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Audit uncovers financial mismanagement at Paine College

Students speak out

Saturday, April 21, 2012 5:45 PM
Last updated Sunday, April 22, 2012 1:40 AM
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Paine College lost eligibility to one federal loan program for students and is at risk of losing more funding for mismanaging student financial aid and inaccurately reporting enrollment and financial data to the government, according to a recent financial audit.

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Paine College's actions have reduced its access to some student aid, and the school concedes it will run a deficit in 2013.  JACKIE RICCIARDI/STAFF
JACKIE RICCIARDI/STAFF
Paine College's actions have reduced its access to some student aid, and the school concedes it will run a deficit in 2013.

Along with other bookkeeping failures, the school did not change enrollment statuses or return unused aid to the government after some students withdrew in the 2010-11 fiscal year, according to a financial audit of the 2009-10 and 2010-11 fiscal years by Augusta certified public accounting firm Cherry, Bakeart and Holland. The audit was certified March 22.

Losing government money at a school such as Paine, where more than 90 percent of students rely on federal aid, would have a “very negative impact on its ability to serve students,” according to Rick Staisloff, the founder and principal of Maryland-based rpkGROUP, a leading consulting firm in higher education.

The 130-year-old private, historically black college has been celebrated for increasing access to higher education for thousands of black students.

“For an institution that is heavily dependent on federal aid, that would have serious repercussions,” said Staisloff, who spoke about college finances in general and not Paine specifically. “Tuition is an important part of the revenue stream, and students’ ability to pay that tuition is in many cases dependent on their access to aid.”

Repeated requests to interview Paine President George Bradley were not granted, and the college instead provided a 250-word written statement. The college’s 12 Board of Trustee members either refused to comment or did not return calls.

The audit obtained by The Chron­icle details the school’s lack of resources and knowledgeable personnel dedicated to preparing financial statements and managing federal money. In the fiscal year ending June 30, 2011, the college spent $500,000 more than it had in income and ended with $343,000 in available cash, compared with $1.1 million in the same account the year before.

The college has not met student enrollment goals for the current fiscal year of 2011-12, causing it to rely on additional financing sources such as credit lines from banks, according to the audit.

While the audit shows a relatively healthy 2009-10 fiscal year, it points to an abrupt change in 2010-11, with a series of financial issues and failures in how officials tracked and distributed financial aid.

Paine lost access until 2014 to the Federal Perkins Loan, a need-based program for students, after not properly accounting for the funds.

It did not have policies and procedures to administer the program, and more than 50 percent of students defaulted on the loan, adding to its ineligibility, according to the audit.

The audit also found Paine failed to correctly administer other Title IV financial aid programs:

• In a sampling of 40 students, Paine awarded financial aid to two who did not attend the school those semesters. The grants and
loans totaling $6,000 have not been returned to the federal government.

• The school did not return leftover federal money to the government within the 45-day requirement after students withdrew from the college in the 2010-11 school year. In two instances, returns totaling $10,000 were almost one year late and were only returned “as a result of the auditor’s inquiry during the testing of refunds,” according to the audit.

• Of 21 students who withdrew during the 2010-11 year who were receiving loans, only one student’s enrollment status was changed during the required time frame to show the person was no longer
attending Paine. Auditors noted that not updating a student’s enrollment status could result in that person paying unnecessary interest on loans.

• In an audit sample, there were two instances where Paine officials recorded they had disbursed loan money to students but actually never gave them the money. The oversight had to do with a failure to keep proper records of loans and disbursements, according to the audit.

Students speak out

Concerns about financial aid surfaced at the college when nearly 30 students protested in front of the administration building March 21. Some students said their financial aid checks bounced, while others said there were months of delays in receiving their checks.

Paine business management senior Adam Richmond, 25, said he received his check for the spring semester three months late in mid-March. When the school finally delivered the $500 check, it was handwritten.

“When I spoke to my bank, they said they’ve never seen a handwritten check from a college,” he said.

A day after Richmond made the deposit, Wells Fargo told him the check had bounced.

He said it took a trip to Bradley’s office to get the situation rectified and to get credited for bank fees from the bounced check.

“It totally threw me off,” Rich­mond said. “It was midterm week, so I wasn’t really able to focus on my classes. I’m down here on my own. I have no family sending money, so every little thing counts. It really set me back.”

Staisloff said it is rare for institutions to distribute bad checks, because the money should be received from the federal government and put into proper accounts for students.

“It would certainly raise red flags,” he said. “There are very stringent rules and regulations surrounding how those funds are to be handled.”

Along with financial aid issues, a school’s deficit spending could also affect its long-term health, Staisloff said.

