The title on the door, or in this case, the name on the front wall doesn’t necessarily mean the place is totally ethical. The San Diego Christian College is in a bit of a fix. They can’t seem to explain where more than $20 million in expenses have gone.
Expenses are supposed to be itemized in public tax returns. The expenditures appeared to have vanished. According to reports, students are dissatisfied with the facilities, professors are complaining of being underpaid and payments are late to vendors.
San Diego Christian College is not free. Tuition is more than $30,000 a year. So, where’s the expense money? Well, don’t look to the school’s CFO Steve Chaney. He made it clear that he would provide details from the period where the money was missing (2012 to 2014) but so far, no documents have been found. No one at the school appeared to have been paying attention and the school’s board has refused to comment.
Here’s the Problem
San Diego Christian College like most private and nonprofits benefit from federal and state funds. In turn, they must be forthright in how they are spending their money. San Diego Christian College is in trouble. The U.S. Department of Education gave the school a failing grade for fiscal 2014. In 2016, an accrediting agency said the school had a “very sketchy multi-year budget.”
While the president of the college said the school is doing just fine, that it is on solid financial footing. How then, does he account for the fact that in 2015 the graduation rate is 30% and tuition costs seem to be covering less and less?
The school’s accrediting agency shows the college has had consistently poor record keeping and though it has reportedly doubled its student-athletes in recent years, it has no sports facilities of its own. In 2016, more than 700 students attended the college. The reasons so many are leaving seem to be a combination of poor facilities and the fact that the college is more concerned about the “religious experience” rather than academics. Students have become worried that their degrees will be meaningless.
In terms of faculty, many have left as well as the result of low pay, low academic standards and the fact that there is no tenure. Professors are required to teach many classes and students sense they are overloaded. Meanwhile, the CFO has stated that hiring more staff is not a priority. They seem to be able to make ends meet through their online programs.
In 2016, due to its low graduation rate the school became ineligible to receive financial aid. This aid is critical as 90 percent of the students rely on aid to supplement what they afford in tuition.
Where’s the Expense Money?
The news about the financial health, graduation rates, staff and facilities are dismal at best. The school is failing. So, where did the millions in expense money go? The CFO Chaney seems to hold the key.
Chaney is a bit of a mystery man. He works for the college for no pay. His company is paid an “undisclosed amount” to handle accounting, bookkeeping and taxes. According to the tax documents that Chaney presumably prepared, only 5 of San Diego Christian College’s vendors are annually paid more than $100,000. Chaney and Associates, Chaney’s company, is not one of them.
What is known is that from fiscal 2012 to fiscal 2014, what was detailed in the returns (prepared by Chaney’s firm) as “other expenses” and “fees for services” totaled more than $20 million but no details were ever given! When Chaney was reportedly confronted over it by the IRS he claims he was told by the IRS not to worry about amending anything.
The former director of the IRS’s Exempt Organizations Division disagreed:
“That’s simply not what the IRS does in that sort of situation. Normal procedure would be that the missing schedule would be solicited from the organization and associated with a return.”
Meanwhile, lawsuits were filed against the college by vendors to the tune of more than $300,000. The lawsuits have been settled. One vendor, the school’s foodservice vendor said the school was “perpetually $80,000 late in payments.”
In 2014 an audit was ordered and the audit found: “San Diego Christian College had two material weaknesses and nine significant deficiencies.”
As federal aid recipients, schools like San Diego Christian College are expected to have none. The majority of the issues were due to turnover in the financial aid department and changes in administrative roles. The audit also noted that there were no internal accounting or bookkeeping controls which again, loops the conversation to the CFO and the school’s board.
An Ethical Storm
A storm is brewing over San Diego Christian College. While it would be disrespectful to say it is of biblical proportion, it could very well signal the beginning of the end. Someone on the board or in the CFO’s office knows exactly where the $20 million has gone. All of the prayer in the world will not stop ethical scrutiny.
The lack of controls and oversight, the strange relationship between the CFO and San Diego Christian College, and the declining quality of the educational product indicate that fraud is interwoven in the very fabric of the school’s mission.
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