Response to corrections requested by SJSU regarding "Millions Misused"

Statement

SJSU’s proposed correction

Response from Spartan Daily

Less than 5% of Spartan Foundation money intended for athletic scholarships was distributed to San Jose State athletes from 2013-2016 according to sources and confirmed by document reviewed by the Spartan Daily

Every donation designated by the donor for athletics scholarships was used for that purpose

While the university claims that every donation designated for athletics scholarships was used for that purpose, one of the main points of the Spartan Daily’s reporting was that donors were being misled into thinking their donations to the Spartan Foundation were going toward athletics scholarships, while less than 5% did, according to sources and documents reviewed by the Spartan Daily. The university acknowledged this in President Papazian’s statement, in which she wrote, “I was made aware that communication to Spartan Foundation donors was not consistently clear regarding use of donor funds to support student athlete scholarships.”

At this time, the Spartan Daily is not planning to make this correction, though we have updated the story to include the university’s claim.

The Spartan Foundation was marketed to donors on SJSU athletics’ website as a fund that provides athletic scholarships, and was managed as part of the Tower Foundation since 2014 .

Spartan Foundation (SF) is a separate 501(c)3. SF is not managed by Tower Foundation. It deposited its donations into accounts at the Tower Foundation.

The Spartan Daily will clarify the story to show that only the accounts were at the Tower Foundation.

The Spartan Foundation was marketed to donors on SJSU athletics’ website as a fund that provides athletic scholarships, and was managed as part of the Tower Foundation since 2014.

Section 1. THE PRIMARY PURPOSE. The primary purpose of the Spartan

Foundation is to raise funds to support nearly 450 student-athletes annually

for the following;

A. Scholarships for all varsity sports.

B. Assist with the operating budgets and Sports Improvement Funds

(coaches' salaries, travel, equipment, recruiting) for the varsity teams.

C. Building, renovating and maintaining facilities for these teams.

D. Student-Athletes Academic Center and provide support to our academic

staff.

The Spartan Daily’s wording was correct, as we said that on the SJSU athletics’ website, the Spartan Foundation was marketed as a fund that provides athletic scholarships. Even though the university took down one of the outdated pages claiming this, there are still others online today, one of which said, “The bylaws of Spartan Foundation read “(The mission of) the Spartan Foundation is to raise funds for student-athlete scholarships at San Jose State University.”; The Spartan Foundation helps provide athletic scholarship assistance for nearly 300 San Jose State student-athletes who compete in 16 sports for the University.” 

The Spartan Foundation is the fundraising arm of the San Jose State University Athletics Department,” website previously stated. “As its primary objective, the Spartan Foundation provides scholarship support for all of San Jose State’s NCAA Division I athletic teams.”

Same bylaws as above

The Spartan Daily is quoting directly from the SJSU Athletics website in this case, so it would not be appropriate for us to change that wording. The Spartan Daily will add a clarification that the SJSU Athletics website was not accurately conveying what the Spartan Foundation’s primary objective was.

$4.5 million was not distributed per year for athletic scholarships through the foundation fund, according to Spartan Foundation account details.

As Spartan Foundation fundraising was inadequate to fund all scholarships, SJSU Athletics used other sources of revenue, beyond Spartan Foundation donations, to fully fund all scholarships. Most importantly, all student-athletes who were selected to receive scholarships received them.

Specifically, from 2013 - 2016, SJSU Athletics provided over $25M in student-athlete scholarship aid through multiple revenue sources such as but not limited to sponsorship agreements, television contracts, game guarantees, and ticket sales.

The following data of athletically-related student aid is sourced from EADA (Equity in Athletics Disclosure Act) as SJSU Athletics submits required information to the Department of Education and reported to the NCAA.

Source: EADA (Equity in Athletics Disclosure Act): https://ope.ed.gov/athletics/#/

Department of Education site:

Survey Year       Athletically-Related Student Aid

2013    $5,167,667

2014    $5,733,710

2015    $6,813,951

2016    $7,604,545

Total    $25,319,873

The Spartan Foundation account details reviewed by the Spartan Daily indicate that $4.5 million that the fund had, was not distributed toward scholarships, even though the university used other funding to pay for scholarships.

The Spartan Daily has also requested additional information from the university before making a final determination.

Statement

SJSU’s proposed correction

Response from Spartan Daily

(Endowment column)

#5. After three years of accruing interest, the revenue

from the principal investment is sent from the Tower

Foundation to the intended area of use.

A distribution from the endowment is made every spring based on the

trailing three-year average market value of the fund. Distributions from

scholarship endowments are directed to the Financial Aid and Scholarship Office; distributions from other endowments are retained

in separate accounts at the Tower Foundation. Distributions are not

sent to any department other than Financial Aid.

