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Financial Mismanagement and Other Concerns

BOARD OF TRUSTEES ISSUES

  • Mismanagement of Endowment Fund.  Paine College’s $8.2M endowment has a net worth of only $4.1M.  The endowment has been used as collateral to a line of credit with total borrowings of $4.1M with no payment plan established.  In essence, the endowment is used to support operations when the donor may have wanted the money to be used for scholarships or other specified purposes.  Because there is little to no documentation to discern the real purpose of donations made to the College, endowment investment standards and protocols may have been broken by use of the endowment fund to collateralize operating loans to the College.  Because the borrowings against the endowment are unlikely to be repaid, with no repayment plan between the college and the lender, and because the borrowings are collateralized by the total endowment fund there has been in effect a de facto liquidation of the endowment fund to the extent of the borrowings against it, i.e. $4.1 million.  Moreover, the college is paying interest on the loan borrowings ($90,507 in fiscal year 2013) while simultaneously paying management fees calculated as a percentage of  the total endowment fund of $8.2 million when in essence it is worth only half that amount. [click here to see 2013 Audit Report by BDO, notes 9 and 15]

  • The Endowment Fund Manager, Morgan Stanley Smith Barney, Did Not Receive The Appropriate Board Authorization To Borrow $360,000 Against The Endowment In December 2013.  The Bradley administration attempted to have the unauthorized loan paid back prior to the April Board of Trustees meeting, however, there was no cash available to do so.  [click here to see letter to Board of Trustees from CFO Ed Patrick]

  • Annual Endowment Disbursements Exceed Board Established Guidelines.  The Board of Trustees has established a disbursement guideline which determines the maximum amount of money which can be disbursed to the college annually for operating expenses.  This guideline has not been adhered to as the college has, in addition to $4.1 million in borrowings collateralized by the endowment, drawn directly from the endowment over $1.7 million dollars in excess of the board established guideline between 2002 -2011. [click here to see Endowment Disbursement Analysis]

  • Dr. Bradley Limits The Information Provided To The Board Of Trustees Such As SACSCOC Letters, Department Of Education Letters, Financial Statements Compliance Audit Reports And Other Important Communications.  The Chairman of the Board of Trustees, Dr. Silas Norman, receives much of this information, but he does not disseminate these documents to all of the other Board members.  SACSCOC warning letters and Department of Education letters dating back to 2012 have not been shared with several Board members.  The Board is unable to hold Dr. Bradley accountable for creating a plan of action to address many of the major issues confronting Paine College.  Unfortunately, they get more information from the Augusta Chronicle articles and other sources than from their Board meetings.  A lack of Board of Trustee governance has been cited by SACSCOC as one of the violations that has landed Paine on probation.  [click here to see the 2013 and 2014 SACS Disclosure Statements on the Status of Paine College]

  • The Paine College Board of Trustees Has Not Held Dr. Bradley Accountable For The Eroding Financial And Academic Standing That Is Occurring Under His Administration.  Prior to Dr. Bradley, Paine College was not under SACSCOC warning status, or probation, and now Paine College accreditation is in jeopardy as the SACSCOC status has moved from warning to the more sever status of probation.  There has been no plan presented to the Board to address the ten SACSCOC standard violations that justify the probation status, and yet, Dr. Bradley has been allowed by the Board to continue as the President of Paine College.  [click here to see the 2013 and 2014 SACS Disclosure Statements on the Status of Paine College]

  • In 2012, Under the Leadership of Former Board Chairman, Dr. Eddie Cheek, Dr. Bradley was allowed to write his own employment contract.  Most of the current Board of Trustees members have never seen his employment contract and have never asked to see it.  The primary job of the Board of Trustees is to hire, evaluate, and if necessary to fire the President of the college.  Yet at Paine there is no effective evaluation or oversight of the President as is evidenced by the fact that a majority of the Board members have never even seen his employment agreement or have any idea of how much money he makes or his wife makes.  Reportedly, Dr. Bradley’s wife, Tina Marshall Bradley, has been hired as a consultant to the college.  It is doubtful that any of the current Board members could recite what her job duties are, or how much money she is to be paid, or have ever seen a consulting agreement between her and the college or have ever asked to see it.

