Fiduciary Review causes policy shift for the Ventura County Community Foundation

Editor’s Note: Is the Ventura County Community Foundation in hot water?  From the Pacific Coast Business Times: Review blasts Ventura County Community Foundation’s fiscal management

From the Pacific Business Times:  “An independent fiduciary review found that the Ventura County Community Foundation undervalued donor-restricted funds due to improper fund management, VCCF announced on June 22.

The seven-month report by auditor KPMG found that the foundation invested permanent funds in money-market accounts, over-allocated interest income to VCCF’s unrestricted funds and charged excessive fund administration fees.”

With the Attorney General breathing down their necks, the Foundation has put out the Press Release below.  From their website:  “VCCF invests the charitable capital that drives the philanthropic engines of Ventura County. Its portfolio performance ranks in the top 11 of all community foundations in the United States for long-term growth. It owns the VCCF Nonprofit Center in Camarillo – a place where nonprofits and the community can come together to work together. invests the charitable capital that drives the philanthropic engines of Ventura County.”

Have they been sticking their hand in the cookie jar or erring with their management of funds?  You decide.

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VCCF Seeks Broader Fiscal/Technology Platform for Donors; Attorney General Review Sought After Finding Financial Anomalies; Foundation continues to implement aggressive fiscal measures

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 that 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 AG’s review is under way, VCCF has already started implementing a multi-step 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.  VCCF 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 Chair Gary E. Erickson said, “Upon discovery of these complex issues, it was essential to vet enormous amounts of data in a short time by a skeletal staff. 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 (1) improper investment of permanent funds in money market accounts, (2) over-allocation of interest income to VCCF’s unrestricted funds and (3) assessment of fund administration fees in excess of agreed amounts.

Bechtel said that 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, CEO Bechtel and remaining 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 time, VCCF invited a thorough review by the Attorney General’s office, which has regulatory oversight over the State’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.  At the same time, we will be preserving Ventura County’s local control over grant-making and distributions to the community,” Bechtel said.  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 from 22 to 5 from May through September 2015, and salaries trimmed up to 20 percent for the remaining staff.  In the past year, the budget has been trimmed by over 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 2016 and is now listed at $9.8 million.

Bechtel and the Board of Directors look forward to working closely with the AG 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, details of the situation which will be conveyed directly to them.

ABOUT VCCF

VCCF invests the charitable capital that drives the philanthropic engines of Ventura County. The foundation was established in 1987 and endeavors to build philanthropy in the region and to give generously for the wellbeing of all in Ventura County.

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