Fresno foundation CEO leaves as finance issues surface at old job

The abrupt departure last month of Hugh Ralston as CEO of Central Valley Community Foundation occurred as his previous employer in Ventura County struggles with financial turmoil and apparent irregularities that came to light after Ralston left for Fresno in the fall 2014.

Officials with the Fresno charitable foundation, however, say the timing of Ralston’s departure was simply coincidental. They declined to explain what led to his exit, saying it was a confidential personnel matter.

Ralston arrived at the Fresno foundation in October 2014 after 11 years as president/CEO of Ventura County Community Foundation. The Ventura County organization reported assets of more than $132 million as of Sept. 30, 2014, according to its financial statement.

In Fresno, Ralston took over a community foundation that was considerably smaller.

The Central Valley Community Foundation, formerly the Fresno Regional Foundation, was established in 1966 and functions as a tax-deductible clearinghouse for charitable contributions, grants and bequests from philanthropists.

According to the nonprofit’s 2015 tax documents filed with the U.S. Internal Revenue Service, it manages assets of more than $53 million. Last year, the foundation coordinated and awarded more than $8 million in grants and awards to charities in Fresno, Kings, Madera, Mariposa, Merced and Tulare counties.

Ralston quickly set about making changes. He spearheaded renaming the Fresno Regional Foundation as the Central Valley Community Foundation to reflect the Valleywide scope of the charities and causes supported by the foundation and its donors. And with his board’s approval, he orchestrated the foundation’s move into larger, more expensive quarters in the Fig Garden Financial Center on Palm Avenue north of Shaw Avenue in northwest Fresno.

The foundation moved from a 2,770-square-foot space in one building of the Fig Garden Financial Center into about 7,500 square feet in an adjacent building in the same complex. The relocation represented an increase in space of about 170 percent – and a hike of about 257 percent in the monthly rent obligation. The base lease rate on the smaller space was reported at $4,783 per month. In the larger space, the 10-year lease calls for monthly rent payments of $17,093.

On June 16, the foundation announced in a press release that it had “officially parted ways” with Ralston a day earlier. David Johnson, a former foundation board member who previously served as interim CEO between the retirement of longtime leader Dan DeSantis and Ralston’s hiring, was tabbed by the board to once again fill in as interim CEO during a search for a permanent replacement.

The Fresno foundation offered no explanation for Ralston’s sudden departure. “Other than that it’s a personnel matter, there’s nothing we’re at liberty to talk about,” Johnson said last week.

Ralston’s separation from the Fresno foundation happened roughly at the same time as newspapers in Ventura County reported on potential financial irregularities in some donor-restricted funds at the Ventura County Community Foundation dating back to Ralston’s tenure with the organization.

Vanessa Bechtel, Ralston’s successor as CEO of the Camarillo-based foundation, said the detailed seven-month review by accounting firm KPMG revealed that a number of donor funds were undervalued as a result of improper management.

The Bee was unable to contact Ralston to discuss his departure from the Fresno foundation or the financial situation of the Ventura County foundation.

Among the issues found by KPMG were that some permanent funds had been invested in low-interest money market accounts rather than in securities with a potential for higher returns; over-allocation of interest income from investments in unrestricted funds; and excessive administrative fees charged to some funds. Bechtel said KPMG’s findings have been shared with the state attorney general’s office, which regulates charities and professional fundraisers through its Charitable Trusts Section.

Now, Bechtel said, the foundation will have to backfill donor accounts found to have been undervalued as a result of the investment irregularities.

“We’re going to end up paying for that out of VCCF unrestricted revenue,” she said. “We’re making adjustments, and we’ve made significant cutbacks over the past year in regards to our expenses, and part of that is to accommodate” making up the interest to the undervalued funds.

How much the foundation ultimately will have to repay to the undervalued funds, however, is yet to be determined. “Right now, all of those calculations are with the attorney general’s office,” Bechtel said. The foundation said in a recent news release that it is working closely with the attorney general “to address the fund management deficiencies and the repayment of any amounts owed to the funds.”

Another aspect of the financial problems at the Ventura County foundation is the debt associated with a major benchmark of Ralston’s tenure – the $6.9 million purchase, with the foundation board’s approval, of a 55,000-square-foot building in 2012 to house the foundation’s offices and provide below-market-value lease space to qualifying nonprofits. Between the purchase price and money for improvements to the building, Bechtel said, the VCCF Nonprofit Center represented an investment of about $11.3 million.

Less than four years after the Ventura County foundation moved into its new space, the building is up for sale. It was listed in January for $11 million; in recent months, the asking price was lowered to $9.8 million. Bechtel said the foundation won’t consider anything less than that and hopes to restructure its debt to stay in the building.

The budget woes have forced the Ventura foundation to reduce its staff, which once numbered 22 employees, to five. Salaries of surviving employees were cut by 20 percent. It also closed its Center for Nonprofit Leadership, which for 24 years provided training and technical assistance to nonprofit organizations in Ventura County.

Johnson, Ralston’s interim replacement in Fresno, described as coincidental the timing of Ralston’s departure relative to recent developments in Ventura County.

Central Valley Community Foundation board members have been aware of the controversy in Camarillo, but board chairman Dr. Alan Pierrot said that was not a factor for the Fresno organization.

“I, as a board member, to this day do not have what I consider reliable information about what happened at the Ventura foundation,” Pierrot said. “I certainly don’t feel we have facts that would lead to any decision, including a personnel decision.”

When the first news articles about the Ventura County foundation’s financial situation appeared last September, there was talk between board members in Fresno and Ventura County “trying to understand what we could,” Pierrot said. But, he added, Ventura board members were limited by confidentiality in what they could discuss, “and we didn’t get a lot of meaningful information.”

Pierrot said the increased expenses for the Fresno foundation under Ralston’s tenure were the result of strategic decisions endorsed by the board of directors, including the move to a larger space and the accompanying growth in the foundation’s lease obligations.

Among expense lines that rose significantly from 2014 to 2015, according to the Fresno foundation’s financial statements, were accounting and legal fees, which more than doubled from about $45,000 in 2014 to $99,000 in 2015; office supplies, rising from about $73,000 to $124,000; and project consultants, which cost less than $400 in 2014 but totaled more than $254,000 last year. Overall, the foundation’s costs and expenses – excluding gifts, grants and events – grew from just over $1.6 million in 2014 to more than $2 million in 2015.

“The board made a conscious decision to increase overhead and expenses as part of a growth strategy,” said Pierrot, who added that part of the additional office space was to establish a new Center for Community, a 2,500-square-foot space to host workshops, training and other gatherings for local nonprofits.

Pierrot added that he is confident about the Fresno foundation’s financial footing. He noted that the foundation’s investment management firm has been in place for at least 10 years.

“And our board chairman last year, Carole Andersen, is the director of (accounting firm) Deloitte’s office in Fresno, so we have a true expert in a leadership role on our financial committee and as chair of the board,” Pierrot said. “We feel that we’re in good hands.”

This story was originally published July 23, 2016 at 3:30 PM with the headline "Fresno foundation CEO leaves as finance issues surface at old job."