DISCLOSURE: THE INTENT IS NOT TO REFUTE EVERY SINGLE WORD THE REPORTER WROTE. THE INTENT IS TO DEFEND SAN DIEGO CHRISTIAN COLLEGE’S STANCE AS IT RELATES TO THE SALIENT TOPICS CONCERNING SDCs EDUCATIONAL ENTERPRISE. 1. San Diego Christian College, a nearly 50-year-old nonprofit school in Santee, can’t account for more than $20 million in expenses that are supposed to be detailed on its public tax returns. SDC has accounted for all expenses. The college has a yearly independent financial audit. The college has always received an unmodified opinion (formerly known as an unqualified opinion, which is positive) by the auditors. The auditing term “unmodified/unqualified opinion” is a positive term, and it means that the auditors find that finances are in accordance with applicable financial reporting framework. For further information, you may refer to the full financial audits. From audit for fiscal year ending June 30, 2015: From audit for fiscal year ending June 30, 2014: From audit for fiscal year ending June 30, 2013: From audit for fiscal year ending June 30, 2012: 2. In the meantime, current and former students complain of inadequate facilities, former staff felt they were underpaid and a vendor claimed the school often fell behind on payments. Students who attend this religious-based college full time pay $30,000 a year in tuition. 3. The school’s chief financial officer, Steve Chaney, told inewsource in an interview he could not say what the $20 million – spent from fiscal 2012 to 2014 – paid for. He said records would be made available, but weeks later the school’s attorney said in an email that San Diego Christian College would not provide any documents. Mr. Chaney was asked by Megan Wood in a recorded interview on September 26, 2017, what made up the “other expenses” from the functional expense section on row 24 of the 2011, 2012 and 2013 federal 990. Mr. Chaney reported he could not remember every line item. She then asked if Mr. Chaney had the information and he reported that all figures reconcile to the annual audit report. Upon the advice of general counsel, it was decided not to respond to Megan’s request for the detail. It is important to note that all expenses reported on page 1 of the Federal Form 990 for 2011, 2012 and 2013 reconcile to the statement of activities reported on each respective independent audit. The "Other Expenses" cited in the article are included as part of the allocation of the functional expenses in the fiscal year audits. The following chart is an accumulation from the information found in different 990’s. 4. “It’s a symptom of a problem. Nobody’s paying attention,” Marcus Owens, a former top administrator with the Internal Revenue Service said after examining the school’s financial records at inewsource’s request. Mr. Owens does not have any connection with San Diego Christian College. He has never asked SDC any questions, nor has SDC ever sent him any documents to review. 5. The college president and the board of trustees, which is ultimately responsible for the school’s finances, either did not respond to requests for interviews or referred inewsource to the school’s attorney, Tracy Warren. She wrote in emails that officials had no comment and that inewsource should “cease and desist” efforts to reach the board. 6. Money problems at the school have mounted over the past few years. The U.S. Department of Education issued San Diego Christian College a failing financial score for fiscal 2014 based on findings from an outside audit. It is true that in 2014, SDC received a .1 financial score, it is also true that the College raised the score in all subsequent years. The Department of Education awarded San Diego Christian full advanced funding in 2015, 2016. SDC fully expects their fiscal health to continue. During the fiscal year ended June 30, 2014, the college experienced a financial loss. This was the result of over extending institutional aid (scholarships) and additional expenses associated with operating two campus during the campus relocation in 2014. Due to these factors, the college was assigned a CFI score that required additional accounting measures to ensure fiscal responsibility. The college addressed the required financial matters and raised the CFI score for Fiscal year 20142015 to 1.1 and then in fiscal year 2015-2016 to 1.6 as confirmed by the Department of Education. This progress removed SDC from the Department of Education’s heighten cash management status. The following is a statement taken from the document SDC received from the Department of Education: 7. In a 2016 report, a regional accrediting agency also highlighted irregularities found in the school’s financial record keeping and earlier raised concerns about its “very sketchy multi-year budget.” The term “very sketchy multi-year budget” was not used in any WSCUC report. In fact, the 2016 WSCUC report stated the opposite on page 12, “Positive annual financial results are now the “norm” rather than the exception with “clean” annual financial audits, and a realistic and datainformed multi-year budgeting process integrated with the strategic plan for allocation of resources.” WSCUC Site Visit Report 2016 (pp. 11-12) Specific excerpt is below: 8. Chaney attributed the failing financial score to money lost while moving the school to a new campus and dismissed concerns from the accrediting agency. Mr. Chaney, did not dismiss any concerns during the recorded interview. He shared the process of the accreditation review and that it is intended to assist and help organization to improve. He also shared that SDC received an 8-year renewal on their accreditation status. The reporter is incorrect about the financial score, and she is incorrect about Mr. Chaney’s statement. 