CAPITAL EXPENDITURE ISSUES

  • Rather Than Renovate The Resident Halls And Or Build A New Resident Hall, Which Would Generate Revenue, The College Built The HEAL Center, A Basketball Gym That Generates Very Little Revenue.  The result is that debt service (repayment of the loan to build it) and maintenance expenses (cash outflows) are significantly in excess of revenue (cash inflows).  These expenses impact the financial statements and contribute to the negative change in net assets that feeds into the financial instability of the College. [click here to see Endowment Disbursement Analysis]

  • Dr. Bradley Has Established Short-Term Loans With Balloon Payments That Come Due In 2015 And 2016.  The HEAL Center loan ($4.5M) and Capitol City Bank loan ($3.1M) expire in 2015 and 2016, respectively.  When Paine College becomes unable to make the balloon payments due on these loans, which is likely because of the precarious financial condition of the College, the loans could be called and the College would face default on these obligations.   Again, these short term debt financings of such large amounts of money feed into the financial instability of Paine College.

  • Expensive Loans That Were Negotiated By Dr. Bradley.  The large dollar loans with short-term repayment structure are unfavorable in cost and expense to Paine College.  The interest rates appear to be reasonable but if Paine College is paying closing costs every 3 years, these loans become very expensive, and again, contribute to the financial instability concern.

FINANCIAL AID ISSUES

  • Dr. Bradley Meets With The Financial Aid Director Weekly Even Though This Position Does Not Directly Report To Him.  He gives instructions to the Financial Aid Director to draw down enough financial aid each month to meet payroll and payoff a certain amount of obligations.  This draw down approach hurts the students since many of them do not receive their financial aid until the fourth and fifth month of the semester, and therefore, the students do not receive their refunds until the fourth and fifth month.  The semester is virtually over and students receive money that is intended for them to purchase books, supplies and other educational related items.  This draw down approach also does not comply with the Department of Education regulations. [click here to see March 2014 U.S. Department of Education deficiency letter]

  • Because Financial Aid Draws Down Financial So Late In The Semester, Students Also Do Not Receive State Financial Aid Such As Hope Scholarship And Georgia Tuition Equalization Grant (GTEG).  State funding is shrinking and these funds are available on a ‘first come, first served’ basis.  Ironically, this approach to manage cash through the financial aid department actually hurts Paine College because less cash payments are received than are available earlier in the semester, and of course, the students are impacted because they must find a way to seek out other sources to pay for their tuition or pay the balance themselves.  [click here to see March 2014 U.S. Department of Education deficiency letter]

  • Financial Aid Department Experiences Repeated Severe Findings, And Yet, No Changes Are Made Under Dr. Bradley.  Deficiencies in Financial Aid have been reported in annual audits, and SACSCOC has noted sub-standard performance by the financial aid department in their two warning status letters and probation status communications.  Financial aid professionals who want to work at Paine College and have more expertise and knowledge than the current staff have been refused employment by Dr. Bradley.   Training for the financial aid personnel is limited and/or non-existent.  80-90% of students and parents complaints are related to financial aid not being applied timely, accurately or completely.   [click here to see 2013 U.S. Department of Education Program Review Report]

  • Past Audits, all the Way Back to the Year Ending June 30, 2011, have Identified as one of the Root Causes of Accounting Errors and Inaccuracies the Constant Turnover of Personnel in the Business Office.  Notwith-standing this fact, Dr. Bradley fired two CFOs and other Business Office personnel after this period.  In essence the dysfunction in the Business Office can be traced directly to Dr. Bradley and his proclivity to terminate the employment of the people he hires. [click here to see Cherry Baekert and Holland 2011 fiscal year audit, p. 43]

GENERAL MISMANAGEMENT AND LEADERSHIP INCOMPETENCE ISSUES

  • Dr. Bradley Spearheads The Establishment Of A Financially Failing Football Program.  Athletics is only profitable at less than 10% of all higher education institutions in the United States.  That means for more than 90% of the colleges and universities athletics cost more money than it brings back.  Over $1M was spent on football in its inaugural year.  These expenses that included coaching staff payroll, coaching staff offices, coaching staff bonuses, equipment and uniforms, weight room building renovation, weight room equipment, and the building of a field house with showers and lockers were untimely and again, contributed to the concern about Paine College’s financial stability.

