College fails to meet accounting standards; Business Development
Center to lose federal funding
Gilroy – A regional agency in Gilroy that fosters small business development and brings biotechnology training to local classrooms will lose its funding – to the tune of at least $150,000 a year – because Gavilan College administrators failed to brush up their book-keeping in a timely fashion, according to a regional director who oversees the program.
The community college, which serves as financial sponsor for the Gavilan College Small Business Development Center, will lose its contract for an $80,000 grant and the matching funds it helped generate because the school “just was not responsive for too long” to requests to meet federal accounting standards, said Chris Rosander, director of the Small Business Development Center at the University of California, Merced.
After nearly a year of delay, Gavilan College untangled the various funding streams that sustained its SBDC and submitted the information to Merced in recent weeks – long after a federal auditor visited the school and declared its ledgers “un-auditable,” according to Rosander.
“The accounting division of the [Gavilan College] administration department – they didn’t assign anyone senior to the program,” he said. “They didn’t take it seriously.”
The regional center at Merced is one of six lead agencies in California that doles out hundreds of thousands of dollars each year from the federal Small Business Administration. The regional centers steer the money to cities, community colleges and other sponsor organizations, which in turn channel the funds to local business centers such as the one based in Gilroy.
Rosander said Gavilan College and other sponsor agencies under the Merced umbrella, which stretches along Central California from Sacramento to Los Angeles, were warned in spring 2005 to clean up their ledgers in advance of a routine federal audit that summer. It would be the first audit since administration of the grant program fell to regional centers like Merced.
“All three of our community college-hosted SBDCs had been doing financial management incorrectly for over a decade under the California Trade and Commerce Agency’s lead management,” Rosander said, explaining that the state dissolved the agency during the 2003 budget crisis.
While colleges in Bakersfield and San Luis Obispo only required a month last summer to shed bad accounting habits and bring their ledgers up to the standards of a new administration, Gavilan College administrators took 10 months. The delays prompted Rosander to send a letter Monday notifying the school it could not continue as financial sponsor of the program.
Gavilan President Steve Kinsella, who was out of town Monday, declined to comment until receiving official notification about the loss of the grant.
“I know that our business office provided to U.C. Merced everything they requested in terms of financial reports for the Small Business Development Center,” college spokeswoman Jan Bernstein-Chargin said. She pointed out that the school has received “clean audits” for a number of years.
The loss of the grant means that the Gavilan SBDC can no longer qualify for matching funds from area cities, corporations and private donors. Those sources accounted for about $70,000 to $80,000 a year.
It remains unclear if the loss of the federal contract will prevent the school from renewing a $140,000 state grant. The California Community College’s Chancellor’s Office, which provides the funding, did not return an inquiry about whether the grant funds must be administered by the SBDC.
The state money has helped bring biotechnology education to 1,600 high school students in Gilroy, Hollister and Morgan Hill. Bernstein-Chargin said the college plans to create a separate director for the biotechnology program, which until now has fallen under the purview of Rich Gillis, the director of the Gavilan SBDC.
Gillis said it would not be appropriate to comment on the possible loss of federal monies, or on his relationship with school administrators who control the center’s funding.
Rosander lauded Gillis, pointing out that a regional accreditation board singled him out for his leadership. But the local director’s effectiveness, he said, was blunted by the college’s financial mismanagement.
“During (the last 10 months) the accounting department kept telling the SBDC director ‘You don’t have any money available,'” Rosander said. “They kept starting and stopping his funding, which meant he had to start and stop his consultants, which meant his performance was falling off and he couldn’t serve his clients. The amount of funding that should have been available was not.”
He stressed that the loss of the contract does not mean the city will lose the benefits of a small business development center. Any local agency that gets the contract, which comes up for renewal in two weeks, must serve a region that spans east Monterey County, San Benito County and southern Santa Clara County. Gilroy is a focal point within that region and there remains a chance that another local agency, such as the Gilroy Economic Development Corporation, could pull down the grant.
“The heart and soul of this is that whatever a community needs in terms of support for small business development and education, that’s really what we’re about,” Gillis said. “That’s our mandate. Even if the grant leaves here and goes elsewhere, I see very little adverse impact on Gilroy because it will still be within the district. And if it does go somewhere, I’ll be looking at the possibility of applying for the job.”
The loss of federal funding for the Gavilan College Small Business Development Center means Gilroyans may have to travel farther afield to get help growing a new business.
