Eastern Gateway Secures Advance to Ensure Cash Flow

YOUNGSTOWN, Ohio — Eastern Gateway Community College had to secure a more than $6 million advance to assure access to adequate cash flow.

The Ohio Controlling Board approved the advance Monday. The chancellor of the Ohio Department of Higher Education distributes payments and subsidies to  colleges and universities for “exceptional circumstances” with controlling board approval.

“We are very excited about that,” Art Daly, senior vice president and development officer at the college, said of the approval. “This shows the state’s commitment to Eastern Gateway and our future.”

Daly doesn’t believe the college, which operates campuses in Youngstown and Steubenville, is in danger of shuttering.

The college is working with the U.S. Department of Education and Daly said the issues are definitely fixable.

“This is just a little bolster to get us through this transition time,” he said.

In the request, college officials cited Eastern Gateway’s Heightened Cash Monitoring 2 status. The U.S. Department of Education placed Eastern Gateway on HCM2 status in August 2022. It requires the college to use its own resources to credit student accounts and then wait for federal student aid reimbursements from U.S. DOE.

Daly said the process is time consuming as the college submits samples of its student files for reimbursement to the education department. Depending on the number of files sent, it can take up to 30 days for the agency to review them.

If errors are detected, the department requests additional documentation for review before releasing funds.

The length of the process, “coupled with EGCC’s continuous need to strengthen, refine and restructure their internal financial aid processes and procedures, have led to recurring cash flow challenges,” according to the request submitted to the controlling board.

The $6 million amounts to a three-month advance in state share of instruction to ensure the college “access to adequate cash flow to sustain operations” while it addresses issues identified by U.S. DOE, the request to the controlling board said.

In August, Eastern Gateway requested and secured approval from the controlling board for nearly $3.6 million in advance disbursements.

The Ohio Department of Higher Education will hold Eastern Gateway’s state share of instruction allocation in limited portions as needed to maintain sufficient cash flow. The timing and amount of those allotments will depend on Pell reimbursements.

Eastern Gateway will return to the controlling board in March 2024 to update members on its progress “and potential consideration for an additional request,” the request to the controlling board said.

Conditions of the advance approved Monday stipulate that the college must adopt a board-approved financial recovery plan by Jan. 15. This plan should include an analysis of financial difficulties and the causes of significant revenue or expenditure problems. It must also describe initiatives to address these difficulties, provide a time estimate for their resolution, and present a detailed financial forecast for at least three years.

Also by Jan. 15, the college should have a board-approved timeline and plan to conduct a search for a college president. John Crooks has been interim president since July.

By March 1, “a determination shall be made regarding opening for the Summer/Fall semesters, based on the anticipated financial viability of the institution in the long term,” the list of conditions said.

Problems stem from the college’s free tuition program that enabled enrollment to balloon from about 5,000 in 2017 to close to 45,000 at its height. The college expects 10,000 students to be enrolled for spring 2024.

The U.S. DOE in July 2022 ordered Eastern Gateway to cease and desist its Free College Benefit program and stopped Pell grant funds for new students. The department alleged that Pell Grant recipients were charged more than those who didn’t receive the grants.

Eastern Gateway sued the department, asking the court to stop enforcement of the order, saying it threatened the college’s ability to continue operations. Pell Grant funds amounted to about 74.5% of Eastern Gateway’s overall revenue at the time.

The college also argued that the federal officials exceeded their authority, their actions were arbitrary, they failed to provide any recourse for appeal and violated the college’s right to due process.

The parties settled the suit in August and the free tuition program ended.

Daly said there are no plans for a change in leadership. The college has hired a consultant to aid in its Heightened Cash Monitoring processes. That consultant is  being paid $13,000 per month and the contract is for three to six months.

Eastern Gateway has been on probation since November 2021, as designated by the Higher Learning Commission.

The college retains its accreditation, however.

Last month, the HLC extended the probation until at least November 2024. It cited an unrealistic fiscal year 2023 budget, ongoing litigation and a federal review that hasn’t been finalized among reasons.

A college spokesman has said Eastern Gateway expects 10,000 students to be enrolled for spring 2024.

“We’re committed to the future of Eastern Gateway and putting students first in everything we do,” Daly said. “Our faculty and our staff are committed to our students. There’s a bright future for Eastern Gateway as we round the bend.”

Copyright 2024 The Business Journal, Youngstown, Ohio.