  • Dr. Bradley Does Not Consider The Students As Being His Clients, But Rather His Constituents That Include The Board Of Trustees, Alumni, Southern Association Of Colleges And Schools, Commission On Colleges (SACSCOC), Local Politicians And Department Of Education.  Therefore, basic needs of students are not considered in the budget such as maintenance of the resident halls, food service equipment, HVAC in the student center where the air conditioning is consistently in disrepair.  Instead, over $300,000 in funding is requested from the United Methodist Church to install stain glass windows in the Chapel.

  • Staffing Is Based On Satisfying Constituents Rather Than What Is Most Beneficial To Paine College.  This is the reason for lack of transparency.  Paranoia and secrecy is the culture rather than openness and availability. Administration staff includes positions to satisfy constituents because when questioned for the reason to keep them, the explanations references their experience, their loyalty or who they know rather than their performance and relevance in meeting full time operational needs.  The result is furloughs and high turnover in positions that meet dire operational needs.

  • Dr. Bradley Is Primarily An Administrator Who Approves All Checks Regardless Of The Dollar Amount; Approves Financial Aid Drawdowns;  And Does Not Allow Any Staff Members To Interact With The Board Without His Prior Approval.  Additionally, Dr. Bradley prohibits staff interaction with media, even if it is a positive story.  Violation of these rules is a basis for termination.  This type of daily operational oversight is rare from the office of a college/university president because this position rarely has the time and the expertise to oversee these types of responsibilities.  Essentially, if the President is overseeing these responsibilities, the primary responsibilities of the President’s office are being neglected, and due to the lack of expertise, the administration of these areas suffer.

  • Dr. Bradley Rarely Interacts With The Local Business And Augusta Community To Raise Awareness Of Paine College Offerings And Raise Private Donations.  Even during times of dire circumstances such as the recent shootings, Dr. Bradley made no public appearance as the leader of Paine College to quell the students, parents and community’s fear and concern.  This impacts contribution revenue from private donors that continues to decline along with student enrollment of both currently enrolled students and new students.

MISMANAGEMENT OF BANKING RELATIONSHIPS

  • Paine College Previously Proposed A $22+ Million Bond Financing Transaction Which Was To Be In Large Part Underwritten By Wells Fargo Capital Finance.  However, shortly after Dr. Bradley abruptly terminated the employment of the last Vice President for Fiscal Affairs, Edward Patrick, Wells Fargo pulled out of the deal and the transaction collapsed.

  • Dr. Bradley Has Considered Moving A Significant Portion Of Banking Operations From Wells Fargo To Capitol City Bank.  Capitol City Bank is under FDIC watch and some will consider this bank more financially unstable than Paine College, and yet, Dr. Bradley is interested in moving more banking operations to them.

  • Dr. Bradley Requested That $163,000 Be Invested In Capitol City Bank Stock Offering.  The stock offering prospectus acknowledged that Capitol City Bank’s ability to sustain operations was in peril and the profile of a suitable investor is one that could assume a high risk investment.

