Star-Studded Cal State fundraising galas net little profit

Posted by on Jul 28, 2012 in Blog, Cal State Pay Scandal, California Politics, Featured Post | 0 comments

Star-Studded Cal State fundraising galas net little profit

When Grammy-award winning funk legends Earth, Wind and Fire performed at Cal State Fullerton’s 2011 Front and Center fundraising event for the Cal State Fullerton Philanthropic Foundation, Honda Center attendees were promised a “winter entertainment extravaganza.”

And the foundation spared no expense to deliver on its promises: $225,000 for entertainment, $249,424 in facility costs, $118,173 on food and beverages and $30,253 in other direct expenses. According to its 2010-11 tax return, the foundation spent more than $622,850, or 78 percent of the event’s gross receipts, to treat each guest like “a shining star, no matter who you are.”

The Orange County Register’s People Watch columnist recounted the festivities as one of the O.C.’s major social events of the month.

“Of all California State University Fullerton’s ‘Front & Center’ events I’ve attended at the Honda Center, I have to say that Saturday night’s headliner, Earth, Wind & Fire, took top honors for pure entertainment,” raved the Register’s Donna Bunce. “Entertainers such as Chicago, the Doobie Brothers, Natalie Cole, Tony Bennett, Kenny Loggins, Reba McEntire, Stevie Nicks, and the Steve Miller Band performed some great shows, but the Grammy Award-winning and Rock and Roll Hall of Fame inductees on Saturday electrified the audience of 9,000, 960 of whom attended the black-tie dinner and silent auction preceding the show.”

And the 2011 event wasn’t an isolated incident. Over the past two years, the Cal State Fullerton Philanthropic Foundation has hosted more than a dozen high-overhead fundraising events that have returned pennies on the dollar to the university. More than $1.41 million, or 59 percent of Fullerton’s gross receipts, has been spent on facility costs, food and beverages, entertainment and other direct expenses, according to Schedule G of the foundation’s Form 990 tax returns.

Cal State Fullerton did not respond to email requests for comment on the foundation’s spending practices.

Cal State Foundations: Slush Funds for Presidents

Fullerton isn’t alone. In fact, it’s doing better than some Cal State foundations, which lose money every year on fundraising ticket sales. As Cal State administrators cry poor from state budget cuts and campaign for November’s multi-billion dollar-tax increases, they continue to use college foundations to pay for luxurious parties, cocktail receptions, golf tournaments, and star-studded “winter extravaganzas,” all under the auspices of raising money for the college.

“It is my belief that the foundations have always operated as a slush-fund for presidents,” Kevin Wehr, president of the Sacramento State University chapter of the California Faculty Association, told CalWatchDog.com earlier this year. Foundation tax records support Wehr’s observation.

In May 2012, the Scripps Howard News Service reviewed tax filings for more than 37,987 charities and other nonprofit groups that collected at least $1 million in revenue. The average fundraising expenses for the 22,598 nonprofits that reported such figures was “about 7 cents for every dollar they raised.” That means Cal State Fullerton’s 2011 Front and Center event exceeded the national average 11 times over.

Foundations Facing Greater Scrutiny with New Pay Policy

Earlier this year, the Cal State Board of Trustees adopted a new executive compensation policy that shifted the financial burden of presidential pay raises from taxpayer funds to nonprofit foundations. In so doing, Cal State has increased the need for public scrutiny of its little-known nonprofit auxiliary groups.

Trustees are expected this week to authorize spending nearly $85,000 in nonprofit funds on bonuses for three incoming campus presidents. College officials defend the controversial practice as needed in order to retain executives with proven fundraising abilities.

“If we can pay a little extra to a president who’s going to go out and do more to bring in money for the university, students benefit and the community benefits,” Larry Sharp, the executive director of the Philanthropic Foundation at Cal State San Bernardino recently told the Los Angeles Times.

Then again, how successful are Cal State’s fundraising efforts?

