According to a report in the Augusta Chronicle, an audit by the accounting firm Cherry, Bakeart, and Holland has found that Paine College, the historically Black educational institution in Augusta, Georgia, did not return unused financial aid money to the federal government for students who dropped out of school during the 2010-11 academic year. As a result, the college has been declared ineligible to participate in the federal Perkins Loan program until 2014. About 90 percent of Paine College students receive some form of federal financial aid.
The audit also showed that the college spent $500,000 more in the fiscal year ending June 30, 2011 than it brought in, and had only $343,000 cash on hand, down from $1.1 million the year before.
Paine College issued a statement which read in part, “Late last September, we became aware that the school would experience an unanticipated financial shortfall for fiscal year 2013. Immediately, Paine sought to ascertain the scope of the financial deficit. To date, it has not been necessary to utilize any funds to cover this budget shortfall and we are confident that there will be no disruption to daily operations or plans for continued growth. Since becoming aware of these budget issues, Paine has moved swiftly to identify the necessary steps to ensure financial continuity. The school promptly put in place financial responsibility measures, including the termination of relevant personnel and a complete review of college fiscal policies and procedures.”
HBCUs lost ground when integration began to break. At the time, black high schools sent the very best of black students at that time to “all white colleges and universities.” During the transition, the HBCUs had no plan to replace the core of students that traditionally found their way to HBCUs. Over the years, white universities were competing for white students and black students while the black HBCUs only competed for the black students. This caused a drop in enrollment and of course, this meant a decline in revenue for the HBCUs. With the continued increase in outflow of funds to pay increased costs and the loss of the inflow of funds, it didn’t take long to find the HBCU institutions in a negative cash flow positon. It was no surprise when restricted funds were used to bear the expense for unrestricted use. Thereby, hoping to replace the funds before an audit.
The bottom line is when businesses (and HBCUs ARE businesses) lose their revenue stream and have continued increases in operating expenses, they are destined to lose control of financial stability.