College trustees were forced to refund the college’s foundation
more than $270,000 this month after the foundation misappropriated
funds and found itself on the verge of bankruptcy.
College trustees were forced to refund the college’s foundation more than $270,000 this month after the foundation misappropriated funds and found itself on the verge of bankruptcy.
The board of trustees voted unanimously during its April 13 meeting to give the money back to the Gavilan College Educational Foundation, though student trustee Hannah Kempis cast an advisory “no” vote. Kempis also objected to the college continuing its annual $65,000 payment to the foundation for marketing and fundraising, saying those funds could be better used to prevent the college from having to cut classes.
“The foundation is supposed to function as a separate entity,” Kempis said. “If the foundation screws up its funds, why is Gavilan College giving them money for it?”
The refund initially appeared on the “consent calendar” – agenda items usually considered routine and not discussed by trustees. However, trustee Elvira Robinson removed the item from the consent calendar because it was a large amount of money and deserved to be discussed publicly, she said.
Steven Kinsella, Gavilan College president and a foundation director, said the agenda item was placed on the consent calendar because trustees did not have much of a choice from a legal standpoint.
“The foundation is asking for the money that it overpaid, and by all legal rights, the college has to pay that back,” Kinsella said.
Still, trustee Mark Dover said he understood why people might be upset.
“I would be upset as a donor if I had given $500 to the athletic department, and it was used to cover the social sciences department,” Dover said. “I had no problem giving that money back.”
The foundation (which raises funds for student scholarships, projects and programs) lost $526,596 in the past 2.5 years, leaving it with only $24,395 as of June 30, according to financial statements. In addition, foundation officials misspent donations that were designated for a stadium project and college preparation, among other uses, Kinsella said. As a result, accounting firm Vavrinek, Trine, Day & Co. expressed “some doubt” in a Feb. 12 audit that the foundation could avoid bankruptcy
However, college officials said they believe the reimbursement and improved oversight will help remedy the situation.
“The board has to have much tighter control obviously on what’s occurring,” Kinsella said.
Tax records and the February audit indicate that the foundation lost $79,113 from a golf tour, casino night and auction in 2007 after gaining $64,384 from those events the previous year.
Kinsella said those figures can be misleading as events often require immediate spending but reap donations the next year, putting them on a later statement. At the same time, no one is debating that the foundation has taken a huge financial hit in recent years.
“It’s been a tough year and a half,” said Foundation Executive Director Ken Berry.
Berry made $64,000 in 2008, down from $99,600 in 2006, according to tax data.
The foundation has suffered some of the same financial setbacks that many other foundations have endured, he said.
Still, whether funds were misspent remains a point of contention. At the end of 2009, an audit shows the foundation had $316,709 earmarked for a football and soccer stadium and $61,494 earmarked for the Puente Program, a college preparatory program for minority students. The audit also indicated the foundation had overspent $43,081 earmarked for scholarships, according to the report.
Berry disputed some of the audit findings, saying that he only considered money for the Puente project as truly earmarked. In addition, he said some earmarked funds varied from month to month.
Yet, the foundation should have done its due diligence and not spent earmarked funds, Berry said, adding that he took full responsibility for what happened.
The foundation is looking forward to “getting back on the right track,” he said. “I think what we have to focus on is that all the money that was raised went back to the college, and the college reimbursed us back.”
Though the foundation has benefited the college, trustees expressed concern about the misuse of funds, they said.
“The situation, it’s troubling, and frankly frustrating for the board of trustees,” board president Deb Smith said.
The college has taken extra precautions with the foundation following the recent financial foul-up. Joe Keeler, Gavilan’s vice president of administrative services, will now oversee the foundation’s finances in an advisory role. In addition, the foundation has established a separate checking account specifically for earmarked funds, Kinsella said.
Kempis, the student trustee who opposed the reimbursement, also belongs to an expenditure reduction task force that recommended in December against the college giving any money to the foundation. She said she will propose that the associated student body compose a letter to board members, students, staff, faculty and foundation donors that would express concern about the board’s April 13 decision to give money back to the foundation.
However, administrators and board members said it is important to keep in mind that the foundation has raised about $1.4 million for the district during the past five years, and that it only recently has fallen on hard times.
The foundation has given the college a baby grand piano and various other musical instruments, and raised about $137,000 for scholarships in fiscal year 2009 alone.
As a result, Dover supported the board’s decision to continue funding the foundation, saying that such fundraising provides a greater connection between the college and the community.
“Some people would never come to the college if it weren’t for those events,” he said.