He said it’s important to look at what factors are causing the deficit – whether the negative is caused by start-up costs, investments or excessive spending.

“You have to look at what’s causing the deficit spending; how long has it been occurring?” he said. “When that’s occurring year after year, it starts to erode the long-term health of an institution.”

Paine’s response

According to Paine’s statement, officials realized in September that the school would have a budget shortfall for fiscal year 2013. Paine has not had to “utilize any funds to cover this budget shortfall” and the deficit should not affect daily operations, it said.

“Since becoming aware of these budget issues, Paine has moved swiftly to identify the necessary steps to ensure financial continuity,” the statement reads. “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.”

In the audit, Paine officials said they hired a controller and assistant controller for the fiscal management team, each with almost 25 years of experience. The college has also started a national search for a chief fiscal officer, to be hired around July.

Federal measure

The U.S. Department of Edu­cation has its own safeguards in place to monitor the financial health of a school.

Sue Menditto, the director of accounting policy for the Nation­al Association of College and Uni­ver­sity Business Officers, a membership organization that focuses on business practices at higher education institutions, said one of those, the Financial Responsibility Composite Score, rates a college on a three-point scale based on audited financial statements.

The score for the 2010-11 year, which the March 22 audit addresses, is not yet available from the De­part­ment of Education. Paine’s score for 2009-10, when it had triple the available cash and no deficit spending, was 2.7 out of 3.

“One of the reasons they have the financial responsibility test is to set up a warning flag so a school wouldn’t out of the blue close, so the students wouldn’t show up and the doors would be closed,” Menditto said.

Coming off a well-scored 2009-10 year, the 2010-11 year showed several difficulties. In 2009-10, Paine had a $107,000 increase in net assets but a decrease of $496,000, or deficit spending, in 2011, according to the audit.

Though available cash plummeted, the school still spent $2 million on the purchase of property, plant and equipment.

Paine obtained a loan of $7 million for the construction of a gym in January, which has a 4.25 percent interest rate due monthly.

In its statement, Paine officials said the school has made strides in new academic programs, capital improvements and strengthening its faculty. It promises to continue its presence and impact in the community.

“Paine continues to be an essential member of the Central Savannah River Area community through an alumni presence, economic development, board involvement and the school’s research contributions,” it said.

PAINE COLLEGE’S STATEMENT

Paine College officials refused an interview with The Augusta Chronicle about the audit’s findings and instead provided a 250-word written statement:

“Over the past five years, Paine College has made significant strides in a number of key areas, including: new academic programs, accreditations, capital improvements, strengthened faculty, more diverse student population and an overhaul of the school’s policies and procedures. Paine continues to be an essential member of the Central Savannah River Area community through an alumni presence, economic development, board involvement and the school’s research contributions.

“We have also demanded accountability from our employees, faculty and students. Clear goals and metrics for success have defined our ability to monitor progress and take corrective actions when needed.

“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.

“Paine leadership will continue to work closely with the college’s Board of Trustees to fulfill the school’s mission. It has been through the valuable support of our alumni, friends and the community that we are positioned to reach higher heights to become recognized as a premier leading liberal arts institution in the region.”

Comments (23) Add comment
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a different drum
26
Points
a different drum 04/21/12 - 06:16 pm
8
3
I say close the school and

I say close the school and leave the road open.

allhans
24011
Points
allhans 04/21/12 - 06:58 pm
7
0
90% of students receive

90% of students receive Federal aid?
Is this a typo.

howcanweknow
2306
Points
howcanweknow 04/21/12 - 07:43 pm
4
1
So someone is responsible for

So someone is responsible for doing potential great harm to this historically black college? Think we'll see Brother Al come down and march / protest to demand the firing of those behind this terrible thing that could hurt so many young African Americans?

Here's an idea.... let's let Dr. Azziz include Paine in the merger, and let him become President there. I know Paine is a private college, but maybe some new management wouldn't hurt?

Little Lamb
46995
Points
Little Lamb 04/21/12 - 08:33 pm
7
0
There's not telling how much

There's not telling how much mismanagement, waste, graft, and other fraud they would uncover if they audit the millions of sales tax dollars going into their privately-owned gymnasium.

