In the 46 years since its founding, the Community Child Care Council of Santa Clara County has gone from managing shoestring budget to, at its peak, $47 million a year in public funds for subsidized day care.

Now, it’s poised to lose everything after a damning audit shed light on rampant abuses, including, among other things, misuse of taxpayer money, falsified and missing records and a seven-figure pension account that appears to benefit only one person: former executive director Alfredo Villaseñor.

The just–released legislative audit also put regulators at the California Department of Education (CDE) on blast for failing to detect any of the violations at the nonprofit known as 4Cs, which showed reckless disregard for the terms of its grant agreements. On Friday, a CDE administrator named Lisa Velarde sent 4Cs interim director Joe Manarang a letter informing him that the nonprofit, which reportedly serves 6,000 children, would lose funding by July 1, and that he had 10 days to contest the decision.

Velarde said the CDE made its decision because of the legislative report, which found that 4Cs failed to justify 81 percent of administrative costs reviewed by auditors, robbed needy parents of time to re-apply for child care by backdating eligibility forms and placed undue financial hardship on day care providers by falling weeks behind on their paychecks. Some of 4Cs’ practices, namely the backdating, “could constitute egregious instances of fraud,” Velarde cautioned.

“At minimum,” she added, “such actions violate state law.”

Instead of telling stakeholders the truth, Manarang—presumably at the urging of 4Cs’ ethically challenged board president Ben Menor—denied the state’s allegations of wrongdoing and tried to make everyone scared enough to support 4Cs’ appeal.

In an unsigned email riddled with exclamation points and random capitalization, 4Cs management professed innocence—“nowhere in the report did it state that we did anything unlawful,” they fibbed. Although that same day, oddly enough, someone on staff felt the need to tape up reminders in the employee toilet stalls reminding everyone to pay child care providers on time.

Meanwhile, the unsigned 4Cs email also falsely indicated that the livelihood of its 2,800 day care providers is at risk. “YOUR program is in danger of being Terminated!” the message declared in bold red letters, inviting the providers to an all-hands-on-deck meeting Monday night. “WE NEED YOUR HELP NOW!”

Sources say about 100 of them showed up to the gathering while Menor and a hired guard stood outside to keep union reps from handing out leaflets that described the organization’s shady conduct.

Contrary to what Menor and his buddy Manarang claim, it’s upper management jobs that are on the line. The imminent defunding simply means that the CDE will dispense with 4Cs and find a new middleman to administer $40 million or so in grants that, for the most part, will go to the same independent day care contractors.

The CDE’s recent crackdown comes as 4Cs’ federal grant givers take a hard look at the $3 million or so it entrusts to the nonprofit each year for Early Head Start programs. If 4Cs loses that money, too, it would zero out the entire budget.