STILLWATER — A member of the Oklahoma State University governing board with 25 years of legal experience in corporate and nonprofit governance pushed back today against claims by recently resigned OSU executives that an audit alleging improper uses of state funding was “not accurate.”
“The audit explicitly states that funds were not spent as appropriated by the Legislature, nor were they spent as agreed to by the board,” said Jennifer Callahan, the newest member of the OSU governing board. “Both internal and external auditors have reached this conclusion.”
OSU administrators released the “state funds” audit to NonDoc and other media following Open Records Act requests Wednesday, one month after Dr. Kayse Shrum resigned as president and Elizabeth Pollard resigned as director of the OSU Innovation Foundation. Shrum and Pollard each issued statements saying they followed laws, policies and legal counsel advice when moving money from the OSU Medical Authority to the Innovation Foundation and its associated institutes.
“Most importantly, there is absolutely no money missing. No state money has been taken,” Shrum said. “All of the money is still in OSU accounts and was spent on delivering education and research per the mission of the university.”
An attorney with McAfee & Taft, Callahan said she “can’t speak to their knowledge and their views,” but she emphasized that “the report speaks specifically to the state laws that were violated.”
“You’ve seen the audit report. It has identified the dollars, and then it’s the process of returning those to restricted funds,” Callahan said. “But ‘missing?’ I mean, I don’t know exactly quite what that means. Dollars were spent, and not for the restricted funds that they were designated for. (…) There were agreements in place. Those are restricted funds, and they were used for other purposes.”
Multiple people with direct knowledge of the situation confirmed that Callahan has spearheaded the review on behalf of the Board of Regents for the Oklahoma Agricultural & Mechanical Colleges. Speaking after the board’s Friday meeting in the OSU Student Union, Callahan outlined the timeline of events leading to the audit.
“During the 2024 legislative session, the Legislature appropriated millions of new funds to the OSU Medical Authority to be utilized for specific purposes. In June, OSU employees came forward with confidential complaints about how these funds and other appropriated dollars were being redirected. These complaints prompted an internal audit review that was completely in accordance with the policies and procedures that OSU has established to manage these types of circumstances,” Callahan said. “In late August, OSU employees briefed me on their concerns about issues that were coming out of this internal audit review. At the same time, I was asked to take the place of a former regent on the board of the Innovation Foundation at OSU. In August, I observed a meeting of the Innovation Foundation (board) and became concerned about its governance structure and its failure to comply with the Open Meetings Act. Due to these concerns, I never formally attended a meeting as a board member.”
Callahan, who joined the Board of Regents in July after a prior nominee of Gov. Kevin Stitt was rejected by the State Senate under a complex set of political dynamics, said she received a briefing on the “preliminary” audit findings in November. Owing to the “emerging issues that were raised in this audit,” she said she recommended establishing a Governance Task Force for the OSU/A&M Board of Regents, which also included regents Joe Hall and Chris Franklin.
“This independent review identified serious issues and led us to make a recommendation that these findings be presented to the board, which resulted in the scheduling of an executive session. Following the executive session, I made motions in the January meeting to freeze the funds associated with the Innovation Foundation, and these motions received unanimous approval,” Callahan said. “The financial stability of the Innovation Foundation was increasingly unstable and to not have acted as we did in January, more funds could have been diverted had it not been stopped. The board did its job.”
‘How those funds were utilized is subject to further review’
While the OSU Board of Regents, interim President Jim Hess and others would certainly like to see Wednesday’s release of the audit turn a page for the university community, details about exactly how the Innovation Foundation spent state funds and how much money must be returned to proper accounts remain unclear.
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For instance, cooperative agreements between the OSU Medical Authority and the Board of Regents did exist between 2023 and 2025 regarding transfers of funds to entities under the Innovation Foundation, including the Oklahoma Aerospace Institute for Research and Education (OAIRE) and the Human Performance and Nutrition Research Institute (HPNRI). However, the audit contends that millions of dollars were co-mingled with other funds and spent on Innovation Foundation costs — such as $1 million for administrative compensation — beyond the authorized scope of those agreements.
“The audit has identified that those were transferred over to the Innovation Foundation instead of where they were supposed to go,” Callahan said. “How those funds were utilized is subject to further review.”
Asked if OSU will release additional information and documentation when specific uses of the funds become clear, Callahan responded, “Potentially.”
“I mean, we have to drill down on that, both with the internal and external audit,” she said.
On Thursday, NonDoc asked Pollard whether the Oklahoma Legislature intended for OSU Medical Authority appropriations to be spent by the Innovation Foundation, which has a mission that involves “translating innovative applied research into products and services” for commercial purposes.
“I’m not going to publicly comment on that at this time,” Pollard said.
Auditors noted that the Innovation Foundation had only generated 2 percent of its Fiscal Year 2025 budget, while more than 95 percent of its funding had come from the redirected state dollars. Asked if the OSU Innovation Foundation was financially sustainable, Pollard similarly avoided the question.
“I’m still reviewing the audit in detail and don’t want to comment more fully on that at this time,” Pollard said.
In a statement Thursday, Gov. Kevin Stitt expressed support for the Board of Regents taking action.
“Any alleged misuse of funds must be addressed quickly,” Stitt said. “I’m grateful that the board took their oversight role seriously and mobilized this audit to ensure they protected taxpayer funds. OSU will emerge even stronger and ready to prepare the next generation of Oklahomans.”
