FROSTBURG -- Frostburg State University Foundation Inc. officials continued to spend money on political events after being warned by a foundation member in August 1988 that such contributions were "flatly" barred by federal tax laws.
Foundation director Mark L. Atchison, who is also a vice president of the university, said those donations included a $100 check written to buy a ticket to a Baltimore fund-raiser for Gov. William Donald Schaefer.
Although the governor's campaign finance director said he had no record of the donation, he disclosed that the campaign had received a $500 contribution in 1988 from a similar non-profit foundation at Salisbury State University.
James W. Smith, the finance director, said the Salisbury State contribution was discovered after a reporter's inquiry about the Frostburg State donation. The $500 would be returned to the Salisbury State University Foundation, he said.
Mr. Atchison of Frostburg State said a $100 check was written Dec. 12, 1988, to "Reflections '88," a major fund-raiser for the governor, from a discretionary fund established for the use of President Herb F. Reinhard Jr.
Mr. Atchison said the university's librarian attended.
In 1987 the foundation, also using money from the president's discretionary account, bought $300 worth of tickets for a salute to Governor Schaefer staged by the Allegany County Democratic Central Committee.
C. William Gilchrest, a lawyer and foundation member, warned Mr. Atchison in an Aug. 22, 1988, letter that the 1987 salute contribution was a "glaring example" of improper spending. He said it could jeopardize the foundation's tax-exempt status.
Federal law, University of Maryland System policy, and the foundation's 20-year-old charter expressly bar the use of funds from non-profit foundations for political purposes.
Asked yesterday why he approved the expenditures, Mr. Atchison said, "I really can't answer that."
He said no one intended to violate the law. "It was an attempt to create a presence for Frostburg State University," he said.
Acknowledging that he was legally responsible for seeing that foundation funds were used properly, Mr. Atchison said: "In retrospect, it was clearly a mistake, an error in judgment."
Despite the $100 contribution, the foundation filed forms with the Internal Revenue Service for the year ending June 30, 1989, that left blank the space for responding to a question about whether any funds had been used for political purposes.
Mr. Atchison, who signed the form, said he did not know why the question had not been answered.
Meanwhile, Salisbury State University President Thomas E. Bellavance said yesterday the non-profit foundation on his campus had purchased $650 in tickets to political events "that could be construed as questionable."
He said they included the $500 for five tickets to the governor's December 1988 fund-raiser in Baltimore, a $50 ticket to an event for Del. Charles J. Ryan, D-Prince George's, in September 1988, a $25 ticket to a September 1988 Maryland women's lawmakers event, and a $75 ticket to a 1986 event for Governor Schaefer held in the university's own dining hall.
Dr. Bellavance said the practice was stopped in 1988 after his in-house counsel advised him that it was inappropriate.
"In each of those instances, there was no intent to support any candidate," he said. "We were just trying to make sure Salisbury was represented."
Back at Frostburg State yesterday, Mr. Gilchrest's letter was anonymously distributed on campus as University of Maryland System internal auditors arrived to inspect the foundation's books.
The inspection, launched at the request of Dr. Reinhard, comes one day after university officials admitted the foundation had contributed an estimated $1,240 from the president's discretionary fund to political events since the fund was established in 1987.
At a meeting of the foundation's board of directors yesterday Dr. Reinhard took responsibility for purchasing tickets to fund-raisers and donations to charities associated with politicians.
He apologized "that the whole thing came about" and asked the directors to abolish his discretionary account, which contained $743.53 on June 30.
Audits released yesterday showed $18,779 has been deposited into the account since June 1986.
Dr. Reinhard said he would never again use foundation funds to support such things as a local hospital auxiliary ball. "If we can't do it from university operating budget, we will simply not have Frostburg represented" at community events, he said.
Dr. Reinhard said Tuesday he had solicited money for the discretionary fund from local business leaders. But Mr. Atchison yesterday said the foundation permitted Dr. Reinhard to take $10,000 that came from an unrestricted estate gift in 1988 and put it in his discretionary account.
Normally, such gifts are put in the foundation's general gift account.
Dr. Reinhard used part of the estate gift -- $3,512.90 -- to establish discretionary accounts for other university officials, Mr. Atchison said. A foundation audit for June 30, 1989, showed 11 such accounts.
Mr. Atchison assumed his position on July 1, 1988, just after the foundation directors had instituted tougher controls on spending and reiterated its policy against using any funds for political purposes. He said he was did not know of any other political contributions made from discretionary accounts controlled by other university officials.