Ventura County Community Foundation Moves to Restore Funds
“Financially we have righted the ship,” CEO Vanessa Bechtel said Friday.
In interviews last week Bechtel shared new details about the approximately 50 endowment funds that will be paid $1.8 million within 12 years. Interest of 3 percent annually or almost $394,000 will be paid on top of that for a grand total of almost $2.2 million, she said.
The payments will boost income that the funds generate by more than $100,000 annually, with the proceeds going to scholarships and nonprofit organizations, she said.
The repayments are based on the findings of an independent audit and an investigation by the state Attorney General’s Office released to the public last month.
- About $1 million is tied to investments held in low-earning money-market accounts rather than the foundation’s investment pool.
- An additional $540,000 will be restored because interest was over-allocated to the agency’s operating budget, fees were wrongly figured based on the type of fund and for miscellaneous reasons.
- Finally, about $160,000 will be paid to five funds because fees were charged beyond what the donors stipulated in written contracts.
In a report following an investigation of more than a year, the attorney general’s office faulted foundation trustees and prior management for using $3.8 million in endowment funds to pay for the headquarters building and for allowing funds to remain in money-market accounts indefinitely. The charity regulator said the foundation should make good on the $1.8 million owed to the funds by 2029 and the $3.8 million when the building is sold or the final mortgage payment is made, documents show.
Foundation officials have agreed to make a series of corrections, including retaining a consultant to review their policies and implementing new controls for monitoring funds.
Bechtel said that she and two top administrators are nearly finished holding personal meetings with representatives of the funds owed the $1.8 million to explain the issues and share plans to restore the money.
Bechtel said representatives knew about the problems based on the foundation’s disclosures over the last year. But the agency had to get confirmation that their calculations were correct before sharing details about how each fund was affected, she said. Managers began meeting with representatives of the fund after the attorney general’s report was made public in late March.
John Orr, a Ventura attorney who handled arrangements for a couple funds, got a call.
Orr said he still has faith in the foundation after learning that those funds were owed several hundred thousand dollars.
One providing money for college scholarships has been approved for an amount in the mid-six figures. Another established to benefit the Museum of Ventura County will be paid in the mid-five figures, he said.
Orr said well-meaning people made mistakes in his view, but he credited foundation officials with making the disclosures and coming up with a plan to restore the cash.
“I think that the Ventura County Community Foundation is a very important organization in this county and it provides a mechanism for funding all kinds of value,” he said.
“In my view they are responding appropriately and it is not a very pretty thing to face,” he said.
About $250,000 plus interest will be restored to a fund used to provide a collection of business materials at the Camarillo Library, said Richard Petropulos, a Camarillo city official. Petropulos said the library receives an annual distribution from a fund bequeathed by citrus rancher Russell Fischer.
The city expects to receive about $150,000 this year from the bequest, which has been reported to be $2.8 million.
Petropulos said council members and top city officials had asked about the fund in light of the issues that have been publicized about the foundation’s finances. His meeting with foundation officials was “very productive,” he said.
“They were very open and transparent,” he said.
Bechtel said only four parties have withdrawn their funds in the wake of the financial difficulties revealed over the past two years. Those funds accounted for less than $1 million of total assets of $112 million, and one left because of a move out of state, she said.
Bechtel said she was not at liberty to name the departing parties. The Star confirmed last week that a scholarship foundation established by the Rotary Club of Ojai was one of them.
That group decided to withdraw funds that totaled around $300,000 primarily because of slow reporting of the value of the fund in quarterly statements, said Don Reed, president of the Rotary Club of Ojai Educational Foundation.
The nonprofit foundation awards about two dozen scholarships annually for college and job-training programs to high school graduates in the Ojai Valley. It took months to get the statements after the community foundation’s fiscal year closed Sept. 30, he said.
That meant the group did not know how many scholarships they could award when they invited students to apply for the awards each January, Reed said.
“We did not have solid numbers,” he said.
Reed said the group had talked with the previous management about fixing the problem, but that the foundation never did over a period of at least eight years and lacked an appropriate software system to correct the situation. The finance committee of the foundation talked with Bechtel after she took over in February 2015 and found her to be “very cooperative,” he said. But the Rotary group balked at waiting any longer.
“By that time our board had lost patience and said it is time to move forward,” he said.
Reed said the move also made sense because the group could transfer the funds to Merrill Lynch, which held the lion’s share of the scholarship funds at $2 million. Merrill Lynch charged a management fee of 1 percent and the foundation 1.3 percent, a significant difference with a large principal, he said.
Bechtel said the foundation has been working on the financial reporting issues and has shortened the lag time to six to seven weeks. It is a complicated process because the agency has to wait for reports from 44 different fund managers and reconcile them before issuing the statements, she said.
She hopes to have real-time on-line reporting available to fund holders by next year.
The attorney general and others have traced the foundation’s problems to rosy expectations for financing the purchase of the building with a $10 million capital campaign. Less than $500,000 was raised, the attorney general said.
Faced with a balloon loan payment of $4 million due earlier this year, the foundation put the building in which it had invested more than $11 million up for sale in 2016. It is no longer on the market and the current plan is to continue leasing the space to nonprofit organizations.
Late last month, the foundation refinanced the building with a 27-year, $4.6 million loan. A final balloon payment of $1.15 million is due in 2044.