San Diego Christian College, long plagued by money problems, is on probation again after a regional accrediting agency found it “significantly out of compliance” with fiscal and administrative requirements.
The WASC Senior College and University Commission warned of “an underlying instability in the basic financial management of the institution” and notified the private nonprofit college in Santee it has until June 2021 to fix the problems. If that doesn’t happen, the college could lose its accreditation and the millions of dollars in financial aid that comes with it.
Why this matters
Though a private, nonprofit institution, San Diego Christian College is required to manage its money responsibly to remain accredited, a nationally recognized standard for quality education. Accreditation is required for students to access publicly funded financial aid.
San Diego Christian remains accredited while on probation but is subject to additional scrutiny, including special visits by the commission and a requirement to submit periodic reports.
If the college were to lose its accreditation, students would no longer have access to federal grants and student loans.
Eighty percent of its undergraduate students received grants or scholarships, and 56% received federal student loans, according to the U.S. Department of Education. San Diego Christian students received more than $7.1 million in federal financial aid that year.
In its nearly 60-year history, the commission has terminated accreditation for just five institutions. Losing the status creates an “immediate existential crisis” for a school, said Terry Hartle, senior vice president for government and public affairs at the American Council on Education.
“Probation is sort of the end of the line,” Hartle said. “They either fix this, or accreditation will be withdrawn.”
Probation for colleges is rare. Just two of the nearly 200 institutions accredited by the commission are under the sanction. It has imposed probation on only four colleges since 2013.
This is the fourth time San Diego Christian has been on probation since 1989. The last time was in 2007. Hartle said that’s not a good thing.
“The people that San Diego Christian competes with for students will very openly tell prospective students, ‘Well, I see you’re interested in San Diego Christian. You know, they’re having serious financial problems,’” Hartle said. “So it’s a problem for any institution that finds themselves in this position.”
The college hired new leaders this year who told inewsource they are committed to correcting the financial deficiencies.
The latest sanction comes two years after an inewsource investigation found $20 million worth of unexplained expenses in the school’s public tax filings and two lawsuits over nonpayment of bills.
Since then, the college has followed Internal Revenue Service rules by detailing a total of $6 million in “other expenses” for the past three years.
But financial troubles, some of which the accreditation commission flagged more than a decade ago, remain.
The commission found San Diego Christian had to secure a short-term loan this past summer to cover cash demands. Its fiscal 2019 budget also never was formally approved by its governing board, with leaders told to “only spend what is needed.”
The college’s most recently available audit also revealed it’s in violation of loan requirements stemming from a 2018 refinancing of all of its debt. Because San Diego Christian is not in compliance, its lender has the right to enforce full payment of the loan. It has not done so, according to the audit, and the college is continuing to make monthly payments.
Tax forms show in recent years the college saw a substantial drop in tuition income, its largest source of revenue. But at the same time, the school’s dependence on tuition has been growing. During fiscal 2012, tuition accounted for 85% of its income. In fiscal 2018, it was 97%.
The U.S. Department of Education also has placed the college under additional oversight so its students can remain eligible for federal financial aid. A department spokesman said San Diego Christian had to submit a letter of credit equal to 10% of its federal student aid funding and has returned to a list of fewer than 500 institutions subject to heightened cash monitoring.
The college’s president, Kevin Corsini, started in September and comes from evangelical Liberty University in Virginia. He said he sees the probation status as an opportunity to improve the college and wants to foster a “culture of accreditation.”
“The team that’s in here now, we see this as a good thing,” Corsini said. “This is actually helping us become a better institution. This is helping us mature and develop and draw our attention to areas that need attention.”
Accreditor ‘not confident’ college has plan
San Diego Christian is nearly 50 years old and is closely associated with Shadow Mountain Community Church in El Cajon. Since 1984, the college has been accredited by WASC Senior College and University Commission, which covers institutions in California, Hawaii and U.S. territories in the Pacific region, according to its website.
