Central State University: what happened? - financial crisis in Central State University, Ohio

Black Issues in Higher Education, Dec 26, 1996 by Mark Fisher

WILBERFORCE, OHIO -- Dr.

Herman B. Smith Jr. stepped onto

Central State University's campus in

early 1995 with hope, ambition and a

clear idea of the task he faced.

The school was an estimated $5

million in debt, but a $4 million bailout

package from the state would stimulate a

resurgence. Besides, Smith had wrestled

with similar crises at three historically

Black colleges and universities (HBCUs)

in the South, and he was hand-nicked for his new

job by Ohio's governor and its top

higher-education official. His brand of

medicine would succeed where others

failed.

But Central State was a different breed

of patient and the extent of its disease had

not been diagnosed. The

school's accumulated debt when Smith

arrived was actually close to $11.6 million,

an audit report later revealed. The

undetected financial instability sabotaged

Smith's rescue effort. After fifteen months,

he was fired.

In a telephone interview from his home in Atlanta, Smith

said he was "grossly, sadly and unjustifiably mistreated" and

called his tenure at CSU "Mission Impossible."

For decades, CSU has lived on a cycle of financial crises

and government bailouts -- a cycle that exasperated its

supporters and frustrated state officials either unwilling or

unable to find a permanent solution. Despite repeated

promises to straighten out the school's finances, CSU's

trustees and administration continued spending more than the

school took in.

The school's current crisis contains a potentially lethal

blend of financial and political minefields. The exact

amount of its multimillion-dollar debt is unknown. Most of its

dormitories have been declared uninhabitable and have been

vandalized, apparently by students. The state auditor and

inspector general are investigating potential wrongdoing. And

some lawmakers have suggested closing or merging the school.

Next Six Months Are Pivotal

The next six months are pivotal as Ohio's elected

officials hammer out how much money

CSU will receive over the next two

years. The school's survival as Ohio's

only public HBCU hinges on that

funding. But lawmakers say before they

make any decisions on the future of

CSU, they want to know the answer to

one seemingly simple question: What

happened at Central State?

That question has no easy answer.

CSU's supporters claim the university

has endured chronic underfunding

because of racial discrimination, and

their position is shared by the U.S.

Department of Education's Office of

Civil Rights.

But state education officials, the

governor and several lawmakers strongly

disagree, claiming mismanagement is to

blame for Central State's crises.

A review of CSU and state records,

as well as interviews with current and

former Central State trustees, state

higher education officials and auditors,

offers glimpses into the reasons for

CSU's downward fiscal spiral.

Estimates of CSU's current debt are

still climbing. The state auditor's office

has told higher-education officials that

CSU's debt has probably reached $16

million, according to an

Oct. 31 memo that Ohio Board of

Regents Chancellor Elaine Hairston sent

to Gov. George Voinovich.

The school still appears to be

spending more than it is bringing in,

according to the memo. "This is a crucial

matter which will have to be addressed

before there is any hope of legislative

support for a solution," Hairston told

the governor.

Auditor of State James Petro, whose

audit showed CSU's debt jumping by

$4.3 million in a single year ending June

1995, said more than half of that

increase can be blamed on overspending,

particularly in the athletic account.

CSU officials now have until

mid-January, after requesting and

receiving a one-month extension from

auditor Petro, to produce a set of

auditable financial records for the year

ending June 30, 1996, so that a state

audit can be completed. That final

report, when it comes, could be even

more scathing than the 1995 audit,

which was released in September.

Placing Blame

Petro said CSU's financial oversight

during 1995-96 included "some of the

worst record-keeping I've ever seen"

and said he may take CSU to court if

they fail to provide records

that can be audited.

But Smith disputes the auditor's

contention that the university's financial

record-keeping was poor during that

period. In fact, the board of regents

praised Smith's chief financial officer in

writing in November 1995 on the

improved quality of financial reports.

"I think they're saying things to

justify the position they've taken,"

Smith said.

Smith criticized his predecessor, Dr.

Arthur E. Thomas, and the previous

CSU board of trustees, which Voinovich

forced out in July, for diverting

room-and-board money to the athletic

program.

"How could the president be

allowed to stay in that chair for ten

years under those conditions?" he said.

Thomas declined to be interviewed

for this story.

Smith also questioned state

oversight of the institution, saying,

"When you talk of lack of management,

you need to start right there in

Columbus... Where were the authorities

in 1990, '91, '92 and '93?"

When he arrived on campus, Smith

said he found "great selfishness, and no

commitment to the institution." Yet his