The Spartan Daily will be issuing a correction that funding is sent from the Tower Foundation to the Financial Aid and Scholarship Office and then to its intended area of use in our next print issue in August.

(Donation column)
#2. A donor contract is signed, including the agreed

upon amount and where the money will be going.

There is no minimum for single-time or recurring

donations given.

Donor contracts are not required for non-endowed donations unless

the purpose of the gift is complicated or involves naming a facility or

program.

The Spartan Daily will be issuing a clarification that formal donor contracts are not always signed for straightforward donations in our next print issue in August.

Statement

SJSU’s proposed correction

Response from Spartan Daily

#2. Donors sign a contract, including the agreed upon amount and where the money will be going. There is no minimum amount for single-time or recurring donations.

See above

The Spartan Daily will be issuing a clarification that formal donor contracts are not always signed for straightforward donations in our next print issue in August.

3. The money should be processed through the Tower Foundation, and then distributed to the area of use based on the donors' original intent. Donations are given out the same year as donated unless specified in the donor contract.

3. The money should be processed through the Tower Foundation,

where it is available for the purpose specified for the donor. Donations

are not given out in the same year as they are on deposit in a Tower account for the area (college/division/department/program) designated by the donor to utilize for the intended purpose depending when the funds are needed. It could be next month or even the following year - as it depends upon variables such as donation amount, timing of the gift, and other funds available for the area's needs.

The Spartan Daily will be issuing a clarification that donations are given out on a schedule as specified by the donor in our next print issue in August.

The Donor Bill of Rights is an agreed upon list of rights and regulations for donors and San Jose State respectively.

The Donor Bill of Rights is an agreed upon list of donor rights considered best practices for charitable organizations. San Jose State and the Tower Foundation subscribe to the Donor Bill of Rights.

The Spartan Daily will clarify that the Donor Bill of Rights is a list of best practices in our next print issue in August.

Statement

SJSU’s proposed correction

Response from Spartan Daily

According to Spartan Foundation documents reviewed by the Spartan Daily, the foundation had more than $4.5 million in total revenue that year and $0 was transferred to athletic scholarships.

Of the $4.5 million of revenue, almost $3.3 million was a transfer of Spartan Foundation balances from SJSU to the

Tower Foundation.

The Spartan Daily’s statement is factually accurate. 

The Tower Foundation sets up a separate branch strictly for athletic donations, hiring Josh Thiel to be the university's first-ever deputy athletics director for advancement.

University Advancement sets up a separate branch

strictly for athletic donations, hiring Josh Thiel to be the university's first-ever deputy athletics director for advancement. However, prior to the establishment of Athletics Advancement, different individuals in

Athletics were involved with fundraising.

The Spartan Daily will issue a correction that the separate branch was set up by University Advancement in our next print issue in August.

Statement

SJSU’s proposed correction

Response from Spartan Daily

The university then announced in 2014 that the Spartan

Foundation account was moved out of athletics and into the

Tower Foundation , according to the Spartan Athletics website.

In 2013, Athletics opened accounts for the Spartan Foundation with the

Tower Foundation, which it subsequently used for depositing donations.

The Spartan Daily’s statement is factually correct, as it was announced to the public in 2014. We have updated our story to include the university’s statement that the accounts were moved in 2013.

In 2016, four individuals received more than $150,000 in

compensation from the Tower Foundation and “related

organizations,” including Faas, Bleymaier, Andy Feinstein, the

provost and vice president of academic affairs, and Coleetta

McElroy, the president of the SJSU Alumni Association.

As an authorized auxiliary of SJSU, Tower and SJSU are related entities.

The IRS requires disclosure of board directors' compensation from related

entities. In 2016, the Tower Foundation's 990 listed 26 individuals who

were affiliated with Tower Foundation. Eight individuals, not four as listed in

the article, were from related entities. Other than Bleymaier, none of the eight individuals were paid by the Tower Foundation.

The Spartan Daily’s statement was factually correct, as it combined both compensation from the Tower Foundation and “related organizations” (columns D and E in the 990), but it was misleading, as the related organizations were not directly related to the story. The Spartan Daily will be issuing a clarification that only Bleymaier received over $150,000 from the Tower Foundation, according to the 2015 990 form.

“Endowments held by each school are not even all distributed,”

one source said.

Endowment distributions are made annually unless the donor requests

distributions only be made after a certain date.

The Spartan Daily spoke with multiple other sources that corroborated that source’s statement. At this time, we have updated the story with the university’s response.

“There are cases where endowments have not been spent with

donor intent.”