Riverman1
87013
Points
Riverman1 04/21/12 - 09:11 pm
9
2
They'll blame it all on Joe

They'll blame it all on Joe Bowles. Say they didn't realize how bad things were until he left.

copperhead
1035
Points
copperhead 04/21/12 - 09:29 pm
6
3
"financial

"financial mismanagement"=STEALING MONEY

Bizkit
33036
Points
Bizkit 04/21/12 - 11:52 pm
5
0
Culture of corruption. Isn't

Culture of corruption. Isn't there 4 or 5 pending lawsuits -two of which are EEOC charges? They froze faculty promotion and tenure for five years and as I understand no faculty have received a raise in over ten years (the only way is to write salary in grants). I understand the buildings would be closed by OSHA if the Inspector General were notified, and the fire marshall. Lead paint peeling, mold growing on walls and ceilings in dorms and offices, asbestos, etc, halls illegally crowded with tables, etc. I have a friend who worked there. The school has about 900 students with 90% on federal aid, the average SAT score is 700-800 (I think the national average is 1400 or 1500). You can go to the Paine site and read their FACT book-check it out. Wow Augusta State University students average 1300-1600 SAT and only 35% on Federal Aid. I don't know if the Paine student population with 700 scores would have the IQ to complete a college degree (nothng racist but you have a certain IQ and usually good SAT scores to attend college)? The Attorney General may need to check that place out because that doesn't add up. I think the national average SAT for Afrian-americans is something like 1275 compared to 1400 for whites. But 1275-1300 is still college material, 700-800 isn't college material.Now that is an average so I would hope the majority are 1200-1400 but you have to wonder how many low SAT students they are accepting with such low averages. Would you expect your child to be accepted into college with SAT scores of 700-800?

Bizkit
33036
Points
Bizkit 04/22/12 - 12:14 am
6
0
I have a niece who just

I have a niece who just scored 1400 and she is taking the SAT again (and the ACT) because she is worried her SAT scores won't be high enough for college (college is so compettive). Check out the Paine site FACT book and you will see SAT scores average 700 range combined scores.That is just insane. Hee, hee. I'd tell her to go to Paine but is too expensive ($22, 620 per year)Augusta State Univeristy is a fraction of that.

freespeach
4
Points
freespeach 04/22/12 - 03:27 am
0
0
I'm not surprised at this.
Unpublished

I'm not surprised at this. The school needs to be closed. It will happen on its own.
Unless, of course, they ask for a handout, not just a hand.

wondersnevercease
9218
Points
wondersnevercease 04/22/12 - 06:58 am
1
0
creative book keeping
Unpublished

creative book keeping .....(wink..wink)

Hucklebuck
43
Points
Hucklebuck 04/22/12 - 07:35 am
9
2
I am a black man and will

I am a black man and will tell you that historically black schools are the biggest ripoffs in the world. For Paine to be 22,000+ a year is crazy. My entire four years in college wasn't that much. They pretty much accept anybody into the schools and then "help" then get financial aid. As a society we need to realize that college isn't for everyone. If you were average in high school and didn't do well on the SAT maybe you need to consider other things. However I know several people that did extremely well in college but didn't so hot on the SAT. Everyone doesn't test well and alot of times students get pushed through and given grades that they don't deserve. These folks then think that they are college material when there are not. Alot of students make good grades but can't even pass the graduation test.

I graduated from AR Johnson and they prepared us for college from day one.

Bizkit
33036
Points
Bizkit 04/22/12 - 08:57 am
5
0
I was just thinking if it

I was just thinking if it cost 22, 000 a year to attend and you have 1000 students that's 22 million income. It's a tiny campus of delapidated old buildings (from I can see now that they've cut down all the trees ). What do they do with all that money? My friend says they pay faculty way less than competitive public colleges and there aren't that many of them. My bet a federal investigation will be pending for this financial incident and breaking labor laws (2 EEOC and two other pending labor cases).If it closes then maybe GHSU can use the space.

Bizkit
33036
Points
Bizkit 04/22/12 - 09:51 am
0
0
Hucklebuck I agree with many

Hucklebuck I agree with many of your comments. I think most African-americans are plenty bright enough for college, but the public schools often failed them and socially promoted them leaving them without the necessary tools. But I agree too college isn 't for everyone, so the problem is how to detect the bright students who made 700 from the student better suited for technical school. I guess they failout by natural selection-the cream always rises to the top. Paine has produced some notable names so I have to wonder are the problems now from the present administration. But since the school does receive federal funds they do have a responsibility to recruit students who will benefit the most and provide a return for the investment. From what I've read at the the school site they emphasize high standards of integrity and service. It would be sad for a bad apple to ruin a HBC like Paine. But in many ways isn't an Historic Black College a vestige from the past-like the confederate flag. It isn't an all black school that would be illegal-it accepts any denomination (its a methodist affiliated school-which I didn't know)and any ethnicity.

