The lack of production by the University of Hawaii’s athletic fundraising arm, ‘Ahahui Koa Anuenue, is adversely impacting the athletic department’s struggling bottom line, a critical audit read.

The report by Accuity LLP, an external auditor, prompted concern when delivered to the Board of Regents Committee on Independent Audit on Thursday.

The auditor’s report noted, “… that AKA has not conducted any substantial fundraising activities or events on behalf of the athletics department as originally intended by the amended and restated memorandum of understanding between AKA, Manoa athletics and the University of Hawaii Foundation … ”

UH President David Lassner, who oversees athletics in his dual role as Manoa Chancellor, concurred with the auditors saying “(AKA’s) revenues have not grown commensurate with (expenses) so that becomes a matter of operational and management concern in terms of how we finance the athletic department.”

The department’s “fiscal 2016 net loss approximated $3.8 million,” according to the audit report, which read, “the financial condition of the athletic department continues to be fragile due to the ongoing struggle to generate operating and fundraising revenues, compounded by increasing operating expenses.”

Until 2014 when AKA moved into the athletic department, it had operated out of the UH Foundation. But with the change, athletics became responsible for the staffing and operational costs of an expanded six-member AKA staff.

In the 2016 fiscal year, which closed June 30, athletics “received $2.15 million from AKA (which) comprised $2 million for (annual premium seat donations) and $150,000 from fundraising,” athletic director David Matlin said in an email to the Honolulu Star-Advertiser.

In addition, Matlin said, there was $179,000 from court-side seating at the Stan Sheriff Center and $146,104 from group sales.

Matlin said that amounted to $1.4 million below the average of UH’s peer institutions. Matlin said, “Total contributions, including contributions to the booster accounts and the AKA donation of $2.15 million, was $4.6 million. … In 2014, our peers had contributions of $6 million.”

Matlin said, “Our initial budget in July 2015 was for $2.3 million for their annual donation and $200,000 for fundraising for a total of $2.5 million. This was adjusted based on information received from Jon (Kobayashi, AKA director). The final projection in May 2016 was $2M for their annual donation and $250,000 for fundraising.”

Kobayashi declined immediate comment.

The audit read, “AKA’s annual contribution to Manoa Athletics has been steadily decreasing. As AKA is tasked with performing fundraising activities for the benefit of the athletics department, AKA maintains a fiduciary obligation to assist athletics department in reducing its accumulated debt.”

As a result of shortcomings in fundraising and ticket sales and increased expenses, the audit read, “liquidity continues to be a concern as borrowings from the university increased by approximately $7.2 million during the year (ending) June 30, 2016.”

Auditors recommended “AKA personnel develop an annual fundraising plan, which includes detailed monetary goals. We also recommend that this plan be initially reviewed and agreed upon by management of the athletic department, Chancellor and the Board of Regents and that AKA’s actual fundraising results be reviewed on an annual basis by the respective parties.”

Matlin said, “We are having discussions with them, and the board. The bottom line is what the president said, we need to get more involved. Whether it is other activities or the pure fundraising aspect, we have to focus on those areas and grow them collaboratively.”