who hires forensic accountants for litigation --- said the DeLoitte & Touche team spoke "to all the right people" and "attempted to lay out facts as opposed to being judgmental."
Fred Jacobs, a Georgia State University accounting professor and forensic accounting expert, also found the report "very thorough in describing what they looked at, and what evidentiary weight they assigned it."
"Their conclusions are couched in cautionary terms," he said. "They express doubt when there is doubt and they express uncertainty when there is uncertainty."
Cautionary language
The report's critics point to the same cautionary language as part of its problem. Miller, the Philadelphia accountant, noted the report includes a sentence or two saying that Adams' foundation spending was largely fine, then devotes "all these pages to these relatively little things."
New York accountant Kessler said the more cautious language allowed the report's authors to insert innuendo with impunity: "You've got all these wiggle words . . . like 'in some instances' or 'may have been.' In this business, we deal in black and white."
Kessler said he was particularly bothered by the inclusion of what he called "nitpicky" allegations, including a list of Adams' friends who received sports tickets. The report also mentions a $58 hotel room charge, later reimbursed, for one of Adams' relatives. "Why even bring something like that up?" said Kessler.
Kessler said he was confounded by the report's treatment of Adams' claim that he had been offered an $850,000 compensation package at Ohio State University. The examiners allowed an Ohio State official to invoke confidentiality agreements to avoid confirming part of Adams' story --- that he'd been offered a job there.
The auditors, Kessler said, then allowed the same official to presumably violate the confidentiality in order to discount another part of Adams' story --- how much Ohio State had been willing to pay.
Questions raised
A third critic of the report, Atlanta accountant David T. Wolfe, said the university foundation's decision to make it public raises questions.
Wolfe, president of Forensic FirstSource, said forensic accountant reports are typically done under contract with an organization's attorneys and relayed in oral form, in order to avoid public disclosure.
That's what the Deloitte accountants did with a second report, on the foundation itself. That second report has not been made public.
Wolfe said a forensic accountant should rarely "offer any conjecture and, if he/she does, rarely in written form, rarely for public consumption and never without clarifying that the inference [conjecture] is not based on complete or conclusive evidence."
"I was surprised by its tone, and I was surprised by the amount and types of opinions, judgments, inferences and conjectures made," Wolfe said. "Clearly, one has to wonder why."
What the Deloitte & Touche report said:
* "Unquestionably, over the course of the six years that Dr. Adams has been the president of UGA, the majority of [foundation] expenses have complied with all policies and procedures. However, in some instances this has not been the case, often due to human error. In some instances, it appears that foundation funds have been misappropriated."
What the experts said:
* "They express doubt when there is doubt and they express uncertainty where there is uncertainty."
Fred Jacobs, accounting professor, Georgia State University
"What some may choose to perceive as conclusions, they actually are overlooking the conditional and qualifying language that the report writers have used."
Jacob Frenkel, former Securities and Exchange Commission attorney
"You've got all these wiggle words . . . like 'in some instances' or 'may have been.' In this business, we deal in black and white."
Author - Pierre L. Titard, Robert L. Braun, and Michael J. Meyer
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