New College of California, a private liberal arts school in San Francisco, is at risk of losing its accreditation for academic and ethical violations.

School administrators, under pressure from faculty, students and the Western Association of Schools & Colleges, announced that they will form a committee to search for a new president and will reconfigure the board of directors.

New College, which emphasizes activism and social change, was put on probation July 5 by the association for violations found by the association's commission. The commission's investigators found that:

-- Students had enrolled in and attended classes long before they were admitted to the college;

-- Grades of incomplete were changed to letter grades by persons not assigned to teach the courses;

-- Independent study was used improperly.

-- The college had insufficient financial reserves, controls and budgeting.

The association, which accredits colleges and universities in California, Hawaii and the western U.S. territories, will conduct an inspection this fall. Based on that inspection, the association could choose to pull the school's accreditation as soon as May. Without accreditation, the school could not give federal and state financial aid to its students. Although the college could remain open, degrees earned by its students would lose value.

New College President Martin Hamilton admits some of the allegations have merit but says the report is exaggerated, unfair and disrespectful to the school.

"It's not like we are perfect, but many things were taken out of context," said Hamilton, 57, who has been at the school since 1977 and president for seven years. He plans to step down as president next year.

Problems at the school have been simmering for a long time, students and faculty say, but seem to have escalated during the past year. Some faculty and staff have resigned, and some students say they will boycott this semester or leave for good.

Most blame Hamilton and the school's other top administrators for the problems. This summer, in response to the commission's findings, the full-time faculty issued a vote of no-confidence in Hamilton, and adjunct instructors formed a council. Several students began organizing a group that would serve as students' official voice.

The commission began its investigation in May after receiving six letters alleging misconduct. It found "clear and egregious violations," according to a letter detailing the findings.

Hamilton said he is working hard to remedy the complaints and hopes to see the school through its probation.

In response to the investigation, the school's board of trustees announced Friday that it will increase the number of board members, form a presidential search committee and name an interim chief financial officer.

Commission investigators also found inadequate records on admissions, questionable handling of financial aid and scholarships, and a general "culture of administrative sloppiness and arbitrariness."

"Our team was only there for a day, but what they found during that day raised very serious concerns," said Ralph Wolff, president of the Senior College Commission of the Western Association of Schools & Colleges. "There is a lot the college needs to do to demonstrate its integrity."

Wolff said a special investigation is extremely rare. Of 156 colleges covered by the association, only two are currently on probation: New College and San Diego Christian College.

One of the key findings is that Hamilton and those close to him make "unilateral assertions of authority."

Harry Britt, a former San Francisco supervisor who has been on the faculty since 1992, said the school is run by "a small group of people who are very highly motivated by the white male experience of the 1960s."

"There is rhetoric about love and community and trust, but in reality, it is an unhealthy situation because of the abusive and unwelcoming power situated at the top," Britt said.

The commission also said the school does not have stable revenues, sufficient financial reserves, effective financial controls or effective financial budgeting and planning. The schools money woes worsened after the purchase last year of the Roxie Theater, for the school's media and film studies program, and the Casa Loma Hotel, for student housing.

Hamilton, who said he earns $75,000 a year as president, admits the school is struggling financially. He also said that there has been a fair amount of staff turnover and that the school has money problems and clunky software, but he thinks he can clean it up.

"Our greatest concern right now is how to balance the budget," he said.

Investigators said they have "serious doubts that the same board and executive leadership that have allowed the problems are now capable of remedying these serious and pervasive matters."

Headquartered in a pink and green building at Valencia and 19th streets in the Mission District, the campus has both graduate and undergraduate degree programs. It also has a law school and a teaching credential program, each of which has separate accreditations.

New College is known for its progressive faculty, one-on-one mentoring and the infusion of critical thinking, self-expression, activism and spirituality into the curriculum. It bills itself as committed to education in support of a "just, sacred and sustainable world" and does a large amount of outreach in both local and global communities.

The threat of losing accreditation has some in a panic.

Jacob Ingersoll moved to San Francisco from Michigan last year for the master's program in Activism and Social Change. The 25-year-old said he noticed from the beginning that things were loose - classes scheduled at the last minute, late financial aid and lax policies.

"I was willing to let it slide. Those are little problems," he said. But then the directors of his department resigned, and he began to learn of deeper issues within the school.

"There was no faculty grievance policy, and none for students either," said Ingersoll, who will enroll at City College of San Francisco while he figures out where to continue his graduate studies. "I was not expecting this at all."

Several students are starting a council they hope can help save the school. Jeremy Zimmer, 26, a commuter student from San Jose, said the Interim Independent Student Council is working on a charter.

"There is a long history of failed attempts at student organizing, and we saw the report as an opportunity to initiate a student council," Zimmer said. "The administration has been incredibly resistant and even hostile to such an idea."

Zimmer started at the college in the fall of 2005 and is close to completing his degree. But he said he will take a leave of absence in solidarity with the teachers who resigned and the students who quit his program.

"I don't feel comfortable being there and giving them money until we see some serious progress," he said. "We are concerned they will not take this seriously and make superficial changes and shuffle people around while the power remains in a close-knit group."

The student council reiterated a call by the Adjunct Council for new leadership and the replacement of the president, academic vice presidents and the 12-member board of trustees.

Some students and faculty say those who are complaining lack perspective.

"A lot of times we are holding things together by a thread, but we are doing amazing work and have so many incredible teachers," said Sudia Paloma McCaleb, who runs the teaching program. "We have a challenge to keep progressive education alive and shouldn't focus our activism on destroying a college."

Gregory Gajus, a part-time humanities teacher who is serving as spokesman for the newly formed, 30-member Adjunct Council, said he sees hope in the commission's letter.

"It mirrors the reality of the school," he said. "It is consistent with what we see. We have been wanting to see change for a long time and felt powerless. Now, we are excited because it validates so many things we have known."

New College of California

Students: About 1,000

Degrees: Bachelor's, master's, law; and teacher accreditation programs

Tuition: Ranges from $6,695 to $8,189 a semester

Location: Main site at 777 Valencia St., San Francisco

Annual budget: $16 million