“Front and Center” Winter Entertainment Extravaganza

Billed on its website as “the annual winter entertainment extravaganza,” Fullerton’s Front and Center event was created to “cultivate prospective supporters for the university, and provide funds for academic enrichment and student scholarships such as the President’s Scholars program.” The school’s public affairs department considers it “the university’s signature community outreach and fundraising event for scholarship programs.”

In reality, Fullerton’s retains only a small percentage of the gross receipts for scholarships, while giving top administrators the chance to mingle with celebrities.

When Fullerton’s president Milton Gordon announced his retirement, a school profile highlighted the long list of celebrity guests who have “shared the stage with Gordon” at Front and Center events, including “Walter Cronkite, Tony Bennett, Bill Cosby, Natalie Cole, Michael Eisner, Christopher Reeve, Stevie Nicks, Reba McIntyre and John Lithgow.” In the above picture, Gordon celebrates with McEbntyre.

In 2010, the Steve Miller Band impressed attendees, while “Criminal Minds” TV actress and Cal State Fullerton alumna Kirsten Vangsness served as emcee. Of the $629,502 in gross receipts, two-thirds of the revenue went toward expenses, with $102,434 spent on facility costs, $88,774 on food and beverages, $204,128 on entertainment and $20,122 in other direct expenses.

“Front & Center has ensured that hundreds of exceptional students achieve their dream of obtaining a four-year college education,” explains the event website. The school’s tax returns tell a different story. If Cal State Fullerton reduced its fundraising expenses by half, or spent just $705,000 in event overhead, the school could have provided more than 100 students with full scholarships this fall.

Tower Foundation Fundraising Events: $53,349 in the Red

While Fullerton administrators revel in celebrity entertainment, San Jose State University hits the links.

SJSU’s President’s Cup is billed as the university’s marquee annual fundraising event. Guests are entitled to a day of golf at the “pristine” Cinnabar Hills Golf Club, with the chance to win up to $1,000 in multiple cash contests before enjoying a hosted reception and “a festive banquet featuring the fabulous wines of Madorom Vineyard of Napa.”

“Your enjoyment and satisfaction are of the utmost importance,” promises the 2012 brochure. In addition to raising funds for athletes, “Another top priority is to provide each and every participant with a memorable day of golf, fun, and camaraderie.”

According to its most recent tax return, San Jose State University’s Tower Foundation lost $14,022 on its four fundraising events in the 2010 tax year. Since 2008, the Tower Foundation has reported $53,349 in losses on ticket sales to its fundraising events. Foundation officials admitted that ticket sales don’t always cover event expenses.

“We don’t always expect ticket sales to cover all expenses,” confirmed Larry Carr, SJSU’s Associate Vice President of Public Affairs. “But, sponsorships and donations (also shown on the tax return) at the event make each one of these events profitable, netting additional funding for the programs the fundraisers support.”

“Fundraising events raise money not just from the sale of tickets to attend the event, but also from other activities that take place during the event,” Carr added.

CalWatchDog.com asked a professional fundraising consultant whether it was normal to lose money on fundraising ticket sales. “If I lost $14,000 a year, my clients would and should fire me,” said Justin Matheson, managing partner of AimPoint Inc, a fundraising firm with a combined three decades of fundraising experience for political and nonprofit clients.

Portantino: Practices Defy Explanation

The high-overhead fundraising practices could draw greater scrutiny from the state Legislature, which recently approved legislation to cap presidential salaries after Cal State Trustees failed to act.

“The tone-deaf nature of these practices defies explanation and continue to negatively reflect on these institutions,” said Assemblymember Anthony Portantino, D-La Cañada Flintridge, one of legislature’s leading critics of wasteful spending. “Their first responsibility is to our students, not fundraisers that lose money and an effort to find every loophole to increase president pay.”

CalWatchdog.com has previously reported on the ethical problems arising from Cal State’s new executive compensation policy. Cal State presidents commonly maintain a powerful influence over foundation boards, which ethics experts say, creates a conflict of interest.

In May, following several CalWatchDog.com reports on inconsistencies in executive compensation data, Cal State Chancellor Charles Reed admitted that the system had “erroneously calculated” the total compensation for university officials on past IRS documents.

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