By The Numbers: Breakdown of OSU Audit

An audit report released Wednesday by the Office of Internal Audit at the Oklahoma Agricultural and Mechanical Colleges Board of Regents has identified significant mismanagement of $41 million in state funds at Oklahoma State University. Here’s a breakdown of the findings:

TIMELINE: What led to the OSU audit?

Editor's Note: These documents were obtained by a records request.

Total Funds Under Review:

$41 million in state funds received between July 1, 2022, and January 15, 2025.

Part of a larger $55.5 million appropriated for Cooperative Agreements.

Key Findings:

1. $11.5 million was transferred to the Innovation Foundation, Inc. without a written contract approved by the OSU/A&M Board, violating state law (70 O.S. §4306(C)) and Board policy.

What is The Innovation Foundation, and why are they at the center of an OSU audit?

1. $20.5 million was co-mingled with other funds, a practice prohibited by OSU Policy 3-0201, GASB 34, and NACUBO standards.
2. $24 million was deposited into unrestricted auxiliary funds instead of restricted Education & General funds, which may be impermissible under 70 O.S. §3901 and NACUBO FARM 363.
3. $4 million was placed in restricted capital funds but was not allocated for specified restricted purposes.
4. $55.5 million was the total amount appropriated for Cooperative Agreements, but the audit focused on the $41 million that had already been transferred.

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Additional Concerns Highlighted in the Audit:

1. The Innovation Foundation, Inc., formerly the Oklahoma State University Research Foundation, relied on legislatively appropriated funds for 96% of its operating costs, raising concerns about its financial independence.
2. OSU’s Education & General (E&G) funds were inappropriately used to cover auxiliary enterprise expenses, including $5.7 million for the Hamm Institute Building operations and $3.6 million for personnel assigned to the Innovation Foundation.
3. OSU did not fully include the $55.5 million in legislatively appropriated funds in its budget presented to the OSU/A&M Board, violating Board and OSRHE policies.
4. Certain OSU executives held simultaneous roles in OSU, OSUMA, and the Innovation Foundation, creating conflicts of interest in the transfer and allocation of funds.

Leadership Changes Before the Audit:

1. OSU President Kayse Shrum resigned weeks before the audit release.

Dr. Kayse Shrum resigns as OSU President, sparking mixed reactions across campus

1. The CEO of the Innovation Foundation resigned shortly after Shrum.
2. Interim OSU President Dr. Jim Hess pledged corrective actions with the OSU/A&M Board of Regents.

OSU’s Response:

Lance Latham, a spokesperson for OSU, stated that while the findings are concerning, they do not impact the university’s overall financial stability.

“OSU remains focused on its land-grant mission to provide accessible education, conduct groundbreaking research, grow the state's workforce, and deliver high-quality health care for Oklahomans. Newly appointed Interim President Dr. Jim Hess is taking swift action, along with the OSU/A&M Board of Regents, to address these matters.”

Other related stories:

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Corrective Actions Recommended by the Audit:

1. OSU must establish and maintain restricted funds for each designated purpose to ensure proper financial tracking.
2. OSU and the Innovation Foundation must reimburse misallocated funds to restricted accounts.
3. OSU should implement stricter financial oversight, including Board-approved contracts for any future fund transfers to affiliated entities.
4. OSU must improve transparency by ensuring all legislative appropriations are properly reported and approved by the Board.

The audit’s findings raise concerns over financial oversight and compliance at OSU, prompting calls for transparency and reform in the handling of state-allocated funds. More updates are expected as OSU leadership addresses the recommendations from the report.