Naval Academy account was used for 'extravagant' spending, inspector general finds
Wednesday, June 30, 2010
Leaders of the U.S. Naval Academy operated a "sham" bank account as a slush fund to cover invitation-only tailgate parties at football games, happy hours and holiday gatherings, according to a report released Tuesday by the naval inspector general.
The report "was a factor" in the premature exit of Vice Adm. Jeffrey Fowler, the Annapolis academy's superintendent, who will leave in September after three years on the job, said Rear Adm. Denny Moynihan, lead spokesman for the Navy.
Fowler pledged to do a better job overseeing academy funds but told investigators "that any expenditures he authorized were permissible" and that he "did not financially gain from these irregularities," Moynihan said.
The superintendent faced an "administrative action" in April in response to the year-long investigation, Moynihan said. Robert C. Parsons, the academy's deputy for finance, was suspended for five days without pay. A third, unnamed official was also reprimanded.
Navy investigators, responding to a 2008 complaint, questioned dozens of expenses involving tax dollars and money raised privately by the academy's foundation.
According to the report, the school spent $400,000 or more annually for academy-sponsored tailgate events over the past six years. Other expenses included $157,000 for a tractor-trailer for the football team, $3.7 million to produce a series of recruiting videos and $325,000 for an antique airplane model that hangs at the entrance to Dahlgren Hall, a signature campus building.
Many of these larger expenses were found to be appropriate use of academy funds; investigators declined to judge whether the sums were excessive.
But auditors sharply criticized the existence of an unauthorized, off-the-books contingency fund, established in 2007 and used to channel privately raised foundation money to various uses.
"Its existence is a sham, and it was used much as in the business definition of a 'slush fund,' " the report says. Many of the expenses were "extravagant and wasteful," and the account itself was "improper on its face."
The academy has enacted "better accounting practices" and other controls in response to the investigation, which concluded in November, Moynihan said. A top naval operations official receives monthly updates on the reforms. Moynihan said the academy is "much better prepared to avoid such incidents in the future."
Fowler's tenure at the academy has stirred considerable controversy, but until now it has mostly focused on admissions and recruiting. Fowler set out to make the academy more racially and socioeconomically akin to the military and the nation. Some alumni and military observers have accused him and the institution of overreaching in their quest for diversity. Meanwhile, the academy has welcomed its most diverse classes and raised the applicant pool under Fowler's watch.