ORLANDO, Fla. — Over the course of several years, UCF has loaned $7.4 million of university revenue to the UCF Athletics Association Inc. and has yet to begin repayment, despite missed deadlines. The loan, according to the Office of the Auditor General, violates Florida Statutes and cannot be accounted for.

Since 2003, the university also transferred $49 million of student athletic fees to the association from money charged to students’ tuition at $11.72 per credit hour.

"We send bills to them and they pay the bills. We just use the university as a bank," said Brad Stricklin, assistant athletics director for business and finance. "It’s just a cash flow thing for us."

Stricklin said that because revenue for the association wasn’t sufficient at the time, the university would hold the athletic fee money, the association would invoice the university and the money would be wired into the association’s account.

The problem, audit manager for colleges and universities Ted Sauerbeck said, is that the university never had the authority to make such transactions to a direct-support organization (DSO).

"We wanted to have a more nationally competitive football program, so it was going to cost more money," Stricklin said. "However, the revenue wasn’t sufficient to meet the start-up expenses."

At the time the money was being given to and loaned to the association, the UCF football program was in the midst of being revamped and the Bright House Networks Stadium, which cost $55 million, was in its conception phase. None of the money used to build the stadium was taxpayer money, university officials have said.

Requests for budget documents were denied by the Athletics Association and deferred to UCF News and Information. Those documents weren’t available before deadline.

"In a nutshell, the university believes it has legal authority to provide funding to its DSO, which is what the athletic association is. We disagree," Sauerbeck said. "The university does not have home rule authority."

Sauerbeck said the university was cited on two different occasions in the 2007 audit concerning the university’s dealings with the Athletics Association, both of which have been repeat offenses in previous audits dating back to the 2003 fiscal year.

"This is not something we see ordinarily," Sauerbeck said. "With the other 11 universities, I don’t recall any of those findings."

In July 2003, the university’s Athletics Department incorporated as a separate entity and became the UCF Athletics Association Inc. — therefore, under Florida Statutes, the university had no authority to make any transactions to the association, Sauerbeck said.

"A department is part of the school with employees of the university, and the moneys that were handled were subject to all internal controls and limitations that all university public moneys are subject to," Sauerbeck said. "But when the money goes to a DSO, they are not necessarily subject to the same controls and limitations that they would be if they were handled by someone who worked for the university."

University officials said they understood the statutes differently.

"The university believes it was both authorized and legal. There is no basis for it not being legal," UCF Vice President and General Counsel Scott Cole said. "They’re a DSO, and by statute they have the right to make expenditures on behalf of the university and to use university resources. It was certainly legal to make those loans."

The university’s general counsel cited in the audit that authority could be implied from numerous Florida statutes, but the auditor general said implication and interpretation doesn’t hold strong.

"None of the statutes cited in the general counsel’s response specifically provide the university authority to make loans to other entities," the audit stated.

It went on to say that Florida Statutes highlight that "direct-support organizations are intended to work to benefit the university, and not operate as a liability to the university by borrowing money from it."

Vice President of UCF News and Information Grant Heston said UCF and the auditor had different definitions of what a DSO was.

"It’s simply a disagreement on what a DSO means. It relates a little bit to the way you can transfer funds," Heston said. "The auditor general is saying there is no explicit authority, and our opinion is that it is implicit or implied authority."

It wasn’t that the association didn’t deserve any money, Sauerbeck said, but the money being transferred had no way of being monitored; so students had no assurance their tuition fee money was being used for the proper purposes.

"I imagine it was being used for the same purposes, but it was being dispersed by the association versus employees of the actual university, and since the funds are not being retained by the university, the university’s records don’t reflect its uses," he said.

According to the audit, the university had the authority to transfer athletic fees to a DSO, but only "for the purpose of paying and securing debt."

Stricklin said: "Only a certain portion of the fee is used toward debt."

The audit voiced concerns of the manner of remittance of the athletic fees because of the lack of procedures to monitor and control those fees.

"There was no accountability on the university side, but it was money due us. It wasn’t as if they said, ‘Let’s just give them money, and we don’t care what they do with it,’" Stricklin said. "I don’t believe in any way shape or form that they [the university] were trying to do anything wrong."

According to documents dating back to 2004 obtained by the Future, more than $7.8 million was loaned to the association, which includes a $375,000 loan after the audit was concluded.

Although UCF should already have started receiving payments on loans totaling more than $4.4 million, not including accrued interest, none of the loans has yet been paid back. Those payments would have totaled more than $966,000.

"Eventually, they would be paid back. We won’t default," Stricklin said.

Even though the university said it felt no fault in the situation, after this fiscal year’s audit, UCF President John Hitt released a response stating that the university would no longer initiate loans or transfers to the association.

"Instead of fighting about it and disagreeing every year, we’ll add more administration costs, but we’ll go ahead and pay it out of the university," Cole said.

Sauerbeck said he believes the university has stopped its practices because university officials have finally acknowledged their mistake.

But regardless of fault, the university and the Athletics Association face no consequences for their actions, according to Board of Governors Director of Communications Bill Edmonds.

"The BOG will get involved if it’s warranted," Edmonds said. "If an issue has been cited, even if it’s serious, if the university is fixing it, then that’s the appropriate response."

Even after supposedly violating Florida statutes and lacking a method of accountability, the audit findings may be ignored.