BOSTON – An alarming letter (“Letter”) dated March 13, 2019 from the Massachusetts Department of Higher Learning to Rev. Christopher T. Metropulos, President of the Hellenic College and Holy Cross Greek Orthodox School of Theology (“HCHC”) expressed grave concern about the present course of HCHC academically and financially.
The Letter leaves open the possibility that the State Authorities may stop HCHC from giving out any more diplomas. It clearly states that “the Board may conduct an adjudicatory hearing to determine whether to revoke or suspend the institution’s degree-granting authority.”
The Letter also states that “Since 2011, HCHC has operated with a structural deficit and projects another deficit for the current fiscal year. The practice of the institution is to budget for a deficit number, which in FY18 was exceeded by the actual final deficit by almost $1.4 million. For FY19, HCHC is projecting a $1.6 million cash flow gap. The draft operating budgets through FY21 project deficits, though diminishing, for each year. [. . .] As of June 30, 2018, HCHC had borrowed nearly $9.5 M from its temporarily and permanently restricted funds to finance its ongoing unrestricted operating losses. The borrowing has increased significantly over the past few years, from $1.4 million in FY15 to almost $3 million in FY18. The institution has acknowledged that there is no plan for repayment for these loans.”
The letter is printed in its entirety below:
“Massachusetts Department of Higher Education
March 13, 2019
Re: 610 CMR. 2.10 Investigation
Dear President Metropulos:
As you know, over the last several months, the Massachusetts Department of Higher Education (the “Department”) has been conducting an investigation, pursuant to 610 CMR 2.10, of Hellenic College Holy Cross (“HCHC”) and its compliance with 610 CMR 2.00. During this preliminary inquiry period of the Department’s investigation, the Department requested that HCHC provide specific information and documentation pertinent to the Department’s concerns so that Department staff could evaluate HCHC’s compliance with the regulations of the Board of Higher Education (the Board).
The Department’s preliminary inquiry, which is now reasonably complete, has indicated a reason to believe that HCHC is not in compliance with certain provisions of 610 CMR 2.00.
Pursuant to 610 CMR 2.10(2), at this time the Commissioner of Higher Education may review the alleged violations with the institution and approve a corrective course of action by the institution or, where the Commissioner does not determine it to be appropriate to review the alleged violations with the institution, the Board may conduct an adjudicatory hearing to determine whether to revoke or suspend the institution’s degree-granting authority. This letter shall serve as my review of the alleged violations with you and my formal request for a corrective course of action.
- HCHC’s continued operation at a deficit
Since 2011, HCHC has operated with a structural deficit and projects another deficit for the current fiscal year. The practice of the institution is to budget for a deficit number, which in FY18 was exceeded by the actual final deficit by almost $1.4 million.
For FY19, HCHC is projecting a $1.6 million cash flow gap. The draft operating budgets through FY21 project deficits, though diminishing, for each year.
While the institution claims it has a strategy to “reduce and eliminate” this deficit, there is no detailed and credible plan to do so currently available, and indeed HCHC has failed to break even for almost 8 years. For example, the general strategy includes “improving [i.e. reducing the] discount rate and [increasing] enrollment”; however, there are no concrete goals set for the coming academic year or beyond for either.
Beginning in February 2019, measures were taken to reduce expenses to close $1.5 million of the projected deficit, but HCHC has only provided evidence for a small portion of this reduction (less than $350,000) in the form of staff retrenchments. HCHC has submitted no evidence regarding the release of collateral pledged for a line of credit or detail regarding the amount saved or reclaimed in reduced “professional services.” It is clear that some of these reductions are one-time adjustments and cannot be counted on to stabilize HCHC’s finances in FY20, which does not indicate a sustainable financial model. Furthermore, it is difficult for the Department to evaluate whether the cuts being made are impacting core areas such as academic or student support programs to the detriment of HCHC’s students and the nonconformance with minimum regulatory requirments.
- Extensive borrowing from endowment to meet operating expenses
As of June 30, 2018, HCHC had borrowed nearly $9.5M from its temporarily and permanently restricted funds to finance its ongoing unrestricted operating losses. The borrowing has increased significantly over the past few years, from $1.4 million in FY15 to almost $3 million in FY18. The institution has acknowledged that there is no plan for repayment for these loans.
