Pa.'s Auditor General DePasquale Says Future of Nation’s First Historically Black University (Cheyney U.) is Dire Without Swift, Decisive Action at State Level

“We cannot sit idly by as this historic and prestigious university fights for survival,”  DePasquale said.

HARRISBURG, Pennsylvania (12/17/14)  -- Auditor General Eugene DePasquale today said that the future of historic Cheyney University in Chester County is bleak and projected to worsen, unless drastic action is taken at the state level to address escalating debt, falling revenues, and declining enrollments.

Cheyney University’s financial position has consistently deteriorated since 2009 and continues to get worse, said DePasquale, citing a financial analysis of the university’s financial data from July 1, 2008 to June 30, 2013.

DePasquale said that while Cheyney University has troublesome finances it is clearly not the only one struggling among the 14 state-owned universities within the Pennsylvania State System of Higher Education. A financial review will be included in future audits of state-owned universities.

“The situation at Cheyney University should be a warning to the systemic financial issues facing state universities. Our best and brightest state leaders and stakeholders must work together to develop a long-term plan to ensure the stability of these public universities to provide affordable college education for families across the state,” DePasquale said. “The consequences of inaction are dire.”

Cheyney was founded in 1837 as the Institute for Colored Youth to provide free classical education for qualified young people. Nearly 80 percent of its students are from Pennsylvania. It is the nation’s first historically black university.

“We cannot sit idly by as this historic and prestigious university fights for survival,” DePasquale said.

According to the audit:
• Expenses exceeded revenue in four of the past five years.
o Cheyney’s deficit increased by $4.5 million in 2013 to a cumulative deficit of $12.3 million. Cheyney officials project another $5.5 million shortfall in 2014-15.
o Increased expenses include bad debt which grew from $1 million in 2012 to $1.5 million in 2013.

• Enrollments are declining. The number of full-time equivalent students is expected to decrease to 1,053 in 2014-15, a 28 percent decrease from 2008-2009 when there were 1,471 full-time equivalent students.

• Declining revenue from state appropriations, tuition, and fees.
o Over the past five years, the state decreased its appropriation to the State System which, in turn, reduced funding to Cheyney and the 13 other universities in the system.
o Cheyney’s allotment from the State System dropped from $15.6 million in 2009 to $12.8 million in 2013.
o The amount collected in tuition and fees dropped from $12.1 million in 2009 to $11.55 million in 2013.
o Overall, revenue is down from $27.8 million in 2009 to $24.4 million in 2013, a negative 12.2 percent.

“It is a losing proposition. When you have fewer state dollars and fewer students, then you have less money to invest into the university to attract more students. It is a vicious and destructive cycle that must be stopped,” DePasquale said.

Officials at Cheyney University agreed with, and have started to implement, several recommendations in the audit, including:

•  develop a plan to systematically reduce the deficit and restore a positive net position;
•  evaluate sources of revenue to determine if funds could be obtained through such efforts as a third-party collection agency for student accounts; and
•  work closely with the State System to increase enrollment and seek revenue sources for needy students, who otherwise won’t be able to attend college.

The audit report also recommends that the State System immediately perform a comprehensive financial analysis of Cheyney’s operations.

“It is clear that Cheyney University and State System officials recognize the fiscal challenges and they are working on solutions, but it is also clear that they cannot do it alone,” DePasquale said, noting a couple of cost-cutting measures Cheyney is already taking, including:

•  decreasing its workforce by 23 percent through reductions in administrative and facility staff; and
•  decreasing non-personnel expenses by 22 percent by requiring offices to reduce discretionary spending by 50 percent.

Administrative leaders at Cheyney University say they are in the process of more aggressively recruiting students to increase tuition revenue. They also plan to target more high ability students and improve student retention and graduation rates, according to the audit.

The State System will continue to monitor the university’s financial position, including weekly reviews of cash levels.

The audit also found Cheyney University was not following established policies and practices for obtaining background checks for employees, volunteers, and contractors involved in youth athletic and academic camps on campus.

Cheyney officials acknowledged the shortcomings and stated in the audit report that a new policy would be presented to the university cabinet this month for implementation in January.

The Cheyney University audit report is available online here.

PERFORMANCE AUDIT: CHEYNEY UNIVERSITY OF PENNSYLVANIA, PENNSYLVANIA STATE SYSTEM OF HIGHER EDUCATION



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