Cal U funds scrutinized

State System memo details review of transferred money, fired president

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Two organizations affiliated with California University of Pennsylvania pooled their money to acquire an upscale loge box at the Consol Energy Center to entertain individuals including potential donors, an internal document shows.

The Foundation for California University of Pennsylvania paid 40 percent of the box's cost the last two years through a pool of unrestricted donations dubbed "Where the Need is Greatest," according to a State System of Higher Education memo obtained by the Pittsburgh Post-Gazette late Monday under the state's Right-to-Know Law.

The Student Association Inc. paid the remainder, though State System spokeswoman Karen Ball said Monday evening that system officials do not know the source of money used by the association, which is funded mainly by university-collected student activity fees transferred to the association.

The box cost a total of $92,250 over two years.

The memo also says that $5.9 million in net profits from Cal U student housing facilities transferred since 2003 into a foundation fund for scholarships, in fact, remained under the control of then Cal U President Angelo Armenti Jr. and was "available for discretionary spending."

Of the $832,511 spent by the fund since 2003, more than half went to endeavors other than scholarships, the memo says.

The pool for scholarships, called the "President's Quasi-Endowment" fund, paid $352,444 to Grenzebach Glier & Associates Inc., an international consultant in philanthropic management for nonprofits -- a firm that had a 20-month contract starting in 2008 with the foundation on behalf of Cal U.

The scholarship fund also paid $100,000 to FranklinCovey Co. in August 2007 and August 2009 for speaking engagements with Stephen R. Covey, author of "The 7 Habits of Highly Effective People." The memo says the scholarship fund paid another $6,375 to the Redevelopment Authority of the County of Washington to support a feasibility study related to construction of a hotel.

Asked whether the State System considered the expenditures appropriate, Ms. Ball said, "I can't characterize it for you because I haven't been able to talk with the people I need to talk to about this."

She said the findings relate to whether the foundation is as separate from Cal U as it is legally supposed to be, something she described as the core issue in the State System's review of Cal U and Mr. Armenti, who was fired last week.

State System officials have not specified why Mr. Armenti was fired. Mr. Armenti has defended himself against what he called false allegations in an audit of spending by Cal U, which is facing budget cuts and rising construction debt.

The memo obtained Monday was written by Dean A. Weber, director of the State System's Office of Internal Audit and Risk Assessment and was sent May 9 to Leonidas Pandeladis, the State System's chief legal counsel.

The three-page memo contained results of a special project review of foundation expenditures related to the president's office intended to determine whether Mr. Armenti received significant personal benefit from payments made through the foundation.

The foundation review determined that Mr. Armenti had access to three foundation funding sources: the "Where the Need is Greatest" fund, the "President's Quasi-Endowment" fund and an annual $7,000 line item for development.

The memo says the review found "no instances of significant personal benefit being received by President Armenti." However, it cited both the Consol Energy Center expenditure and the scholarship fund as "observations."

The memo said records indicate that Mr. Armenti and his wife used the box for fundraising occasions just twice.

Last week, an audit released by the State System said the net housing profits are considered part of Cal U's education and general fund and thus are considered public funds. "Therefore, the transfer to the foundation is considered unlawful," the audit stated.

It recommended the transfers end and a review be conducted to determine whether "housing fees charged to students are unnecessarily inflated because net profits are being used for scholarships rather than offsetting future housing costs."

Also Monday, it remained unclear whether Mr. Armenti, whose salary was $227,160 under a contract that runs through June 2014, will be paid his final two years other than for unused sick time, leave and accrued health benefits. Asked if the System has or is drafting a settlement agreement, Ms. Ball repeatedly replied, "We have no agreement with Mr. Armenti at this time."

Ms. Ball said Mr. Armenti can remain in his campus residence for 60 days and will continue to have use of a car provided to him as president for a period of time she could not specify.

education - region - neigh_south

Bill Schackner:, or 412-263-1977. First Published May 22, 2012 12:15 AM


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