Central State U is asking the state for help to improve its financial condition

Losing money and students, Central Ohio State University is turning to the state for guidance.

Historically, the Black Sea Land Grant Institution has been in deficit for three consecutive years, suffered from declining enrollments and was unable to pay its suppliers on time. To help the college out of the hole, university leaders who were new to the institution decided this summer to take their financial problems to the state and ask for help. Central State has already cut staff and frozen hiring to address the financial situation.

The public university is currently under “financial watch,” a designation by the Ohio Department of Higher Education that signals that “immediate and decisive action is needed to improve the institution’s financial condition,” according to news release from the department. This is the second time in the last decade that the university has been under financial control.

The chancellor of the Ohio Department of Higher Education is tasked with making this call based on eight criteria. Central State University fulfilled five of them, including a significant gap between the adopted budget and actual revenues.

“Given the combination of their finances, including delayed payments to suppliers, downward revisions to the budget and cash flow concerns, it became clear to us this month that a fiscal review would be helpful and help formalize a series of steps that we probably would have liked anyway take with the leadership of Central State University,” said Mike Duffy, chancellor of the department, in an interview with the publication Inside the higher ed.

Within three months, the university will have to develop a financial recovery plan. This should include an analysis of how the university got into its poor financial position and what efforts the university is making to recover from it, as well as contingency plans and financial projections for the future. The university must also prepare quarterly financial reports and work with the state auditor to improve budgeting, accounting and financial reporting procedures.

But this hard work is accompanied by free consultations and advice. The state auditor must write a report to the university’s Board of Trustees with an analysis of financial issues and recommendations. State funds will also pay for the company to provide additional accounting support. The department’s goal is for Central State to end its financial controls within three years when it improves its financial situation.

Ohio Gov. Mike DeWine said in a release that university and state officials agreed there was “good cause” for financial surveillance and that state lawmakers would “continue to work closely” with the university. He emphasized that the university is “an important part of the higher education landscape in Ohio” as its only public HBCU.

Moraquinho A. O. Kuti, who became president of Central State University in July, said he would like to see the university in a better financial position, but the fiscal control status comes with tools and guidance from the state that will help the university in the long term.

“We’re fortunate that the state responded to our request to come and help us revise our books … It’s always better to work in the light and (to) know what’s going on,” Kuti said. “We don’t want to be here, but it will be a good exercise for us.”

What happened

When Cootee arrived at Central State this summer, he found his finances in dire straits.

The university’s deficit was $3 million in fiscal year 2024. It also had deficits in 2022 and 2023 of $4 million and $14 million, respectively.

These budget problems are due in part to declining enrollment. In 2022, the university had approximately 1,600 on-campus students, with the number of online students growing to 4,000, Kuti said.

But after graduation, the number of online students dropped sharply Career Pluscontroversial free college program for union members, in 2023. The program allowed union members to earn an associate’s degree at Eastern Gateway Community College and a bachelor’s degree at Central State, while the U.S. Department of Education sent a ban letter to Eastern Gateway alleging the program violates federal financial aid rules. Central State ended its relationship with the Student Resource Center, a company that helped facilitate the program, in the fall of 2022 and then ended the program altogether. The Dayton Daily News reported

However, the loss of the program came at a high price. A student of the previous year head count numbers according to the Ohio Department of Higher Education, the total enrollment for fall 2024 is 2,719, with only 842 students enrolled online, a significant difference from the several thousand the university enrolled two years ago.

“When the online population dispersed, we had too much infrastructure (spending) supporting the online environment,” Kuti said. “And so when the students were gone, we lost a lot of money.”

Duffy emphasized that Central State also faces the same challenges as other higher education institutions, including a demographic crisis — a decline in traditional-age college students — and cuts in federal COVID-19 aid funds that have helped some institutions shore up their finances.

While fiscal oversight is not “incredibly common,” “the challenges Central State University is facing are not unique,” Duffy said. “They are very similar to other institutions in the country.”

What will happen next?

This is not the first time that Central State has come under financial scrutiny. The university also received the designation in 2015, partly due to financial struggles, and managed to get rid of it by 2017.

Cootee said his goal is to end financial scrutiny of the university between 18 and 24 months ahead of the department’s goal. The university has suspended most hiring and limited travel to cut costs. It also laid off 12 employees, saving about $700,000 this fiscal year.

“We have to keep costs down, so we’re reviewing all of our contracts to make sure they’re beneficial,” Kuti said. “We are looking at curricular alignment across campus to make sure we are supporting the most productive programs. We are looking at efficiency and ways to increase profits in all directions.”

Meanwhile, administrators held meetings with staff and faculty to explain what was happening and what fiscal control meant.

“This designation does not affect our classes,” Kuti said. “It does not affect our accreditation.”

If the university’s financial situation continues to deteriorate in a few years, the next step for the Ohio Department of Higher Education will be a conservatorship, with an appointed conservator leading the university. But Duffy doesn’t believe it will come to that for Central State.

“We believe that the prospects are good,” he said. The new president “obviously has some work ahead of him, but students will not be affected in their day-to-day lives. … We look forward to working with (administrators) to help shape their future and how they position themselves.”

Kuti also feels hopeful.

“This is not how we wanted to start the school year,” he said. But “people on campus know that we are a sustainable university and that we have a bright future.”