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Audit: WLU Coaches Didn’t Pay Taxes on Camp Revenue

Two say they didn’t consider $80,000 collected from events to be income

May 18, 2011
By SHELLEY HANSON Staff Writer With AP Dispatches , The Intelligencer / Wheeling News-Register

WEST LIBERTY - West Liberty University is reminding its coaches they need to pay taxes on income they earned during athletic camps after an audit revealed two coaches failed to do so.

An audit of the school's 2008-10 finances revealed two university coaches had not paid state or federal taxes on $80,000 in revenues from 10 different camps.

Jack Wright, WLU chief financial officer, said the camps held at the university are organized by the coaches. The coaches also charge and collect fees for the events. During the seven-month audit, Wright said the auditors reviewed the school's summer camps. During this review, they interviewed the coaches and two - who work for the men's football and basketball teams - admitted to the auditors they had not reported their camp-related revenue because they did not believe it was considered income.

"They asked them questions, and they were very honest and said that they hadn't" reported the revenues, Wright said. "We have a number of summer camps up here, and a lot of coaches did file their tax reports. They found two did not. ... We're telling all the internal coaches they need to promptly pay all their taxes."

Wright said the university has debated whether it should take over running the camps, but such a decision won't be made soon.

He added the audit revealed some other issues the university already is working to correct. The audit report was presented to state legislators Tuesday.

Wright noted officials believe the audit was productive for the university.

One of the coaches told auditors "that he was a basketball coach and not a businessman, and was unaware that he should report this income," the report states. It does not name any individuals or list the total revenues from the camps, which hosted junior high and elementary school athletes.

"These were money-making operations," Legislative Auditor Aaron Allred told the House-Senate Post-Audits Subcommittee.

Another audit finding: The Hilltopper Athletic Club received $101,515 from boosters and in other revenues during that time, but had lost its tax-exempt nonprofit charity status with the U.S. Internal Revenue Service. The club had failed to file essential state paperwork while seeking to regain that status, the report said.

"By operating as a nonprofit organization absent proper authorization to do so, taxes not applicable to nonprofit organizations may be evaded," the report said. "In addition, collecting donations from deceived donors may potentially result in litigation."

The club had also kept an outside bank account, amid dueling views by West Liberty's athletic director and chief financial officer over whether its funds belonged to the state. State employees had overseen the club, and partly during college business hours, the report said.

University officials told auditors the club no longer operates independently and they've closed that account, transferring its balance to the school's funds while it considers whether to reform the club.

West Liberty has also updated its rules governing camps and conferences in response to the audit, the report said. Agreeing that school policy bars employees from reaping private gain through university property, officials told auditors they will instruct the coaches to pay any taxes due and recommend they amend prior returns if necessary.

Good advice, said Senate Minority Leader Mike Hall.

"They could be in trouble with the IRS and the state of West Virginia for tax evasion," said the Putnam County Republican. "The IRS will probably come in with tax penalties."

Allred noted to lawmakers Tuesday that university officials requested the audit, after the office of post-audit Director Stacy Sneed identified a number of finance-related problems at Bluefield State College.

"They weren't sure what problems they had, but after hearing about the Bluefield State audit they believed they had issues," Allred said.

The West Liberty audit focused on its Athletic Department, Development Office and Alumni Association, and raised 11 issues. Several involved the handling of purchasing cards and documenting spending. In addition to the camp revenues, auditors found that $53,564 in such fringe benefits as housing and meals were not included as income on the federal statements the school provided to four athletic employees for tax filing purposes.

"There is a possibility that error, theft or fraud may be occurring and unnoticed by University management," the report said, citing the "significant internal control weaknesses" the audit revealed.

University officials said they agreed with each of the findings and would comply with the resulting recommendations.

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