State employees may have violated the Ethics Act by receiving money from private groups set up to attract major sporting events to Utah, according to an audit released Friday.

The report, however, included no evidence that any state employees were padding their own pockets with extra money. While extra money may have been obtained under questionable circumstances, it apparently was used to build the financial base of the private groups.The report also praised the groups for attracting major sporting events that help the economy, but said the groups are poorly managed.

The long-awaited audit, performed by the Legislative Auditor General, examined the state's sports development office and two private organizations, Better Utah Inc., and The Sports Foundation.

Better Utah was established in 1984 and was used to raise funds for the state's unsuccessful bid for the 1992 Winter Olympics.

The Sports Foundation received a contract from the state earlier this year after state officials decided to turn their sports promotion efforts over to private business. The foundation still receives about $240,000 yearly from the state, but has a goal of eventually becoming self-sufficient.

Several weeks ago, Salt Lake City auditors uncovered the possible misuse of $20,000 in city money by Better Utah Inc., which is one such group. Dave Johnson, a former state employee, was serving as director of both Better Utah and the Sports Foundation.

The city audit said Better Utah may have billed both the city and the state for the same expenses. The legislative audit revealed the same problems, involving about $16,000, and said state employees were improperly serving as board members at Better Utah and the Sports Foundation.

Dave Adams, executive director of the state's Department of Community and Economic Development, serves as an officer of Better Utah and as a member of the Utah Sports Foundation's board of directors.

He was an officer with Better Utah when the state awarded the contract to the Sports Foundation earlier this year. Better Utah contributed $30,000 to help the foundation's bid. State employees also used state equipment to help type the foundation's bid proposal. The foundation was the only organization to bid on the contract.

The state Public Officers and Employees Ethics Act requires employees to avoid conflicts of interest in their state duties and in the releasing of bids.

Adams was in the Far East on Friday and not available for comment. David Grant, deputy director of the department, said he agrees that more bidders should have been involved in seeking the contract.

Grant said the state agrees with the audit recommendations and will remove all employees from positions that might be considered conflicts.

However, Grant said the state's relationships with Better Utah and the Sports Foundation were not unusual because of the small number of sports promoting organizations that exist in Utah.

The report said the foundation has been poorly managed. When it won the state contract, it hired the two state workers, a director and a secretary, who had been performing the same function for the state. Those employees were immediately given a 16 percent raise and were given $7,500 from Better Utah.

The $7,500 was to cover retirement benefits the employees believed they had lost when they left the state.

The audit said that may not have been an appropriate compensation.

Other expenses were paid without receipts or proofs of purchase.

The audit also recommends that lawmakers reject a Sports Foundation request for an additional $100,000 in fiscal 1990. Grant said he understood why auditors would question that request. The money is needed to attract a national bowling tournament in 1993.

"With matching funds in place we could bring in the bid," Grant said. "The cash would not be used until 1993, but we don't have the capacity now to bind the 1993 Legislature."