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After Tough Review, Ventura County Community Foundation Moves to Bolster Operation

After months of staff and budget cuts, the Ventura County Community Foundation has embarked on the next phase of its fiscal restructuring by reporting observations from an independent fiduciary review to the Charitable Trusts Section of the California Attorney General’s Office.

Hired in February 2015, VCCF chief executive officer Vanessa Bechtel said the fiscal issues that she and her new management team discovered were supported by a report that an internationally respected accounting firm issued after a seven-month review.

“These findings were disappointing to say the least, and the Board of Directors regrets this turn of events,” Bechtel said. “Every foundation aims to make sure donor funds are being maximized for their intended purpose. Unfortunately, the fiduciary review found otherwise.”

While the attorney general’s review is underway, VCCF has already started implementing a multistep plan to provide stronger fund oversight and fiscal management. Some fund holders will actually see their asset balances increase, and none will reflect decreases in the next statement due to this review. 

The foundation has asked the AG’s office to verify the scope and accuracy of the proposed restatements.

“While no fund holders will see their account balances decrease as a result of this review,” Bechtel said, “some fund holders will see their balances increase on subsequent statements.”

Board chairman Gary E. Erickson described the process.

“Upon discovery of these complex issues, it was essential to vet enormous amounts of data in a short time by a skeletal staff,” he said. “I am pleased to say everyone did a Herculean job.

“Though change is always difficult, we believe our findings and the proposed course is for the best.”

The independent accounting firm was asked to conduct a fiduciary review to determine whether assets of donor-restricted funds had been properly managed in the past.

The review, conducted over approximately seven months, led to a determination that a number of donor-restricted funds were undervalued due to improper fund management.

Issues uncovered include:

» Improper investment of permanent funds in money market accounts

» Over-allocation of interest income to VCCF’s unrestricted funds

» Assessment of fund administration fees in excess of agreed amounts

Bechtel said the next step is to determine the scope of the undervaluation of the donor-restricted funds and set up a way to replenish those funds over time, subject to review by the AG.

After receiving the results of the independent fiduciary review, Bechtel and remaining foundation staff took immediate action reviewing the comprehensive records of approximately 250 funds in less than one month to reconcile the findings and determine whether any amounts were owed to those funds.

During this same period, VCCF invited a thorough review by the Attorney General’s Office, which has regulatory oversight over California’s nonprofit organizations.

In addition to restoring any undervalued funds, VCCF has developed a restructuring plan to provide stronger fund oversight and fiscal management going forward.

“We are in advanced discussions to outsource VCCF’s back-end management of the foundation’s funds,” Bechtel said. “At the same time, we will be preserving Ventura County’s local control over grant-making and distributions to the community.”

She stressed that fund holders may benefit from potentially lower fees, broader investment options and more sophisticated operational platforms offered by a partner institution.

This latest development comes after previously reported findings by Bechtel and her new management team of unrealistic budget projections and a shortfall of unrestricted revenue to pay VCCF’s operating expenses, in addition to the irregularities in the foundation’s asset and fund management reporting system.

These observations led the VCCF Board of Directors in March 2015 to retain the same independent accounting firm to determine the availability of funds for VCCF’s general operations.

Based on the firm’s forecast of sharply reduced resources available for operations, staff was slashed to five from 22 from May through September 2015, and salaries were trimmed up to 20 percent for the remaining staff.

In the past year, the budget has been reduced by more than 60 percent to be brought into line with available resources.

These aggressive measures have served to strengthen VCCF’s financial condition.

“We have sufficient cash to fund operations through September 2017,” Bechtel said.

Further cost-saving measures include positioning VCCF’s building for sale, which went on the market in January and is now listed at $9.8 million.

Bechtel and the Board of Directors look forward to working closely with the attorney general to address the fund management deficiencies and the repayment of any amounts owed to the funds.

In addition, VCCF is working with newly engaged auditors to restate its financial statements so that it may deliver accurate government and public reports.

VCCF has been in the process of informing fund holders and donors, directly conveying details of the situation to them.

Click here for more information about the Ventura County Community Foundation. Click here to make an online donation.

Bonnie Giles is chief financial officer of the Ventura County Community Foundation.

 

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