Paying for the Freeh Report

There was a rumor circulating that individuals from outside the University paid for the Freeh Report.  Well, all monies are fungible -- meaning that money flows in and out and it can't be traced to any one particular source, person, or persons.

The Notes to the Penn State University 2012 Financial Statements reveal that the monies paid to Freeh and others in the aftermath of the Grand Jury presentment were paid from institutional support funds.  Institutional support funds comprised 6.9% of the budget at a cost of $314.3M.  See chart at bottom.

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Litigation and Contingencies

In November 2011, the University was made aware of certain allegations in a Commonwealth of Pennsylvania Grand Jury presentment. Various legal proceedings and investigations have arisen as a result of such allegations, including criminal proceedings against a former officer, an administrator and a former employee of the University. Certain civil litigation has been filed against the University with anticipation that other complaints will be filed. The outcome of such litigation and potential for future litigation is unknown at June 30, 2012 and, therefore, no accruals for future costs have been recorded in the 2012 financial statements. Through June 30, 2012, the University has incurred costs, net of insurance reimbursements totaling $16.1 million for internal investigation, legal, communications and other related costs. These costs are included in institutional support within the 2012 consolidated statement of activities. Insurance reimbursements through June 30, 2012 totaled $779,000.

The University has included $2.0 million in accruals for costs that were incurred but not paid at the balance sheet date. Such accruals are part of the costs, net of insurance reimbursements, noted above and are included in current liabilities. Potential for future insurance reimbursement is unknown as of June 30, 2012 and as a result no revenue accruals have been recorded in the 2012 financial statements.