Sonoma State University will phase out a department that may face substantial penalties for its handling of state and federal money.

The top two officials of the California Institute of Human Services were placed on leave last month and an audit of its books is being done, SSU officials said.

Although the audit isn?t complete, officials said a decision has been made to close the institute, which trains social service providers, as its state and federal grant funding expires.

?It?s winding down,? said Laurence Furukawa-Schlereth, SSU?s vice president for finance and administration.

The closure will take two to three years as the individual grants lapse and are reviewed to see if they still fit within SSU?s educational mission, said Susan Kashack, associate vice president of communications.

The grants that SSU decides to keep, Kashack said, ?can be incorporated very easily into the more traditional part of the university. It is just efficient.?

?We are not renewing some of the grants, unless they are directly tied to the university?s education mission,? Kashack said. ?It probably will not even be called California Institute for Human Service three years from now because these grants will be integrated into the educational program.?

She said the allegations of mismanagement are not the direct reason the institute is being closed, but the decision was the result of the broader review the allegations prompted.

?The institute has trained many, many people to do good things throughout the state and community, but with limited resources and limited time, we have to make sure that everything we do points toward our mission,? Kashack said.

The grants have been for such programs as training Head Start teachers or recruiting students for AmeriCorps.

The audit began six weeks ago involving staff members from SSU and the California State University. Furukawa-Schlereth said KPMG, the campus? outside auditor, has been brought in because of its expertise in state and federal grants.

Auditors are looking into whether employees paid by one grant were working on another, expenditures were billed to the proper grant and contracts worth more than $50,000 were put out for competitive bids.

Preliminary results indicate SSU will have to repay large sums to the state and federal governments, Furukawa-Schlereth said.

Exactly how much will be released next week when the audit is finished, he said.

?It?s significant,? Furukawa-Schlereth said.

The institute operates on $22 million in state and federal grants and runs programs that train providers of services that deal with pre-school and after-school programs, child abuse, family violence and literacy.

It was founded 27 years ago and employs 125 people at SSU and the Channel Island and San Marcos university campuses.

?The work is quite noble, but does it make a strong contribution to curriculum?? Furukawa-Schlereth asked. ?You have to make sure.?

Meanwhile, the institute?s two top officials remain on paid administrative leave.

Tony Apolloni of Santa Rosa, the institute?s founder and SSU?s associate vice president of research and sponsored programs, is paid $153,120 a year.

George Triest of Sebastopol, the institute?s managing director, is paid $125,532 a year.

Apolloni declined comment and Triest could not be reached.

You can reach Staff Writer Bob Norberg at 521-5206 or bob.norberg@pressdemocrat.com