9. “They’re supposed to come in and be concerned about everything,” he said, insisting students shouldn’t be worried. “This institution is on solid footings.” 10. Yet there are doubts about the school’s finances. 11. “It concerns me,” said David Oliveira, a senior and student athlete. “I’m about to graduate and I’m worried about my degree.” Since he enrolled in 2014, Oliveira said he has seen his scholarship drop from covering 90 percent of his tuition to 80 percent. Another problem is increasingly “overloaded professors,” Oliveira said. SDC awards institutional scholarships to support student retention. These merit-based scholarships are tracked and monitored for all programs at SDC, and there are several reasons why a student may have their scholarship increased or decreased. Athletic scholarships are a part of the meritbased calculations; therefore, depending on benchmarks and team composition, athletic scholarships are determined. SDC participates in NAIA athletics and in the GSAC Conference where full-athletic scholarships are uncommon. There can be many reasons why Oliveira’s scholarship was reduced; because, since he is a current student, SDC is unable to disclose those specific reasons. The average athletic scholarship at SDC is roughly 40%, therefore the student, by his own words, is receiving double the average athletic scholarship. 12. The college’s graduation rate is also low — 30 percent in 2015, making the school ineligible to access state-funded Cal Grants. San Diego Christian College is eligible for its students to receive CalGrant. There are two pieces of information below: (1) Email from California Student Aid Commission and (2) screenshot from CSAC website showing eligibility of San Diego Christian College. wed 11 '1 2017 1245 PM FW: Cal Grant Eligibility Chart Tol I 0 You replied to this message on 12:51 PM. From: l@csac.ca.gov] Sent: We nes a Novem er 01, 2017 12:29 PM To Cc. Subject: RE: Cal Grant Eligibility Chart HE I will inform staff to update the list. Apologize for it not being updated after the IPA was approved. . sdcc.edu> I?ll let you know as soon as the change is made. Thank you, From! Sent: nes ay, ovem er To: I csac.ca. ov> Subje a Importance: High It was great to see you at the conference! I hope your travels home were smooth. We noticed that San Diego Christian still shows on the publicly posted Cal Grant ineligible list (linked below). I realize we've gone through quite the special circumstances, but would it be possible to have these updated? I appreciate your assistance! We recently had some pretty bad press come out (much of which was inaccurate or misleading at best), and showing our restored Cal Grant eligibility in rebuttal would be very helpful. Anything we can do to assist? Please feel free to respond with any questions or concerns. Cal Grant Eligible Institution Search To ?nd at elignle Cal Grant School please enter in am or all otthe forming intonnau?on and Click Go . ll you do not enter the scan name as is "horned in the program it may not shcv. in me results here As an altema'ii'e to locate your oesrreo school in a search onh or. the city where the school rs located and look tor the school in me results held . tearing selection critera blank Will return all eligible Cal Grant schools . Students who receive a Cal Grant A ariaro and choose to attend a Cairorma Cornnunih College or change schocl to a Cali?cmia Communih Colege. have their wares ieserieo ?or up to three years Cal Grant A parent is mace ooh a?ter the, transfer to a tear tumonfee charging colege Acadia: mm:anaregocmsiia~c Cly: 509mm: ALL Segrents Total Number of Records: 1 TOBI Number of Pages: 1 School Maine SAN Di 93 Eli - PRVATE YEAR AND PRVATE GRADUATE SAMEE 01203103 worm i9; CumUs sag Cordliccs of bse Pmac~ P-azc- Copinght 2 2000-2317 Cal foma Smart No Conmss'oi - State of Cali?ma 13. San Diego Christian College calls itself “one of the top” Christian colleges in Southern California. SDC does not call itself “one of the top” Christian colleges; rather U.S. News & World Report does. 14. The school was founded by three people — a creationist, a pastor and the author of the best-selling Left Behind series. San Diego Christian existed on church-owned land in El Cajon until 2014, when it moved to “establish its identity as an independent, faith-based liberal arts college.” 