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A private company created by Utah State University was rife with conflicts of interest and inconsistent financial reporting, according to an audit released Wednesday.
Utah State University Archaeological Services, created in 2009, was formed through the school's Sociology, Social Work and Anthropology Department, with faculty members as owners of the company.
That led to instances of USU faculty receiving grants, which were then spent contracting with their own business, according to a report completed by the Office of the Utah Legislative Auditor General.
The company also received university contracts without a competitive process — a violation of state law — accessed university resources and inappropriately used the Utah State University name to identify itself, the report states.
"We found that conflicts of interest existed and persist between USU faculty and USUAS," the report states, "and that USU managed those conflicts poorly."
Lead performance auditor Matthew Harvey said administrators were aware of conflicts with the company, but their efforts to mitigate and control those conflicts were ineffective.
One of those controls included guidance by administrators that grants be run through a member of the anthropology program faculty, according to the report, but that faculty member is married to the director of Utah State University Archaeological Services.
"The university was very much involved with the formation of this company as a private company," Harvey said, "and should have foreseen that doing so would create conflicts of interest."
Other issues highlighted in the report include company board meetings being held in university facilities, and inconsistent reports of quarterly earnings and royalty payments.
Auditors were unable to locate earnings reports from 2012, and only one year — 2010 — for which full quarterly reporting records were available.
"We found no evidence that USU followed up when the quarterly statements were sent inconsistently and [USU] did not exercise its right to audit USUAS to ensure compliance," the audit states.
Wednesday's report included a response from Utah State University in which administrators concurred with all of the audit's recommendations.
Spokesman Tim Vitale told The Tribune that USU faculty members have divested their shares in the company, which will remove Utah State University from its name.
"USU has initiated the termination of the USUAS License Agreement," the school's response states. "This termination will require USUAS to change its name to no longer include 'USU' or any other trademark of the university."
Harvey said it is not yet known what the company's name will be.
"The entity is a private business," he said. "It can do whatever it wants."
He said USU administrators have committed to respond to the issues raised by the audit.
"We'll see how they are implemented, but I don't see any indications that the university is not responding appropriately to the recommendations," he said.
Twitter: @bjaminwood