This article is the second of a series looking into the rise and fall of former Georgia Perimeter College president Anthony Tricoli.
Former Georgia Perimeter College (GPC) President Anthony Tricoli was not given “timely and reliable financial information” during the years that led to an “unprecedented fiscal shortfall” at the institution.
That’s part of the conclusion of an audit by the University System of Georgia (USG), released Sept. 17.
“The internal reports produced by the budget director did not suggest that any significant budget issues existed,” the audit stated.
On May 7, USG Chancellor Henry Huckaby announced via email to GPC employees that a $16 million budget shortfall had been discovered at the college and that “in light of the need for a fresh approach,” Tricoli’s six years at the helm of the college had ended.
GPC’s former fiscal leadership team relied on inaccurate spreadsheets that did not correspond to the college’s general ledger, according to the audit. Additionally, “it appears that members of GPC’s cabinet, to include the former president, and both the president’s council and the strategic budget committee, were provided incomplete and inaccurate budget presentations” made at various group meetings by Ron Carruth, former executive vice president of financial and administrative affairs and chief business officer (CBO), and former budget director Mark Gerspacher.
Tricoli told The Champion he was never informed “that we were spending down our reserves or that our budget was going in the red.”
“In fact, the information…presented to me was very misleading,” Tricoli said. “The information…never showed us dipping into our reserves and never showed us headed to the red or never showed us headed toward a budget problem.”
However, the audit concluded that Tricoli “did not perform the necessary financial due diligence associated with his responsibilities as institution head.”
Responsibility “rests with the president”
While responsibility for GPC’s management “rests with the president,” the audit states that the president must rely on the college’s chief business officer and the CBO’s staff in the execution of his fiduciary duty.
At GPC, the budget director reported to the assistant vice president for financial and administrative affairs, Sheletha Champion, who reported to the chief business officer.
In interviews with auditors, each member of GPC’s former fiscal leadership team claimed to have been unaware of GPC’s fiscal condition.
Tricoli “asserted that he was unaware of GPC’s fiscal condition and that it was [Carruth’s] duty to inform him of fiscal issues. [Carruth] indicated that he relied on [Gerspacher] and [Champion] to keep him informed of fiscal deficits. [Champion] indicated that she was excluded from key decision-making with respect to the budget. [Gerspacher] indicated that he brought some budget concerns to the attention of” Carruth and Champion,” according to the audit.
Auditors determined that Tricoli “did not adequately review the financial statements of the institution issued under his authority.”
Tricoli “indicated that he did not read the statements and that they were routed to the former CBO for handling,” according to the audit. “While the president should be able to rely on the CBO to handle ongoing financial management, the president is nevertheless responsible for the financial statements – and the financial condition – of the institution.”
When issues associated with cash flow and audit shortfalls were brought to his attention, Carruth “indicated that he did not fully appreciate the scope or magnitude of the underlying fiscal issues when they were raised with him by both his own staff and auditors.”
Financial reality not reflected in budget
According to the audit, GPC’s financial problems developed over time.
“While the institution started spending more than it earned in fiscal year 2009, overall revenue was increasing” from fiscal year 2009 through fiscal year 2012,” the audit stated. “Nevertheless, GPC’s spending exceeded its revenue each year. These annual shortfalls were managed through a combination of accounting entries…and through the use of institutional reserves.”
The “ongoing use of reserves to plug operational costs clearly is not and was not sustainable,” the report stated.
According to the audit, GPC had an “ineffective” financial system of record. GPC’s budgets did not match budgets approved by the Board of Regents and budgets “were not adjusted to reflect actual financial reality.”
Auditors discovered that “fundamental budget duties were not performed” by Gerspacher, according to the findings.
“Budget reporting was inaccurate, budgets were not correctly loaded into the financial system, numerous individuals could override the flawed budgets that were loaded in the system, and budget development essentially ignored actual financial experience,” according to the audit. “In short, essentially every primary duty of the [Gerspacher] was left unfulfilled.”
Financial challenges preventable
According to the audit, GPC’s fiscal challenges were preventable.
“Unfortunately, key leaders at every level charged with actual responsibility for GPC’s fiscal management did not exercise all of their assigned duties,” the report stated. “It appears that an emphasis on enrollment growth and program expansion took precedence over sound fiscal practice as management and leadership priorities.”
Auditors stated that they did not know “why the former fiscal leadership team was not aware of GPC’s fiscal situation.” Publicly available information was in place to alert the GPC leadership to the college’s “declining financial position and to the fact that the prepared budget was not sustainable.” Annual financial reports, cash balances and financial system queries and reports were available for use in understanding the institution’s fiscal situation.
Once the budget shortfall “became apparent to the school’s former leadership,” Tricoli immediately notified the chief financial officer of the USG.
Subsequently, several senior personnel changes were made, including the appointment of Rob Watts as interim GPC president, a chief business officer and associate vice president for fiscal affairs. Gerspacher had resigned shortly before the deficit was reported and an assistant vice president for budgets and strategic financial planning was appointed in his place.
The new financial leadership team increased to $9.5 million its state institutional loans; closed $1.4 million of purchase orders; moved $4.7 million in summer 2012 revenue from fiscal year 2013 to fiscal year 2012; and laid off 282 staff members.
Watts also closed five internal institutes and centers, including the Atlanta Center for Civic Engagement and Service Learning, the Southeastern Institute of Sustainability, the Southern Academy for Literary Arts and Scholarship, the Center for International Education and the Center for Organizational Development.