The executive director of the Gavilan College Educational
Foundation resigned shortly after it was revealed that the
foundation he headed misspent $270,000 in earmarked funds.
The executive director of the Gavilan College Educational Foundation resigned shortly after it was revealed that the foundation he headed misspent $270,000 in earmarked funds.
“I felt it was best for the college foundation that, because of all this back and forth, it would be better if I stepped down,” said Ken Berry, who headed the foundation for the last seven years.
Earlier this year, the college discovered that the foundation – which raises money for student scholarships and athletic and academic programs and projects – had dispersed $270,372 to Gavilan College that was earmarked for specific projects and programs. In April, the foundation asked the college to return the money, a request Gavilan trustees unanimously approved, saying they had no real choice.
The money has been used to reinstate the donor accounts, Gavilan College President Steve Kinsella said. The money was also used to refund at least $170,000 to Jeff Garcia – an 11-year veteran quarterback of the National Football League and a graduate of Gavilan College – who asked for his donation back when it was not spent within a few years to construct a stadium, said Bob Garcia, Jeff’s father.
Gavilan College pays the foundation $65,000 every year in exchange for marketing and fundraising services, said Kinsella, who also sits on the educational foundation’s board. Unlike many of the contributions made by private donors, which are “restricted” – or earmarked for a specific purpose – the college’s contribution was “unrestricted” and could therefore be put toward paying for a staff member and hosting foundation events.
“If everyone restricts their money, you can’t pay operating costs,” Kinsella said.
Although the foundation flourished during Berry’s first five years, pumping more than $1 million into programs and projects at Gavilan College, the sour economy took its toll in recent years, stemming the flow of donations to the foundation, Berry said.
“We were doing well and then things came to a screeching halt,” Berry said.
When contributions stopped flowing, the foundation tapped into earmarked funds to cover operating costs, such as Berry’s salary and events, Kinsella said.
“Restricted money ended up being used for unrestricted purposes,” he said.
Additionally, the foundation mistakenly “overpaid” the college for certain programs, Kinsella said. For example, “One year, they gave out $100,000 in scholarships when they didn’t have $100,000 to give,” he said.
Financial statements show that the foundation’s balance declined from $550,990 in June 2007 to $24,394 in June 2009 as a result of losses and disbursements made to the college. Although tax records show a loss of nearly $80,000 on a golf tournament, a casino night and an auction in 2007 alone, Kinsella said the numbers can be misleading because fundraisers usually require cash up front while donations don’t flow in until later.
However, he did not want to make excuses, he said.
“There’s no denying it’s poor coordination of events, poor monitoring of restricted accounts and inadequate monitoring of unrestricted costs as they’re being incurred,” he said. He chalked the financial mess up to “really bad organization and accounting.”
The use of earmarked funds to cover day-to-day expenses came to light when the foundation started running out of cash, Kinsella said. The foundation unsuccessfully attempted to restore its restricted accounts by fundraising before going before Gavilan College trustees and requesting them to return the $270,000, Kinsella said. Surplus funds from the college’s unrestricted general fund covered the expense, he said.
“As college president, I’m stepping in,” Kinsella said. “We can’t do this again. We’re far better off if we never get the money in the first place, because the departments have all spent it. I can’t go back to them and ask them for the money back – it’s now a projector, it’s tables and chairs.”
However, despite the financial mess, only one donor, who Kinsella would not name, requested his contribution be returned.
About three years ago, Jeff Garcia contributed a sizable sum to the foundation to help build a stadium at Gavilan, said Bob Garcia, who is also a former head football coach at the college.
“They were going to start matching it and get companies to start throwing in money,” Bob Garcia said.
At its peak, the stadium fund showed a balance of $343,779, according to financial statements. Berry said he expected the project to cost $3 to $5 million.
“This was going to be the first stadium at a community college to be privately funded,” Berry said. “We had the best intentions to build a stadium. At the time, things were going well. But the last two years, it’s been horrible.”
After the money sat for a couple years with no stadium in sight, Jeff Garcia asked that his donation be returned, Bob Garcia said. The football player was told that the foundation only had about $170,000 of his original contribution left, causing concern on his son’s behalf, Bob Garcia said.
“That money was earmarked for a special purpose and it shouldn’t have been touched,” he said.
The stadium fund showed a balance of zero dollars as of April 30 and Kinsella said the donor who made the request has been refunded.
To avoid misspending restricted funds in the future, Gavilan has put several safeguards in place, Kinsella said, such as creating separate checking accounts for restricted and unrestricted funds. Therefore, the foundation will be able to avoid the commingling of the two types of funds and prevent internal borrowing, said Joe Keeler, Gavilan’s vice president of administrative services. Additionally, Keeler has been assigned to oversee the foundation’s finances in an advisory role. Keeler will help the foundation’s board, which is made up of volunteers, and the executive director make sound financial decisions, Kinsella said.
“They have been very faithful and hardworking members of the board,” he said. “They just made a mistake.”
Now that Berry has resigned, Gavilan trustees hope to play a role in the selection of his replacement.
“If the configuration stays the same, our role will still be limited but the college will have more of a proactive role in operations,” Gavilan trustee Tom Breen said. “The board is certainly very interested in how we go forward from here. I think, by default, we will be more involved. We want to assume more responsibility for (the foundation’s) success. Things are going to be different and, I trust, better.”
With such a close relationship between the foundation and the college, the foundation’s finances “need to be simple,” Breen said.
Trustees expect to be updated on the foundation’s financial and hiring situations at a June board meeting.