Accreditors ensure institutions are following a set of standards, from financial management to the quality of staff and faculty. When they’re not, commissions can take action. That includes probation, or in the worst cases, termination of accreditation.
Of the colleges accredited by the WASC Senior College and University Commission, only San Diego Christian and Master’s University and Seminary in Santa Clarita are on probation. Another institution is under warning and seven others — including for-profit, San Diego-based Ashford University — received formal notices of concern.
In a June decision, the accreditor notified San Diego Christian officials that it was “not confident that the leadership at SDCC has a plan to address these serious financial issues and assure long-term sustainability of the institution.” The commission also said more work was needed on assessing co-curricular programs and data collection.
Hartle said probation forces colleges to act when an accreditor believes there are issues threatening their long-term existence. It serves public interest “because you do not want institutions of higher education limping along financially, offering a substandard education,” he said.
The accrediting commission has raised concerns over the college’s money for years. As early as 2008, the commission said “the financial foundations of San Diego Christian are fragile.” This year, a visiting team found that a five-year forecasting tool that had been strongly recommended in 2016, had not been updated since 2017.
San Diego Christian operated without a permanent full-time chief financial officer for more than a year following the 2017 inewsource report exposing the college’s failure to properly detail the $20 million in expenses from fiscal 2012 to 2014. At the time, students complained of inadequate facilities, former staff felt they were underpaid and the college settled with two vendors over missing payments.
Less than a month after inewsource published its story, then-CFO Steve Chaney left the college. Tim Savaloja, vice chairman of San Diego Christian’s board, replaced him on an interim basis.
It wasn’t until December 2018 that the college made a permanent hire, appointing Al Garrett as CFO. A team from the accrediting commission said the 14-month period without a permanent CFO “had a devastating impact” on the college’s finances.
Upon Garrett’s arrival, San Diego Christian restated financial statements for its fiscal 2018 audit. The numbers reported a $1.1 million decrease in net assets; the original statements showed a nearly $58,000 increase.
When asked whether the college’s financial condition is a result of insufficient revenue or poor management, Chief Operating Officer Bill Crawford said higher education has often operated like government instead of like a business.
Previous college administrators “reduced expenses,” said Crawford, a former board trustee hired in May.
“You can see that from the 990 (tax forms),” he said. “They made appropriate moves. Where they were challenged was investing in revenue-generating activities.”
Crawford said he’s bringing a business approach. The college is seeking partnerships with Christian high schools and home school networks, and calling prospective students who began but didn’t complete their online applications.
And it’s ramping up fundraising efforts. Crawford said the college has brought in $850,000 in donations and pledges this year. It reported about $272,000 in contributions on its fiscal 2018 tax return.
Battling enrollment declines
Full-time students pay more than $31,400 annually to attend San Diego Christian. About half continue to attend after completing their first year. The college’s overall graduation rate is 44%.
In 2018, 525 students attended, down from 630 in 2012. College officials told inewsource that they now are using more conservative enrollment projections while still working to expand the pool of potential students.
Crawford said he tells staff and students to embrace the college’s financial struggles.
“You can’t pretend this doesn’t exist,” he said. “You embrace it, you understand it, you talk about it. You use that as a cause, if you will, to make this a better place.”
Hartle said it appears that San Diego Christian is grappling with issues facing other specialized liberal arts colleges across the U.S. — fewer students, and thus, less money.
“My guess is that there are people in Southern California who want to pursue a faith-based education and who are going elsewhere,” he said. “You know, maybe they’re going to Northern California, maybe they’re going to Arizona. Maybe they’re coming to Liberty in Virginia. I don’t know. But I’m assuming that there’s a pretty good market for a high-quality Christian education in Southern California.
“Now, the question for the team at San Diego Christian is: ‘What are we going to do to aggressively tap into this market? What things have we not been doing that we need to tee up right away?’”