Mar 282012

By Teri Walker —

Northland Pioneer College Foundation Executive Director Lance Chugg was shocked by the decision made last week by the Navajo County Community College District Governing Board to cut ties with his organization, but recent discussions between the foundation and the college leave him hopeful the two organizations may be able to work things out.

Chugg said over the weekend, he and foundation board members had conversations with NPC board members, NPC President Jeanne Swarthout and Vice President of Administrative Services Blaine Hatch about the strained relationship.

“We are talking and we’re working through this,” said Chugg.

Prior to the weekend discussions, Chugg was discouraged.

“I had no idea our relationship was less than amicable,” said Chugg, who said he did not receive personal notification from the college that the relationship between the foundation and NPC had strained to a point that the college would decide to sever it.

Chugg said he didn’t receive a phone call or an e-mail from Swarthout, or anyone else at the college, letting him know the seriousness of the decision the board would be addressing at the college’s monthly board meeting.

“Yes, I’m admitting I did receive an e-mail with the agenda and I didn’t look at it. But even if I had, in light of the things we’ve been dealing with at the Auditor General’s Office lately, I probably wouldn’t have attended,” said Chugg.

The agenda for last week’s governing board meeting included an item entitled “Possible change in relationship between the college and the NPC Foundation as a result of opinion issued by the Arizona Office of Auditor General.”

The issue at hand is an ongoing dispute among the foundation, the college and the Auditor General’s Office about whether the foundation is a component of NPC and therefore required to submit an audit report to the Auditor General to be used in the college’s audit process. The Auditor General’s Office contends the foundation is a component of NPC; the foundation contends that it is not.

By state statute, if colleges do not include audits of all of their components as part of their own audits, the Auditor General will bring findings against the college, which can jeopardize a college’s good standing and have serious ramifications for the institution.

Chugg explained that when he eventually did read the meeting agenda and saw the item relating to the foundation, he assumed the Auditor General must have provided the college with a recommendation for how to proceed with altering the relationship with the foundation in a manner that the foundation’s lack of an audit would not harm the college. Even when he learned of the college board’s decision to sever relations, he said he thought the term seemed harsh, but that it probably just meant that there’d be a change in the classification of the relationship, not that the college would completely disengage from the foundation.

Chugg maintains the foundation’s reluctance to participate in an audit is because the organization is struggling financially and would prefer to distribute its funds through student scholarships, rather than divert the $7,000 required for an audit.

He also aluded to long-standing disputes over the foundation being referred to as a component of the college, saying the foundation board believes the term makes the organization appear to be a subsidiary of the college, a designation that doesn’t sit well with them.

When he learned college board members were expressing alarm over the foundation’s refusal to participate in an audit, when it had been made clear to the organization that doing so would harm the college, Chugg said the foundation’s stand had been misconstrued.

He contends the foundation had at no point been adamant it would not participate in the audit. The Auditor General’s Office, college attorneys and college staff believe Chugg’s own communiqués say otherwise.

Swarthout said the Auditor General’s Office copied the college on a string of e-mails that volleyed back and forth between Chugg and their office, in which, she says, Chugg clearly stated the foundation didn’t intend to undertake an audit.

When Chugg made his case in an e-mail to the Auditor General about foundation officials’ reasons for believing it is not a component of the college, the Auditor General responded that the foundation was indeed a component of the college, according to established criteria, and submission of an audit was required.

“In his communication to the Auditor General he said, essentially, ‘we’re not going to do it, now tell us how to do this so it won’t harm the college,’” Swarthout paraphrased Chugg.

Chugg said his and the foundation’s contention all along has been that they don’t want to harm the college. When the Auditor General rejected the foundation’s argument against being a component, Chugg said he sought guidance from the Auditor General on how the foundation could, essentially, be “unclassified” as a component without harming the college. He has not yet received a response, and Swarthout said she doesn’t believe one will be forthcoming.

Speaking about the Auditor General’s Office, Swarthout said, “They’re done. They responded to the foundation’s argument and said they didn’t accept it. They’ve said the foundation is a component and subject to the audit.”

When Swarthout shared the communications between Chugg and the Auditor General’s Office, the college’s attorneys instructed her to seek final clarification of Chugg’s intent.

Swarthout sent an e-mail to Chugg in early March saying she wanted to be certain that her understanding of the foundation’s decision was clear, to which Chugg said he responded, “…for internal reasons, we are not likely to continue doing an audit of our activities. This obligation has been a sore point for a number of years.”

Chugg said his wording of “not likely” was “an expression of intent, not an absolute position.”

Swarthout disagreed with that characterization based on the other e-mails she read: “His response to the Auditor General was the foundation’s not going to do it.”

Since their email exchanges of March 1 and March 2, there was no further communication between Swarthout and Chugg on the matter before the March 20 board meeting. Swarthout’s assistant emailed the board meeting agenda to Chugg as part of the standard mailing list for the monthly meeting.