While HCHC’s trustees froze borrowing from the endowment in January 2018, the draft operating budgets through FY21 show that HCHC is at least considering continuing to borrow from its restricted assets to pay operating expenses in the amount of $1.9 million per year.
- Decline in enrollment
HCHC failed to meet its enrollment targets for the first two years of a three-year enrollment plan begun in 2017. In 2017, HCHC was short by 43 FTEs and in 2018 by 70 FTEs; HCHC’s enrollment actually declined between 2017 and 2018, which is the opposite of what was needed and projected. While the goal for 2019 was lowered by about 100 students, which allowed HCHC to meet the new target, the institution’s low enrollment clearly has a consequence for its revenue expectations.
HCHC has proposed strategies for increasing the number of applications, and it claims that its current admissions cycle is yielding more applicants and more deposits to date than in the two prior cycles. However, HCHC has also made cuts in this area, stating that as part of its February 2019 expense reduction, it has made cuts to “professional services like consulting and contracting for admissions.” It is unclear what impact these cuts will have on HCHC’s enrollment numbers for 2019 and beyond. Additionally, some of the tactics that HCHC has cited as facilitating its enrolment goals are not clearly tied to enrolment outcomes such as increasing applications or supporting student persistence; for example, HCHC cites creating more academic partnerships and professional pathways as an enrollment management strategy without linking to goals or outcomes.
- Inadequate budget and planning process
As of March 1, 2019, HCHC had still not passed a budget for FY19. While this budget is due to be presented and vote on by the Board by April 1, 2019, it is not accepted practice to be so far into the budget year without one.
The budget information that HCHC has provided, in the form of a draft document showing projected budgets for FY19-21, indicates unrealistic and improbable planning. While the projections reflect a more realistic FTE number and commit the institution to 41 % discount rate in the current fiscal year (rising one percentage point in each of the two next years), the rates for salaries and wages, payroll taxes, and fringe benefits have been carried over at the same amount year to year. As these three areas constitute over half of the total institutional budget, and as some of the amounts are doubtless subject to factors beyond the institution’s control, keeping to a fixed amount will require reductions in other parts of the budget, or further reductions in staff, should costs such as health insurance or payroll tax obligations increase. The draft projected budgets also show a flat and continuing contribution from the Archdiocese of $1.5 million in each of FY19, FY20, and FY21. However, in November 2018, HCHC reported to NECHE that the Archdiocese contributed only $1 million in FY19, which was anticipated to increase to $1.2 million in FY20 and $1.5 million in FY21.
I am requesting that HCHC submit a proposed corrective course of action, which must include reasonable and feasible proposals to stabilize HCHC’s finances, to the Department by Friday, March 29, 2019. I am also requesting a meeting with the appropriate members of HCHC’s administration and leadership to discuss HCHC’s compliance issues and its corrective course of action, to be held the week of April 1, 2019. To that end, please contact my executive assistant, Meghan Mcinnis, at [email protected] or (617) 994-6901 as soon as possible so that she can schedule a meeting to be held at our offices at One Ashburton Place in Boston.
Please note that, while the Department’s focus at this time is on HCHC’s compliance with 610 CMR 2.07(3)(f), there are other areas where HCHC’s compliance with the Board’s degree granting regulations is in question. The Department reserves the right to explore these compliance issues with HCHC in the future, including requiring additional corrective course(s) of action if necessary. However, given what the Department deems to be particularly exigent circumstances with regard to HCHC’s financial stability, we have elected to proceed with a review of this area first.
Thank you in advance for your anticipated cooperation. We look forward to receiving HCHC’s corrective action plan and meeting with you in the coming weeks.
Carlos E. Santiago
Commissioner of Higher Education
CC: His Eminence Archbishop Demetrios, Chair of the Board of Trustees, HCHC
Patricia A. Marshall, Deputy Commissioner for Academic Affairs & Student Success
Cynthia F. Brown, Senior Advisor, Academic Affairs & Student Success
Ashley H. Wisneski, Deputy General Counsel
Meghan Mcinnis, Administrative Coordinator & Executive Assistant to the Commissioner.”