15. Documents from the school’s accrediting agency show the college lost $2.4 million in net assets that year because of unexpected relocation costs and poor record keeping. San Diego Christian College said in a 2015 report that those were “extraordinary issues” in an “isolated year.” The document cited by Megan Wood in no way states the $2.4M change in net assets was due to “poor record keeping”. Megan shares at the first part of the article that Mr Chaney shared the loss is due to moving a campus. Mr. Chaney shared with her the moving of a campus and over awarding. She fails to mention that the over awarding caused over $1.5M of the loss in FY 13.14. Furthermore, although the fiscal year 13-14 resulted in a lowered composite score, the fiscal year 14-15 proved that the leadership of SDC addressed the issues to result in no findings in the final audit report. WSCUC Site Visit 2016 Report (p. 33) See actual text from WSCUC Report here: 16. The new campus is five office buildings tucked behind a shopping center in Santee. Inside are classrooms, a library, a cafeteria, and a chapel where most full-time students are required to attend services every Monday and Wednesday morning or potentially pay a fine. SDC’s campus also includes the a Science Lab, Hawks Annex, Murf & Breezeway, residence halls, and an Aviation hangar and offices at the airport, all with intentional design. 17. Despite more than doubling the number of student-athletes at the college over six years, the school has no sports facilities of its own. Students use a nearby park, the Boys and Girls Club, and facilities at neighboring community colleges. San Diego Christian College competes in NAIA Division 1 athletics. This is very different than NCAA Division 1 athletics. SDC’s focus is first on being students, then athletes. SDC’s athletes compete in rigorous competitions through the GSAC Conference. SDC’s Men’s & Women’s Tennis teams both won conference titles, and competed at the national tournament in the past few years. SDC’s baseball team went to the College World Series three years ago. SDC has many other successes to celebrate, but the motivating factor for the college is that SDC is students first and athletes second. This past year, SDC’s athletic department was awarded the Champions of Character from the NAIA national organization. SDC’s athletic department developed healthy and strategic relationships with neighboring institutions to utilize their tremendous facilities. SDC is in good standing in conference and community through the platform of athletics. 18. Last year, more than 700 students attended the college. 19. Kaitlin Brooks, a former assistant professor of communication at San Diego Christian, said academic rigor was “put on the backburner” at the college in favor of the religious experience — one of the reasons she said she left in 2016. 20. Brooks, a San Diego Christian graduate, recalled being told by a superior that her job was to “protect students from the outside world, which to me does not resonate with how I see my job as a college professor.” More pressing, she said, was the low pay that pushed her and other professors away. There are no tenured professors at San Diego Christian – all are on one-year contracts, according to the U.S. Department of Education. Brooks said she knows of more than a dozen other professors who left the school within the past year. “It seemed unusually high,” she said. According to Benchmarking, SDC’s faculty salaries align with its size. Also, SDC has Meritbased, three-year contracts for faculty who qualify. The following table is a national benchmarking exercise carried out by the Council for Christian Colleges & Universities (CCCU), which is a national association with represents the majority of Christian higher educational institutions. The number cited is inaccurate. The professors who left at the end of last year never cited pay for their reason for leaving. 21. Depending on their positions, professors made about $40,000 to $67,000 in the 2015-16 school year. The same chart is used to show how SDC’s faculty salaries are aligned with national averages: 22. Students said they’ve recently noticed professors taking on multiple subjects. “I have a professor, she teaches me social media marketing and she teaches me entrepreneurship. And she teaches him another class,” said Oliveira, pointing to his teammate. He said it seemed like too much for one professor to teach three or more subjects a day. SDC has professors with advanced degrees in a variety of areas. Teaching across disciplines is intentional. The professor mentioned serves as the Acting Chair and prefers to teach most of the courses in her program. It is a part of the intimate experience that a college like SDC provides. WSCUC also reviews SDC’s course offerings and faculty load and have reported no concern. 23. “It makes it awkward for them and hard for them, and for us as well,” Oliveira said. “When you ask something it’s, ‘Oh, which class are you talking about?’” When asked a question by a student who is in more than one of a professor’s classes, it is typical to ask which class the student is referring to. What matters most, is that the students receive an answer to their question. Further to this, the important note here is that the faculty member is not asking who the student is, because they have already invested quality time and have come to know each of their students. 