October 10, 2018 CUSD BOT Meeting Agenda Item #43 Resolution No. 1819-18, Resolution Regarding the Capistrano Unified School District Foundation for Education 

Board Agenda page 652

Board Audio at 34:20

CUSDWatch Comment

On April 12, 2018 CUSD Foundation issued the following Statement:

“The Board of Directors of the Capistrano Unified School District Foundation recently became aware of serious financial irregularities that we believe involve the Foundation’s former executive director who resigned in December 2017” 

“The Foundation is shocked and deeply saddened by this situation, but remains absolutely committed to providing financial support to assist in meeting the educational needs of the many students in the Capistrano Unified School District”

On September 26, 2018 CUSD held a Board Workshop which included a presentation on Education Foundations.

On April 27, 2018, Administration notified the CUSD Foundation that “the District is extremely concerned about the Foundation’s present ability to appropriately manage and direct the funds which it currently controls.” Administration also demanded the CUSD Foundation “turn over to the District all funds currently in its possession that were raised for the benefit of CUSD schools,” “turn over to the District an accounting of all financial transactions,” and that “‘all pending and future request for donations from District employees must be presented’ to Deputy Superintendent.’”

• On May 2, 2018, the CUSD Foundation responded by denying each of these demands. First, the CUSD Foundation stated that “our non-profit organization cannot legally transfer or turn over funds or approval authority to any public school district,” and that “we would be breaking relevant laws were we to turn over donations collected by our independent 501(c)(3) corporation….” The CUSD Foundation also stated that, in denying provision of financial information to the District so Administration could conduct an audit, “[t]his is being handled by appropriate law enforcement agencies and an outside accounting firm.”

• Following receipt of the May 2, 2018 letter from the CUSD Foundation, the District researched the claims by the Foundation that it could not transfer money to the District and determined the Foundation’s contentions were unsupported by fact or by law.

• On May 21, 2018, Administration notified the CUSD Foundation that “these laws and regulations do not prohibit charitable organizations from transferring or turning over funds or approval authority to the entity for which the charitable organization was created.” Administration also brought to the CUSD Foundation’s attention that its own bylaws stated the CUSD Foundation’s treasurer “shall disburse the funds of the Corporation as may be ordered by the [Foundation] Board.” 

• There have been multiple exchanges by email and in face-to-face meetings with representatives from the CUSD Foundation; however, as of the date of preparation for Trustees’ October 10, 2018 meeting, the CUSD Foundation has not complied with the District’s demands

According to CUSD:

• The CUSD Foundation has represented, but the District cannot verify, that the CUSD Foundation regularly makes gifts, grants, or bequests to District staff and/or schools; there is no evidence that CUSD Foundation has followed applicable Board Policies when making such gifts, grants, or bequests.

• During the course of its investigation, Administration learned that CUSD Foundation has amended its bylaws for the stated purpose of distancing itself from the District, by extending its mission to benefit students residing within the District’s boundaries regardless of whether they attend District schools, all while continuing to publicly utilize the District’s name.

• Administration has reviewed the financial filings by the CUSD Foundation that are required by law in order to maintain its charitable designation, and has determined there are potentially inaccurate statements and/or incomplete information therein; and

Resolution 1819-18 Approves the issuance of a Cease and Desist to the CUSD Foundation to cease and desist from raising funds as the CUSD or Capistrano Unified School District Foundation, or in any way that suggests to unwitting donors that the CUSD Foundation is endorsed by, or any form associated with, the Capistrano Unified School District

Secretary of State Business Search:

* Agent for Service of Process- Michelle Hart is the person that is allegedly under investigation for misappropriation of funds.

The Concern is that CUSD allowed this foundation to act as an agent for school booster clubs etc - allowing them to deposit their money with the Foundation and then when needed, the Booster Club would send a request to the Foundation to pay for a project for them. 

During the Board workshop, it was brought to the Publics attention that site based organizations like Booster Clubs placed their money with the foundation to hold until needed.

CUSD has no idea how many CUSD site-based organizations have money with the foundation. It was also disturbing to learn that when Ms. Hart was first hired to work 20 hours per week she was paid $1,500 per month plus 20% of the donations according to the OC Weekly Article: OC Weekly Article Charity For Capistrano Unified School District Sues Former Director for Fraud

"According to filings with the California Attorney General’s office, over the years CUSD has annually raised as little as $124,000 and as much as $1.25 million."

See also: CUSDWatch: September 26, 2018 Special Board Workshop

*Note- The Foundation address is the same as Capistrano Unified School Districts Administrative Office. Is there a rental agreement or lease or was the foundation given free rent from the District?



Committed To Our Community

The mission of the CUSD Foundation is to raise money by developing partnerships with businesses and the community to enhance the quality of education for every student in the Capistrano Unified School District.

Founded in 1992, our non-profit organization has raised over $2,000,000 for students, teachers and schools over the last decade, providing much needed resources to enrich student-learning experiences that fall outside the district’s budgetary reach. Our volunteer-based, non-profit educational partnership raises funds through a variety of programs and events.

Board of Directors:

Larney Fowler, President | Larned Fowler Attorney at Law

Jeff Montejano, Vice President | BIASC Chief Executive Officer

Malinda Goller, Treasurer | Regional Vice President of Calwest Bank

Laval Brewer, Secretary | Executive Director of Playworks Southern California

Enzo Scognamiglio, Board Member | Owner, Brio Tuscany Grill

Susie Casky, Board Member | Retired

Paul Simonds, Board Member | Vice President Curt Pringle & Associates 

Joone Kim-Lopez, Board Member | General Manager of the Moulton Niguel Water District