Ivy Tech ex-president repays $20,000 following audit of expenses

June 16, 2008

Retired Ivy Tech Community College President Gerald Lamkin has repaid nearly $20,000 after a review of the college foundation's expense-reimbursement policy uncovered bills that had been paid for him without proper documentation.

College and foundation officials call the accounting lapse and Lamkin's inability to produce receipts for all the submitted expenses an "innocent oversight" and have implemented a revised policy with tighter controls.

Lamkin, now Ivy Tech's president emeritus, also paid more than $3,500 in interest as a result of the review, conducted by the school's law firm and an outside accounting firm.

He was traveling and could not be reached for comment.

The investigation, launched in April 2007 at the request of an unnamed foundation board member, covered the 30-month period from Jan. 1, 2004, to June 30, 2007, the date Lamkin retired as president.

Although the amount of money in question is relatively small--a mere fraction of the $48.7 million in assets Ivy Tech Foundation held at the end of its last fiscal year--it nevertheless is considered an "excess benefit transaction," which not-for-profits must disclose on their federal tax form.

Tax laws prohibit charities from using their assets for the benefit of an executive rather than the organization. Because Lamkin could not provide documentation for all of his reimbursed expenses, the difference should have been classified as taxable income for him.

Hired in 1967 as an accounting and management instructor, Lamkin, 71, served 24 years as president of Ivy Tech , a state-funded educational institution overseen by a 14-member board of trustees.

Ivy Tech Foundation is a separate not-for-profit organization governed by its own board; its purpose is to support Ivy Tech students and programs. Lamkin, who was paid $275,000 as president and now makes $192,500, gave the foundation about $81,000 over the years.

The two boards share a handful of members, and the college provides administrative support since the foundation doesn't have any employees.

A foundation trustee suspected the prior reimbursement policy lacked oversight and brought it to the attention of the full board, sparking the review, said Joe Reed, chairman of its audit and policy committee. Reed said he didn't know which trustee raised the issue.

The review, conducted by Indianapolis-based Ice Miller LLP and local accounting firm Katz Sapper & Miller, found that Lamkin charged about $3,100 a month--mostly for meals and travel--to a foundation-issued credit card. He turned over the credit card statement each month to the foundation, which paid the bill.

But Lamkin did not provide supporting documentation, such as receipts and an explanation of the business purpose of the expense, and the accounting staff did not ask for any, Reed explained.

He blamed turnover in the accounting department, saying staff members likely weren't as knowledgeable about the policy as they should have been and didn't ask Lamkin for documentation.

Lamkin regularly entertained potential donors at the Columbia Club in Indianapolis, using a membership paid for by the foundation. Unlike other Indiana colleges and universities, Ivy Tech does not provide its president with a house, which is where other university leaders do most of their entertaining.

While Ivy Tech declined to provide an accounting of the $19,491 in unsubstantiated expenses Lamkin submitted, the foundation's tax-form disclosure indicates the first expense Lamkin was unable to back up was an $11.66 payment for an unknown charge made Jan. 5, 2004. The last expense was a $15.22 business club expense on May 31, 2007.

For the most part, Reed said, when Lamkin couldn't substantiate an expense, it was because he was unable to provide the name of the person he entertained or the purpose of the meeting.

"Being that far back, he couldn't find the detail," said Reed, a retired banker from Logansport. "Many of us aren't very detail-oriented, so he might not have felt he needed the level of detail of records he should have."

In order to correct an excess-benefit transaction, the IRS requires that the amount in question be repaid with interest. Lamkin paid $3,582 in interest. A 25-percent excise tax also is imposed if the repayment is not made in a timely manner. Lamkin was not required to pay the excise tax.

Ivy Tech's new repayment policy appears to make it difficult for the same problems to crop up again because it's an "accountable plan," which meets IRS guidelines for business-expense reimbursement, said Bruce Hopkins, a Kansas City attorney who wrote the 1999 book "The Law of Tax-Exempt Organizations."

"If it's not an accountable plan, it hasn't really accomplished much," Hopkins said. Such plans include rules stating that expenses must be business-related, properly substantiated and accounted for on a timely basis.

The college's old expense-reimbursement process, which the review found to be "generally" in compliance with federal regulations, ultimately was deemed "not adequate and should be improved," according to the foundation's disclosure.

"We feel that the new policies will prevent a similar situation from happening again," said Jeff Fanter, Ivy Tech's vice president of marketing and communications. "In this case, there was an innocent accounting oversight, but the changes put in place add additional checks and balances to eliminate even those types of oversights."

New safeguards include prior-approval requirements that the old plan didn't have, according to Fanter and documents included with the foundation's tax filing.

All college employees--including current President Tom Snyder--must provide an estimate of expenses to their respective budget departments as annual budgets are being set. And to be reimbursed for qualified expenses, employees must complete a newly created form that spells out the type of documentation needed.

No such form existed with the prior plan.

In addition, there is no longer a foundation-issued credit card, which had been issued only to Lamkin.

"Things are put under the microscope more than they were in the past," Reed said.

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