24. Chaney, the CFO, said hiring more professors is not the school’s priority. Instead, the college is using software to expand, he said. The school has an online program that now offers bachelor’s degrees in six subjects and master’s degrees in two subjects. Eleven degrees are offered to traditional on-campus students. This is a complete fabrication. Mr. Chaney remembers discussing how the college has invested hundreds of thousands of dollars in software to better enable abilities to serve students. The growth of the online program was discussed but never the hiring of professors, in the context presented. Mr. Chaney also recalls Megan asking why when a professor wanted to be made full-time did the leadership not allow it (implying a lack of funds from the college). Mr. Chaney’s response was to state that there are a lot of requests and the leadership weighs each decision with the goal of serving the students. Furthermore, showing the fiscal responsibility of a mature institution, leadership has clearly created benchmarks to highlight where additional hires need to come from. At the point of departure of the former part-time faculty member, the number of students in the Communication department did not justify unnecessarily increasing costs by making the part-time faculty member into a full-time position. In the exit interview with the former part-time faculty member she told Human Resources that the reason she is leaving is because she did not agree with the direction the new Chair of Communication was heading. This was also evidenced in her audio interview in the article where she praised the former Chair. The aspect of her deciding to leave was more based on the departmental direction vs. any financial matter. The reporter is providing information not provided to her by Mr. Chaney. She wrongly and incorrectly attributes comments to Mr. Chaney which he never stated. 25. “We can serve almost 2,000 students with the current staff we have,” Chaney said. This was said in context of software related to Enrollment Services. This comment had nothing to do with Instructional Services. Again, benchmarking allows us to deliver industry standards for institutions of similar size. 26. This year, San Diego Christian College became one of two private colleges in California ineligible to receive Cal Grants because of its low graduation rate in 2015 and 15.7 percent default rate (the percentage of students who don’t repay their federal loans) in 2013. Cal Grants are financial aid that qualified students do not have to repay. San Diego Christian College is eligible to receive Cal Grants. SDC students have full rights to receive the Cal Grant. All SDC students, who are eligible to receive CalGrant, are fully capable to receive their aid from the State of California. Through the investigation of employees at San Diego Christian College, SDC found that information on the CSAC website was inaccurate and SDC reached out to the commission to change the information. The email below shows how a proper investigative process delivered factual information. Furthermore, the second screenshot proves that SDC is eligible for CalGrant. wed 11 '1 2017 1245 pm FW: Cal Grant Eligibility Chart Tol I 0 You replied to this message on 12:51 PM. From: l@csac.ca.gov] Sent: We nes a Novem er 01, 2017 12:29 PM To Cc. Subject: RE: Cal Grant Eligibility Chart HE I will inform staff to update the list. Apologize for it not being updated after the IPA was approved. . sdcc.edu> I?ll let you know as soon as the change is made. Thank you, From! Sent: nes ay, ovem er To: I csac.ca. ov> Subje Importance: High It was great to see you at the conference! I hope your travels home were smooth. We noticed that San Diego Christian still shows on the publicly posted Cal Grant ineligible list (linked below). I realize we've gone through quite the special circumstances, but would it be possible to have these updated? I appreciate your assistance! We recently had some pretty bad press come out (much of which was inaccurate or misleading at best), and showing our restored Cal Grant eligibility in rebuttal would be very helpful. Anything we can do to assist? Please feel free to respond with any questions or concerns. 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Pa it Caps-right 2015-7017 Caldowna Shiaem Ad Comm Stale oi Ca Nomi-a 27. Last year, at least 114 San Diego Christian College students received this state grant, and 90 percent of the school’s students had some type of financial aid. 28. Chaney, whose accounting company is based in Roseville, works as a full-time officer of the college for no pay, according to the school’s tax returns. The college pays his company, Chaney and Associates, an undisclosed amount to handle its accounts payable, payroll, tax preparation and more. According to tax documents, only five of the school’s contractors are paid more than $100,000. Chaney and Associates is not one of them. The Federal Form 990 requires an organization to report the top five vendors paid more than $100,000 in the tax year. Chaney & Associates did not qualify to be amongst the top five paid vendors. Document is normal IRS Form 990. 29. Chaney’s relationship as a school officer and the owner of a company that does business with the college is not disclosed in the school’s yearly IRS returns, although that is required. The 990 clearly showed Steve Chaney as CFO, and he was listed as an Officer of the organization. 