In the rare instances that endowment spending isn't aligned with the

donor's intention for the funds, department personnel are advised what

permitted uses are.

The Spartan Daily’s statement is factually correct and the university’s proposed correction is in agreement with it.

The sources said they saw Tower Foundation money distributed

to individual colleges, but the deans spent the money against

donors’ intent. When the donors came back to ask where the

money went, the Tower Foundation realized the mistakes made

by individual colleges.

This broad statement falsely implies all distributions were mishandled by

the colleges. In the rare instances that spending is outside the donor's

intent, Tower Foundation requests the expenditure be paid from another

account. At times, Tower has sought donor permission for exceptions.

Similar to the other correction request, the Spartan Daily will be adding in the university’s statement as a response to the story.

Student scholarships sit in the Tower Foundation because

sometimes the deans have a hard time reading the Tower

Foundation quarterly report or the deans didn’t know the

scholarship money existed, sources said.

Background: Within 90 days of a new dean or VP starting, Tower

Foundation's Chief Operating Officer, Leslie Rohn, meets with them and

review every single endowment and current use account in their college

with them, answering questions and providing copies of source documents

they need. Correction: Donations for student scholarships were transferred

to the Financial Aid and Scholarship office two years ago after a

Chancellor's Office audit recommended that scholarships be held in a

single location.

The Spartan Daily has summarized the university’s statement and included it in the story. We appreciate the additional background from the university, and wish we were able to receive this information prior to publishing.

The sources also said that when development officers in charge of donor accounts leave their job, their endowment accounts were forgotten about.

Endowment account holders (whether they be the dean, department chair

or program director) receive monthly reports showing endowment

distribution balances and spending. The focus of development officers is

on cultivating major gifts rather than accounting for funds in their colleges. Tower has a senior accountant whose focus is the endowment; she not

only answers questions, she alerts the dean or department when an endowment isn't being used.

Similar to other correction requests, the Spartan Daily will be adding in the university’s statement as a response to the story.

Kuehn was hired in December of 2016, and since then, Tower

Foundation employees said an accounting system in the Tower

Foundation has been instituted to ensure donor money is

properly logged and going exactly where it is intended.

The endowment system referred to as an accounting system was brought

online in 2015 by Kuehn's predecessor. The endowment system

streamlined many processes, but prior to it there were internal controls

which were designed to ensure donor funds were appropriately used.

Tower Foundation has an annual financial audit by an accounting firm

approved by the campus and the Chancellor's Office. There have been no

findings nor deficiencies identified by the auditors. The Tower Foundation

also has a rigorous triennial Chancellor's Office audit. There have been no

endowment findings or deficiencies identified by the Chancellor's Office

auditors.

The Spartan Daily will issue a correction that the new accounting system came online in 2015, before Kuehn was hired.

In 2018, the Tower Foundation set up a separate branch strictly for athletic donations, hiring Josh Thiel to be the university's first-ever deputy athletics director for athletics advancement.

Same as page 4-5

The Spartan Daily will issue a correction that the separate branch was set up by University Advancement.

Then, after being called the Spartan Foundation since 1958, the Spartan Foundation was renamed the Spartan Athletics Fund in August of 2018.

The Spartan Foundation wasn't renamed. The annual fundraising Spartan Foundation used to do was taken over by Athletics Advancement. The

annual fund was named Spartan Athletics Fund.

Statements from the university, such as this one from August 2018, (“the Spartan Athletics Fund was formerly known by fans and supporters as the Spartan Foundation”)  were misleading on whether the Spartan Foundation was renamed.

We will be clarifying that the Spartan Athletics Fund took over the fundraising previously done by the Spartan Foundation, and some messaging misleadingly implied that the foundation was simply renamed.

President Papazian announced the resignation of Paul Lanning, who was the CEO of the Tower Foundation

Paul Lanning was VP for University Advancement and CEO of the Tower

Foundation

The Spartan Daily will sometimes abbreviate long titles, such as Lanning’s, due to limited print space. For example, when Lanning resigned, the headline was “SJSU VP for advancement resigns.”

We will include Lanning’s full title in our online version.

The Spartan Foundation reported in its 2014 990 EZ tax filings

that it had received $0 in gifts, grants, contributions and

membership fees. However, according to the documents

reviewed by the Spartan Daily, almost $1.5 million was collected

that year.

Spartan Foundation utilized its accounts at the Tower Foundation for

depositing funds raised starting in 2014. Because the funds were deposited

at Tower, the Spartan Foundation 501(c)3 wasn't the legal recipient.

The Spartan Daily will be adding the university’s statement as an additional clarification to our story.