To do that, OSU leaders are trudging forward with their primary request of the Oklahoma Legislature this session: $295 million for a new College of Veterinary Medicine facility. Once a leading vet school in America, the program remains on accreditation probation, and OSU leaders have expressed belief that a new, modern physical structure could return the program to national prominence.
“A new facility is absolutely critical for attracting the top veterinary talent and the top veterinary students,” Hess told regents during Friday’s meeting. “It’s also critical to make sure the state of Oklahoma regains a competitive advantage in the ability to recruit the highest-quality students and faculty. Our neighboring states are making major investments in veterinary medicine, and with all of our work together, so will we.”
State Secretary of Agriculture Blayne Arthur, who serves on the OSU/A&M Board of Regents, said after the meeting that “tremendous needs” exist for the College of Veterinary Medicine and that such an investment by the Legislature will support human health as well as animal health and agricultural production.
“Veterinary medicine, and in particular large-animal practitioners, are so important to our food supply chain continuing to move,” Arthur said. “Here in Oklahoma, our livestock producers really rely on large animal, food animal practitioners to take care of their livestock, make the right decision (and) ensure that we’re getting a high quality animal protein product out to all consumers.”
Chairman Jimmy Harrell agreed with Hess and Arthur, saying lawmakers should view the Board of Regents’ response to the Innovation Foundation situation as evidence of a commitment to fiscal responsibility.
“I think they can see that by our actions, what we’ve done as a board,” Harrell said. “I think they’ll see that we’re trying to handle the money they send us in a proper manner, and I think that’s the way you message it — that we’re handling the money they gave us in a proper manner and the way they expected us to use it.”
Senate Appropriations and Budget Chairman Chuck Hall (R-Perry) said Thursday he was briefed on the OSU audit before its release.
“I think we recognized through this audit that in some cases the legislative intent wasn’t followed. I do believe that Oklahoma State is doing everything that they can to have corrective action, and I have confidence that they will do that, and that the legislative intent will be followed prospectively,” Hall said. “Oklahoma State is putting procedures in place to make sure — in working with the Board of Regents at OSU — that they get accurate reporting. I think that this is a lesson learned. I think we found, you know, we potentially uncovered gaps in kind of auditing procedures. And so I think that we learn from it, that we take corrective action, and I think ultimately the legislative intent will be followed.”
Although Arthur seemed to acknowledge the issues the audit identified could complicate OSU’s pursuit of funding for a new OSU College of Veterinary Medicine facility, she said the need is so important that stakeholders simply have to be direct and honest about the situation at hand.
“I think we have very clear and transparent conversations with lawmakers and those decision makers about the needs specific to veterinary medicine, and (we) ensure them with the leadership in place at the Oklahoma State University and the Board of Regents that we’re going to make the vet school what we want it all to be.”
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OSU agenda items feature multiple financial requests
Inheriting the institution’s fiscal responsibility, Hess is charged with implementing corrective measures to address OSU’s financial reimbursements to the proper entities recommended in the March 5 audit. The audit recommends that Hess oversee the Innovation Foundation’s reimbursement of all improperly diverted funds, with various mid-summer repayment deadlines looming.
Callahan, meanwhile, said the regents have selected a new chief financial officer for OSU, who she said should be announced next week.
Despite the board’s purported new focus on governance reform and transparency, members approved multiple vaguely described agenda items regarding large purchases and funding allocations.
The OSU/A&M Board of Regents approved multiple agenda items regarding OSU financial matters Friday, including:
- “Request approval of curricular changes including new degrees, program modifications, etc.”;
- “Request approval of actions required to refund master lease program bonds for savings”;
- “Request approval of Series 2025 General Revenue Bond actions, including execution of a resolution to form Supplemental Bond Resolutions and the sale of the Board’s Series 2025 General Revenue Bonds”; and
- “Request approval to enter into a purchase agreement for real property adjacent to the east side of the Stillwater campus and authorize the designated administrator(s) to take all steps necessary to effectuate the purchase, and to manage or operate the property.” (During the meeting, a member clarified that this agenda item referred to a $4 million purchase of the Stillwater YMCA facility at 204 S. Duck St.)
The board also approved multiple purchase requests and the qualified use of OSU’s auxiliary enterprise funding, including:
- “Authorization for Housing and Residential Life to increase the previously approved estimated annual amount of $1.8 million to $3.6 million for overflow student housing. This increase is due to a possible increase in the number of beds from 200 to 400 on an as-needed basis. Funding will be provided by Auxiliary Enterprises Funds”;
- “Authorization for OSU Athletics to purchase 11,000 chairbacks for Boone Pickens Stadium in the estimated amount of $1.5 million. This one-time purchase will allow the chairbacks to be leased on gameday and generate new revenue for Athletics”;
- “Authorization for OSU-Center for Health Sciences to purchase reagents and testing supplies from Hologic Inc. for laboratory testing within the clinic system in the estimated annual amount of $700,000”;
- “Authorization for the Student Union to purchase water damage and restoration services for three floors of the Student Union in the estimated amount of $3,040,000”; and
- “Ratification of interim approval received from the Board CEO, Feb. 22, 2025. Authorization for the Student Union to purchase water damage and restoration services for the first part of recovery services for three floors of the Student Union in the amount of $960,000.”