30. “The college saved a ton of money by outsourcing to me,” Chaney said, adding that the school previously paid four times the amount his company charges for the same services. 31. Nonprofits making more than $50,000 a year are required to file public tax returns detailing yearly revenues and expenses. San Diego Christian College files our public tax returns and obeys all requirements from IRS and the State of California. 32. During fiscal 2012, 2013 and 2014, undocumented “other expenses” and “fees for services” at San Diego Christian College amounted to more than $20 million. The IRS requires documentation that explains those costs. None was attached. The IRS clearly received and processed the tax returns mentioned. The requested information is contained on supplemental schedules. This information is available and reconciles to audit reports. The tax software package did not transmit the schedules as intended. The IRS provided support and guidance to not amend as it was just supplemental information. Using the same form, this outlines what the IRS received relating to “Other Expenses”. The chart is an accumulation from the information provided for different 990’s. 33. Chaney told inewsource he would need to “refresh” his memory about the documents missing from the 2012 and 2013 returns. As for the 2014 documentation, he said a “system glitch” prevented its upload to the IRS. He contacted the IRS about the return, he said, but the IRS told him “don’t worry about amending it.” When asked what documentation he had on this interaction – a tracking number, for example – Chaney said he hadn’t asked for any. 34. Owens, the former director of the IRS’s Exempt Organizations Division, questioned Chaney’s account. Again, SDC has no connection to Mr. Owens. SDC did not provide any documentation to him, nor communicated with him. 35. “That’s simply not what the IRS does in that sort of situation,” he said. “Normal procedure would be that the missing schedule would be solicited from the organization and associated with a return.” The IRS has in no way contacted SDC for the missing information. Just the opposite, they have received and accepted the reports without findings. The IRS agent must be discussing the situation in general. Moreover, Megan Wood does not have a power of attorney to discuss any matter with the IRS regarding SDC’s tax return. The IRS would be violating internal rules if they shared anything specific or answered anything specific regarding SDC. 36. The IRS declined to comment on the college’s finances. This proves that Megan Woods did not discuss SDC’s return with the IRS. 37. inewsource sent three years of the school’s audited financials and tax forms to Owens, who is now a partner at the law firm Loeb & Loeb in Washington, D.C. “It looks like the organization is really suffering from a lack of personnel,” he said, confirming the expenses needed to be detailed. Marcus Owens could not know the specific situation regarding SDC and the elements of personnel needs. He does not know the depth of checks and balances in place within SDC. Through every single successful independent audit, SDC has not had any material deficiencies. Certainly not related to lack of personnel. As this is the case, there is also no need to add additional personnel to a non-issue. 38. Owens also addressed the fact that Chaney works more than 500 miles away from the college, out of his office in Roseville. “If they had a chief financial officer on campus, 40 hours a week, I suspect they would not have the sort of gaps and problems they’re facing,” Owens said. “Which are in the order of somebody doesn’t have the time to pay close attention to what’s going on.” Leadership led the organization to financial stability as recognized by the WASC report and reaffirmation of accreditation. The college has experienced positive change in net assets for the past three fiscal years. It is interesting that Mr. Owens is able to provide an opinion about SDC’s operations in San Diego, when he is located over 2, 685 miles away in Washington D.C. 39. Two lawsuits were filed against the college by a food vendor and landlord in the past two years over missing payments. The total amount owed the two companies was more than $309,000, according to the lawsuits. Both cases were settled for undisclosed terms. Allegations and claims are not fact. Additionally, SDC had a cross claim against the former food vendor. SDC settled with the food provider to finalize the relationship. 40. Chaney would not comment on the lawsuits, but said they were “minor.” 