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A Sonoma State University social services program accumulated more than $2 million worth of questionable expenses, including $280,000 in payments to an ex-employee, according to a state audit report.

University officials said Monday that the improper expenditures could reach $3.6 million after further review of the California Institute on Human Services.

The state audit is sharply critical of the two former university administrators who ran the program, Tony Apolloni and George Triest.

The audit cites questionable expenses, violations of contract policies, potential conflicts-of-interest and, in the case of the ex-employee, a misappropriation of funds that lasted for five years.

The institute, which is being phased out by the university, provides training and educational services for social service agencies, focusing on family violence, early childhood education and literacy.

It was founded in 1979 and operated last year on $22 million in state and federal grants.

The state audit was initiated earlier this year after SSU officials reported inappropriate expenditures by the institute. University police last spring opened a criminal investigation, which remains ongoing.

In outlining their findings, the auditors didn't identify the former SSU employee who received the alleged payments.

They said the employee was a since-retired woman who at the time worked at a care facility for the developmentally disabled and was paid with grant funds from the institute. Auditors said Apolloni owned the property that housed the care facility and one of his relatives lived there.

Additionally, auditors found a $25,000 payment in 2000 for an institute project at the same care facility, citing the expenditure as a potential conflict-of-interest for Apolloni.

In reaction to the report, SSU President Rubin Armi?na released a statement Monday saying that "we are very disappointed that people we trusted violated that trust."

Neither Apolloni, the institute's executive director, nor Triest, its senior director, could be reached for comment. The two were let go from their positions in June, officials said.

Both men also refused to meet and answer the auditors' questions, according to the report.

SSU officials said the university might owe a substantial amount of money to the state and federal governments because of misspending by the institute.

SSU spokeswoman Susan Kashack said that amount now stands at $2.9 million and could rise to $3.6 million.

She said the university might have to tap reserves or borrow money to make the repayments.

The 33-page report by the Office of the University Auditor, which is part of the California State University chancellor's office, was released Friday and was titled a special investigation. It reviewed the institute's finances dating back at least 20 years and noted a variety of questionable expenses.

They include:

$720,000 in administrative payroll and contractual operating expenses without a proper funding source.

$624,000 in labor costs not approved by the officials directly in charge of overseeing expenditures for each grant.

$403,000 in other questionable and possibly "non-billable" expenses.

$9,000 in payments in 1987 or 1988 to a nonprofit corporation created by Apolloni and from which he received payments in 1986 and 1987.

Far from settling the matter, the report drew calls for more information.

Among those demanding more details was Barbara Nemko, the elected Napa County Superintendent of Schools, who was identified in the report, though not by name.

The report noted that the institute in 1999-2000 paid $5,792 to Nemko, identified only as the head of the Napa County Office of Education. At the time, Apolloni was employed as an administrator for both the institute and the county office.

The auditors acknowledged they were unable to determine exactly who hired Nemko or authorized the payments.

Nonetheless, they concluded, "because the supervisor (Nemko) received payments from an entity run by the executive director (Apolloni) and she had the ability to influence his secondary employment, this situation creates at least the appearance of a conflict of interest."

Nemko strongly denied any conflict of interest.

She said she needed more specifics to know exactly for what she had been paid seven years ago, but it was possible that she had done the work directly at the behest of the state Department of Education. In that case, she said, the SSU institute simply handled the payment for that work.

"If they would like to say that I did something improper," she said, "I would like to know what it was."

She added she was appalled that no one from the auditor's office had contacted her regarding the allegation.

Clara Potes-Fellow, a spokeswoman for the auditor's office, said the auditors didn't contact Nemko because they didn't need to add to the documents they already had obtained and because neither the county superintendent nor her office are part of the state university's jurisdiction.

The report also left unsatisfied Bob Karlsrud, dean emeritus of SSU's school of social sciences, who had overseen the institute's directors until he stepped down in 2001.

Karlsrud, who now is retired but still lectures at the university, said educators there want to get to the bottom of what happened, in part to prevent it from happening again.

"To understand this whole thing we need the audits" by both the university and a private auditor, Karlsrud said.

He also wants to see the written policies that allegedly were violated and the written orders authorizing the institute's managers to oversee the expenditures.

Even though Apolloni was let go as an administrator, he is a former professor and has exercised his right under existing labor agreements to return to teaching. He "expects to do so in spring 2008," Armi?na told university employees in a memo dated Friday.

You can reach Staff Writer Robert Digitale at 521-5285 or robert. digitale @pressdemocrat.com.

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