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7 Comments

  1. Rita says:

    To whom it may concern, Board of Trustees. As a concerned parent I am very saddened about the mismanagement of the school and it’s monies being used inappropriately by George c Bradley and other staff members. I feel with the current situations that is going on at Paine College and the standings of George C Bradley it is truly time to make some strong financial and beneficial changes to this college. With Mr Bradley in office we unfortunately can not do this. My daughter has been attending Paine College for two yrs and since we are new to the area I’m very ashamed to say my daughter attends Paine. I’ve expressed to her time and time again that things were not ran right and something needs to be done about the management of this College. In all my years I have never experienced anything like this. The students are being robbed of their education and we as parents are being robbed of our monies that we are paying out for our children to attend Paine. They are not subjects they are victims of mismanagement and greed, unfortunately if the Board of Trustees do not sit down and discuss this situation right now the consequences will be even worse. Please take all our concerns as parents in consideration. What will happen to these college students that are attending Paine now if they do lose their accreditation in the year of 2015? They will be devastated and so will we parents. There will be great turmoil on the Paine College campus from students and parents. And you all could not payback to any of the students nor the parents the money that has been spent thus far.
    Thank you for your concern in this matter. I’m looking for a huge change in Paine College as we go through this transition.

  2. Shelly says:

    #iluvmypc I’ve met these people personally and they have the best interest of the students and school in mind. Tge question is do the students have their best interest in mind. The students has or had opportunities to eat dinner with the president how many showed; two. The president had open office hours for the students do they go? Versus having parties raise money for ur school. This sense of entitlement with out work. If a perfect school is what you seek then transfer. If not help make the situation better. Those pot holes can be filled by any body all you have to do is sign paper work. Tell the male students stop damaging their dorms. Look at the community these students come from, who cleans cause its the right thing to do, no one. Because of this mentality that it’s not my job,

  3. Cathea Hardaway says:

    speaking on the presidents “open door” policy. if he has one then why when two concerned students about a mold infestation problem which lead to my roommate and I to lose valuable items as well as our clothes and books but when we went during his “open door” hours his secretary went and closed his door right after looking us dead in the eyes…smh

  4. Mason Johnson says:

    I had been vaguely aware that Paine might be having financial problems, but when I received a copy of the Alumni Meeting Report of July 12, 2014 via email, I woke up to the really bad news that the school–my school!–was in severe difficulty. I want to do everything in my power to help, but as I do further research on the Net, I’m wondering how best to do that. I’m worried that whatever I give may be going down a rat hole as long as the current administration is in charge. I’m hoping that the Board of Trustees can be persuaded to make the necessary changes in administration to put us back on the right track. Thank you for this web site and for caring enough about our college to keep us engaged!

  5. Wilma Sykes-Brown says:

    I am a graduate of an HBCU, i.e., Hampton University. I have also worked with Paine College students and faculty in my pre-retired position GRU-Medical College of Georgia. I’m saddened to learn of Paine’s slow decline, it’s reputation, and poor financial status as the entity impacted the most will be its students. If what I have read is true, it’s unbelievable that those in authority have made such a horrific mess – the future of Paine appears to be highly unstable and recovery questionable.

  6. Omar says:

    Morris Brown College (MBC) is a private, coed, liberal arts college located in the Vine City community of Atlanta, Georgia, United States. It is a historically black college affiliated with the African Methodist Episcopal Church. Although Morris Brown College is no longer member of the Atlanta University Center Consortium, it is located within the Atlanta University Center (a district designated by the Atlanta City Council).

    In 2002 it lost its accreditation and federal funding due to a financial mismanagement scandal during the 1998–2002 tenure of Dolores Cross as school president. The United Negro College Fund also terminated its support for the college.[3]

    In August 2012, Morris Brown filed for Chapter 11 bankruptcy in an attempt to prevent foreclosure and sale of the school at auction.[4]
    As of 2011 Morris Brown is in a “Self-Study” phase of the accreditation process with Transnational Association of Christian Colleges and Schools and is looking to reapply in October 2012. Until 2003, Morris Brown was accredited by a regional accreditor, the Southern Association of Colleges and Schools (SACS). Morris Brown was more than $23 million in debt and was on probation in 2001 with SACS for shoddy bookkeeping and a shortage of professors with advanced degrees. In December 2002, SACS revoked Morris Brown’s accreditation. Almost eight years later, the college settled its nearly $10 million debt with the Department of Education.[5]
    Eighty percent of the school’s 2,500 students received financial aid from the federal government, which gave Morris Brown $8 million a year. A federal criminal case against the former president, Dolores Cross, and the financial aid director, Parvesh Singh, proved the pair had embezzled a great deal of the federal aid and diverted it to ineligible college costs, such as personal staff, instead of subsidizing the students.