Chugg said there are qualifications that must be met to be considered a component and he doesn’t believe the foundation meets them. First, a component must provide significant support; the foundation provided $30,000 to the college in 2007/2008; $22,947 in 2008/2009; $8,315 in 2010/2011; and has awarded $17,280 in scholarships so far in the 2011/2012 school year. “Compared with a $20 million budget, I think most people would agree that’s not significant support,” he said.

Another criteria to be a component, Chugg said, would be for the college to have some level of control over the foundation.

“We are completely independent. In fact, we put a firewall between the foundation board, the college board and NPC. In years past, the college had a preponderant influence, but it no longer does,” said Chugg, explaining that there are no NPC board members or staff on the foundation board.

Chugg said the foundation wants the relationship with the college clearly defined. Concerns about the relationship are longstanding, he says.

“Essentially, the college should not have the ability to impose obligations on us without our consent,” he said. “These concerns predate me; they go back to the mid-2000s.”

He referenced a time when the foundation awarded scholarship money to the college and later discovered it hadn’t been dispersed, a situation that was later resolved, but added, he said, to concerns about the relationship.

“We are not a subsidiary of the college. They do not own us, they do not control us. They are our tenant,” he said emphatically.

NPC used to lease a building from the foundation on West Hopi Drive in Holbrook. When the college moved out of the building before the lease expired, an indemnity agreement was reached wherein the college committed to pay a portion of the executive director’s salary, decreasing by 20 percent each fiscal year, and provide office space, phone and other amenities to the executive director through February 2016, in lieu of rent. Chugg is currently housed at the Silver Creek Campus in Snowflake.

Chugg said the college didn’t contact the foundation directly when it began discussions about moving out of the Hopi Drive building, rather he found out about the possibility when he saw the monthly meeting agenda.

“Fortunately, that time, I looked at the agenda,” he said. “I didn’t find out about it through communication from the college.”

He said even with the indemnity agreement, the breaking of the lease has caused financial hardship for the foundation, which, coupled with decreased donations due to the economy, has caused the foundation to adopt austerity measures. His position will be cut to 25 percent of his previous time and pay to help offset operating costs and be able to fulfill scholarship commitments.

“Our budget situation is very serious,” said Chugg. “While we’ve made a good faith effort to lease our building in Holbrook…we haven’t been able to do so,” said Chugg.

Chugg said the Hopi Drive building functions as an endowment and is meant to pay for the foundation’s operating expenses.

Lack of clarity over funding of the foundation has led, Chugg believes, to confusion over the relationship between Chugg and NPC. Recent comments by college board members relating to Chugg’s lack of attendance at the monthly college board meetings, and lack of reporting of foundation activities to the college, affirm Chugg’s concern.

There is a standing item on the monthly college board agenda for a report from the foundation, but Chugg hasn’t attended a meeting since April 2011. Chugg said staying away from the meetings is a cost saving measure. When he has something of consequence to communicate to the college board, he says he will attend.

“The perspective that I had a quasi-employee obligation is not correct,” said Chugg.

Swarthout said she met with Chugg about six months ago to discuss improving communication between the two entities, as she was in the dark about the foundation’s activities. Her hope in calling the meeting was that the college and foundation could begin working together toward common aims. She said there has been no outcome from that meeting.

Both Swarthout and Chugg note that they wish for there to be an effective relationship between their two organizations.

Swarthout said that when a college and its foundation are working in tandem, they can garner strong results for a college in terms of fundraising and student support.

She said not having open lines of communication with the foundation, even a basic awareness of what the organization is working on, represents missed opportunities. Any of the foundation board meetings Swarthout has attended, she said, has been as a result of her requesting to attend; the foundation has not extended an invitation to the college president to attend their meetings.

“We want no ill feelings between us. We want to remain partners and we don’t want to harm students,” said Chugg, speaking for the foundation.

“The idea that we have a devil-may-care attitude toward whether our actions would harm the college is completely false,” said Chugg. “That is not, and never has been, our stand.”

At the end of the day, though, Chugg said the foundation is not satisfied with being labeled a component of the college and will continue to seek to disentangle itself from that designation.

“We’re not motivated by a desire not to work together on behalf of our students. We just want to reaffirm the separateness of our organizations,” said Chugg. “We’d like to see if we can lower the perceived antagonism level.”

The college board set the date for severing the relationship with the foundation at 30 days from the date of the board meeting, which was March 20, to give the foundation an opportunity to respond.

Swarthout sent Chugg an email and certified letter last week alerting him to the board’s action.

The instigation of discussions in recent days has Chugg hopeful.

“At this point, we agree there’s been some misunderstanding, but we are talking and we are working through this,” said Chugg on Monday.