Bizkit
33036
Points
Bizkit 04/22/12 - 10:21 am
4
0
Let's hope the Georgia and US

Let's hope the Georgia and US Attorney General are investigating the school for fraud and other illegalities.

greygranny
0
Points
greygranny 04/22/12 - 10:57 am
1
1
Hucklebuck, you are correct.

Hucklebuck, you are correct. Everyone is not college material and many of these students are left with a huge debt when they finally leave this college. Many students would be better served at Augusta Technical College than a regular 4 year institution. Oh, and isn't the president of Augusta Tech a Paine graduate?

itsanotherday1
45477
Points
itsanotherday1 04/22/12 - 11:05 am
6
0
As far as academic standards

As far as academic standards for entry, Paine isn't that much different than the public universities. Paine apparently admits anyone who is breathing just to get the tuition $$ from the feds, and the public colleges feed at the trough of HOPE the same way. HOPE is running out of money because of the funds wasted on students who wash out. HOPE should only reimburse tuition AFTER successful completion of college courses, not before.

Cruising
0
Points
Cruising 04/22/12 - 01:05 pm
5
0
This is disgraceful and the

This is disgraceful and the administration is accountable! Board members MUST open their eyes and do what is right. The administration has fired others in the past and has spoken about what will be done to rectify the wrong...I wonder who will be fired this time?

The students, parents and community deserve better. The administration of Paine College has failed us!! How will this "wrong" be addressed. I truly hope it won't be addressed by a cover up.

Sweet son
10741
Points
Sweet son 04/22/12 - 04:08 pm
3
0
Started not to go to the

Started not to go to the touble to login but this is so much not news or a surprise. Need to check Bradley(Pres) and Brown(Development) closely! Have you noticed how Bradley hides all the time. Julius Scott and Shirley Lewis always operated transparently!

showboat
348
Points
showboat 04/22/12 - 04:28 pm
0
0
PAINE NEED TO FIND SHIRLEY
Unpublished

PAINE NEED TO FIND SHIRLEY and JULIUS FAST THIS PLACE IS ABOUT TO GO UNDER WITH THIS LEADERSHIP TEAM. THEY WANT TO CLOSE A STREET NEED TO GET THIER HOUSE IN ORDER ASAP.

dstewartsr
20389
Points
dstewartsr 04/22/12 - 04:52 pm
2
0
"90% of students receive

"90% of students receive Federal aid? Is this a typo?"

No, unless you're a millionaire (and unlikely to attend this school) students almost always qualify for the Pell Grant.

Cestlavie
147
Points
Cestlavie 04/22/12 - 05:19 pm
3
0
As a graduate of Paine

As a graduate of Paine College during the Dr. Julius Scott years, I am deeply disturbed by this information. The faculty members during that time were very demanding and students who couldn't cut it were usually weeded out during their freshman year. I have recently heard rumors of financial mismanagement, including faculty receiving checks that bounced, and students not receiving their financial aid, but I had no idea that things had gotten this bad.

Paine College has a rich tradition of excellence. I challenge the Board of Trustees to investigate the present staff and administration and make the changes necessary to bring the school back into compliance. I also challenge my fellow alumni to ask the hard questions and demand accountability from the school leadership.

And for the naysayers, please direct that energy toward having an audit of the Augusta-Richmond County government. I'm sure that will be much more eye-opening than this.

dichotomy
34479
Points
dichotomy 04/22/12 - 07:22 pm
2
1
"90% of students receive

"90% of students receive Federal aid?"

Paine is pretty much a taxpayer funded diploma mill masquerading as a private school. Has been for some time. Believe me, between federal student aid and federal grant money, Paine is a private school operating with mostly very public money. Apparently it hires it's own graduates to run the loan programs because they do not seem to be able to read and comprehend the rules and requlations very well.

showboat
348
Points
showboat 04/22/12 - 10:51 pm
0
0
HOW DID A PRIVATE SCHOOL GET
Unpublished

HOW DID A PRIVATE SCHOOL GET MONEY FROM THE RICHMOND COUNTY GOVERNMENT TO BUILD A NEW GYM? NEED AN AUDIT ON THIS.

Bizkit
33036
Points
Bizkit 04/23/12 - 08:47 am
1
0
I hear they fired all the

I hear they fired all the financial aid staff so likely the Attorney General is asking them to testify against the school and make a deal if they were culpable too.

redoutlook12
0
Points
redoutlook12 04/23/12 - 08:55 am
1
0
What is going on in our

What is going on in our community? Where is honesty and good management. Colleges cheating, elected officials with their hand in the cookie jar and a judge who doesn't pay any taxes like the rest of us. Talk about the need for an honesty audit!

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