College of the Desert Accused of Defrauding State $5.2 Million

PALM DESERT, CA -- College of the Desert is facing serious charges of fraudulent activity that they collected more than $5.2 million in excess state funds by "improperly and knowingly" inflating enrollment numbers, the California Community Colleges Chancellor reported Thursday.

"After a thorough investigation, the Chancellor’s Office has determined that Desert CCD improperly and knowingly claimed excess state apportionment funding between 2003-04 and 2009-10 and that this matter should be turned over to the district attorney and the state controller for possible prosecution," a letter dated Nov. 29 by Chancellor Brice Harris states.

According to Harris, during this seven year period, the Desert Community College District used "catalog hours" -- or time scheduled for a course -- rather than "the legally required student contact hours" -- or actual time spent in class by a student -- to gain state funds.

What's more, a state-ordered "extraordinary audit" found the misreporting led to an overpayment amount of $5,261,544, which must now be repaid.

The Full-Time Equivalent Student (FTES) funding claims were then allegedly signed and certified when the District knew the numbers were false, as the state audit team found:

• The District concealed this FTES reporting error to the Chancellor's Office for a seven-year period, signing and certifying annual apportionment attendance report forms (CCFS-320) as true and accurate. 
• Based on the documentation reviewed, “there is sufficient evidence to demonstrate that financial statement fraud and mismanagement may have occurred.”     

"To rectify this matter, this amount will be collected in full from the District," Harris said in his letter, adding that another $630,169 will be deducted from this school year's base apportionment.

Harris said that COD will be responsible for:

• Paying back the $5.2 million in full.
• Engaging their contracted auditor "to do an 'Agreed Upon Procedures' verification in accordance with the Government Auditing Standards issued by the Comptroller General of the United States to confirm that catalog hours are no longer being used as a basis of claiming state apportionment."
• Putting in place "adequate additional internal controls" to "limit the risk of fraud and/or misappropriation of assets in the future."

As news of the allegations came to light, College of the Desert put out a press release addressing the issue head-on.

“We are deeply concerned with the audit findings and take seriously their consequences," COD Superintendent/President Dr. Joel Kinnamon said in the release. "We also take seriously our obligations as stewards of taxpayer funds and are committed to working with the Chancellor’s Office to settle all over-payments and to insure full and complete compliance with all requirements both now and in the future.”

Kinnamon has only been with the school since he was appointed successor to former Superintendent/President Jerry Patton in July 2012.  

“I am committed to being transparent and proactive,” he added. “As College of the Desert President, I understand the seriousness of these findings and have already taken prompt and immediate action in response."

Kinnamon said the school is already working on meeting the Chancellor's requirements of auditing and placing additional internal controls.  

"Further, the College has pledged its full cooperation to the District Attorney and any and all state authorities for any subsequent investigation or action," he said.

“I want to assure the public that we are taking appropriate steps to address the issues which have been highlighted by the report and are committed to doing whatever is necessary to preserve the public trust,” he added.

Palm Desert Patch contacted the Riverside County District Attorney's Office Thursday night, but spokesman John Hall said he could not yet comment as to if they've received the report due to the late hour, though said he would likely have more information Friday morning.