    In 2002, the Southern Association of Colleges and Schools revoked the college’s accreditation because of its financial problems. Cross and Singh were charged in December 2004 in a 34-count indictment that accused them of defrauding the school, the U.S. Department of Education, and hundreds of students. The pair, who had first worked together at a college in Chicago, Illinois, were convicted of using the names of hundreds of students, ex-students, and people who were never enrolled to obtain financial aid for the school.[8]

    During the time Cross held the college presidency, from November 1998 through February 2002, Singh obtained about 1,800 payments from federally insured loans and Pell grants for these students, who had no idea they would be responsible for paying off the loans, the indictment said.[9]

    At the time of the 2004 indictment, Cross was teaching at DePaul University in Chicago.[10] On May 1, 2006, Cross pleaded guilty to fraud by embezzlement.[11] She agreed to pay $11,000 to the Department of Education in restitution. Singh pleaded guilty to one count of embezzlement.

    On January 3, 2007, Cross was sentenced to five years of probation and one year of home confinement for the fraud. Cross, 70 years old, suffers from sleep apnea and has had a series of small strokes, factors the judge took into consideration. Singh, 64, also received five years of probation but 18 months of home confinement. An additional factor the judge considered was that the embezzled funds were not used for personal profit, but to prop up the school’s poor finances.[8] However, the initial indictment said Cross had used the funds to finance personal trips for herself, her family, and friends.[12]

    The prosecutor, U.S. Attorney David Nahmias, said at the sentencing: “When the defendants arrived at Morris Brown, the college was already in serious financial condition. Thereafter, these defendants misappropriated … money in fairly complicated ways in what appears to have been a misguided and ultimately criminal attempt to keep Morris Brown afloat.”[3]

    ETHIER WE CAN FIX THIS PROBLEM OR BE LIKE MORRIS BROWN!

  7. Omar says:

    Saint Paul’s College was a private, historically black college located in Lawrenceville, Virginia. Saint Paul’s College opened its doors on September 24, 1888. Saint Paul’s College offered undergraduate degrees for traditional college students and distant learning students in the Continuing Studies Program. The school also offered adult education to help assist working adults to gain undergraduate degrees. Saint Paul’s College have a Single Parent Support System Program that assist single teen parents to gain a college education. The college had long experienced significant financial difficulties, culminating in a court conflict with its regional accreditor the Southern Association of Colleges and Schools in 2012. Throughout the 2012–2013 school year, the college sought to merge with another institution, but on June 3, 2013, the board announced the college would close on June 30, 2013.[4]

    Athletics[edit]

    The college discontinued its athletic programs in July 2011 in an effort to alleviate financial difficulties.[13] The football team drained $300,000 to $400,000 annually.[14] The men’s sports teams were known as the Tigers and the women’s sports teams were known as the Lady Tigers. The college competed in the NCAA Division II in the Central Intercollegiate Athletic Association.[15]

    In June of 2012, the college’s regional accreditor, the Southern Association of Colleges and Schools Commission on Colleges, stripped the college of its accreditation. Although the college had been on probation, it lost its accreditation for “violations concerning financial resources, institutional effectiveness in support services, institutional effectiveness in academics and student services, lack of terminal degrees for too many faculty members, and a lack of financial stability.”[7] The college sued the accreditor and two months later a court issued a preliminary injunction reinstating the college’s probationary accreditation to protect it during further legal proceedings.[8] Although there were initial plans that St. Augustine’s University in Raleigh, North Carolina, another historically black university of Episcopal heritage, would acquire St Paul’s,[9] the deal was abandoned in May 2013.[10] Shortly thereafter, the college reported to SACS that it would close on June 30, 2013.[4]

    ETHIER WE CAN FIX THIS PROBLEM OR BE LIKE SAINT PUAL’S COLLEGE!

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