41. Taylor Maddox, a former co-owner of the school’s past food vendor, Philoxenia, catered the school’s cafeteria from 2014 to 2016. He said the college was perpetually $80,000 late in payments. There were times when the company had to notify school staff that it could not serve food the next day without getting paid, Maddox said. “Sometimes, the food quality would be lower and (students) would come to us and ask questions, because in their minds, they paid for their meal plan,” he said. 42. Another indication of financial trouble at San Diego Christian College is its annual federal financial responsibility score. Colleges and universities that receive a score of 1.5 or higher from the U.S. Department of Education — based on a -1 to 3 scale — are considered financially responsible and can receive federal financial aid without additional oversight. Scores are based on a school’s cash reserves, net income and ability to borrow as reported in its audited financials. In 2014, the college was given a score of 0.1 – which “pushed the College into the ‘fail’ zone”, according to its accrediting agency. That required the college to provide a $1.47 million letter of credit to secure federal student aid for the following year. The college’s most recently released score was 1.1 in 2015. That’s considered financially responsible, according to the Education Department, but requires cash monitoring. Records show the college was placed under this oversight from June 2016 to at least December 2016. Throughout the past few years, the federal financial responsibility score has strengthened. This is evidence that the federal agencies approve of the direction SDC is going financially. They review various KPIs to determine a number, for each institution. SDC has been transparent regarding the transition year of 2013-14. Leadership has worked hard to improve this result every single year since. 43. Chaney attributed the failing financial score to the school relocation and the distribution of too many college-funded scholarships. The college’s financial aid department — managed by the vice president for student affairs — over-awarded student scholarships by $1.4 million in fiscal 2014, according to its latest reaccreditation report. That year, the school awarded $5.7 million in scholarships. The prior year, it awarded $4.3 million. As a result, school officials hired new financial aid staff and shifted oversight of the department to Chaney. He said the fiscal 2016 financial score — which is not yet publicly available — will be reported at 1.6. 44. In 2019, the regional school accrediting agency will return to San Diego Christian College in a special visit to monitor what progress has been made since its reaccreditation in 2016. 45. Before moving to its new campus, San Diego Christian College retained the same financial auditor for at least four years. 46. “Year after year, it was perfect, perfect, perfect,” Chaney said about the results of the audits. But for fiscal 2014 — the year it received its failing financial score — the college’s board hired a new “national” auditor to “scrutinize” the school’s finances, he said. SDC’s audit committee recommended to the board to hire a new auditor after the move from the previous campus. The audit committee wanted to have a fresh set of eyes on the audit. The College selected a nationally recognized audit firm, CliftonLarsonAllen. It is important to note that Sarbanes and Oxley recommend that organization change their audit firms every few years. CLA had findings that were very typical for an organization that experienced a complete department transition. SDC’s financial aid department implemented all the recommendations and did not experience any findings in the future year audits. Regardless of the findings, CLA provided an “unqualified opinion”. 47. “That was our desire,” Chaney said. “We had nothing to hide.” The audit found the school had two material weaknesses and nine significant deficiencies, noting federal aid recipients like San Diego Christian College are expected to have none. The audit found a majority of the issues were due to the turnover in the college’s financial aid department and changes in administrative roles. It also noted certain internal controls, such as payroll transactions and adjusting journal entries, were not reviewed. Several other deficiencies included students not receiving financial aid disbursements in the timeframe required by the Department of Education and not meeting federal reporting standards. SDC disagreed with this finding from CLA. SDC showed CLA that all journal entries are reviewed and approved by multiple personnel before entered. CLA adjusted its findings and shared ways to electronically track the reviews and postings. Payroll processes have been multi-layered for the past five years. Each step of the way, leads to further approval and provides appropriate checks and balances to ensure proper governance. Journal Entries - Management’s Response - SDC believes there is a thorough review and approval process for journal entries. Each journal entry is supported by a source document. The review and approval process is completely electronic in the college’s accounting system. Management has retroactively addressed the concern to establish a documented review and approval process. 48. That audit was done by the Clifton Larson Allen accounting firm. It’s now done by Ken Mierzwinski, a certified public accountant who has done work for Chaney in the past. The College has used well-known and independent auditing firms to perform its external audits. All firms have extensive experience in higher education and have represented many colleges before accrediting agencies. All three firms provided “unqualified opinions” thereby showing appropriate accounting measure have been followed. 49. Every audit since has found zero deficiencies.