State auditors again slam Keys college over financing for the school's Stock Island dorm

skinney@keynoter.comApril 5, 2014 

For the second straight year, Florida Keys Community College has been cited by state auditors for inappropriately using college money to bolster the foundation in charge of the 100-bed Stock Island dormitory -- which has lost more than $1.5 million between opening in 2011 and September 2012.

The Florida Auditor General's Office report released Monday covers the fiscal year ending June 30, 2013.

The finance audit from the previous year containing a similar finding led the Southern Association for Colleges and Schools to place the college on accreditation "warning" based on lackluster internal finance controls related to the dorm.

The ultimate penalty would be losing accreditation, which would sever student access to federal financial aid. It also wouldn't allow students to transfer credits to universities.

As of June 30, the college has loaned the Florida Keys Campus Foundation, a direct-support organization created to incur construction financing debt for the dorm and to manage the dorm, $908,544. The foundation has repaid $115,190, according to the audit.

"We are unaware of any specific authority in Florida statutes permitting use of college funds to finance the activities of its college direct-support organization," auditors concluded.

"It's a high priority," college spokeswoman Amber Ernst-Leonard said of the need for the Campus Foundation to repay the college.

She also noted that a team from accreditation organization is due on campus in two weeks for a "monitoring visit on the warning status. The audit we received will certainly be something they consider when they're here."

College trustee Brian Schmitt explained what's called a forbearance agreement the college's board approved on Monday at a meeting at Marathon High School.

The deal is between the college and Lapis Advisors of San Francisco, which provided $8.2 million in bond financing for the dorm construction.

Under the deal, Schmitt said the college's interest rate would go from 7 percent to 5 percent for at least one and up to two years, and remove payments on the principal.

"At the end of that two-year term, the college should be paid back most, if not all, of the money owed to it" by the housing support organization.

Schmitt said occupancy projections on which the bond financing was based "were just too optimistic. I think it's the best thing we can do right now is work together with these guys and see if we can get the dormitory to perform at a level we can predict."

Suggestions kicked around include raising the rent above the current $4,000 semesterly rate, boosting summer occupancy and requiring students to agree to live there both spring and fall semester.

Schmitt acknowledged the direct link between audit findings and the accreditation but said the forbearance agreement and efforts to improve dorm revenue "I hope would give them a lot of comfort."

He also said the college's bond counsel, Ken Artin, disagrees with the Auditor General Office's that covering housing expenses is not allowed.

Schmitt said the board is considering asking for either a Monroe County Circuit Court declaratory judgment saying that's the case or asking for an opinion from the Florida Attorney General's Office.

College President Jonathan Gueverra is in Washington, D.C., and said in a Friday e-mail that he didn't have time to comment.

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