Dive Brief:

• Ohio’s state auditor last week alleged “derelict accounting and controls” and “rampant financial mismanagement of public resources” at Eastern Gateway Community College during the now-shuttered institution’s final years.
• The report from auditor Keith Faber’s office flagged $17.3 million of Eastern Gateway’s spending — the total amount of its federal student aid dollars in fiscal 2023 — as being insufficiently accounted for, due to “pervasive deficiencies in recordkeeping.”
• The office additionally detailed dozens of instances of inadequate data, unjustified spending, poor student recordkeeping, and lack of existing or approved written spending policies, among other issues.

Dive Insight:

Faber issued a blunt summary of the troubled Eastern Gateway’s financial leadership during the period covered by the report, from July 2022 to June 2023. 

“This goes beyond sloppiness and honest mistakes,” Faber said in a statement. “The public should be outraged.”

When investigating the public college's books, state auditors were “unable to obtain audit evidence supporting the College’s compliance with applicable federal requirements for these programs,” according to the report. In other words, Eastern Gateway’s recordkeeping deficiencies may have violated federal law tied to Title IV, in the auditors’ view.

Eastern Gateway indeed came under scrutiny over federal compliance, which ultimately hastened its demise. 

In 2022, the U.S. Department of Education alleged the institution’s free college initiative illegally charged students with Pell Grants more than those without. The department told Eastern Gateway to stop offering the free college program and implemented other regulatory restrictions, at which point the institution sued the agency. However, Eastern Gateway eventually did end the program as part of a settlement with the feds. 

The reputational damage and subsequent student decline after ending its free college program took a heavy toll on Eastern Gateway. In February 2024, the community college announced it would suspend enrollment for all students after its spring semester. By May, the institution announced it would permanently close in the fall. 

But despite being shuttered for more than a year, Eastern Gateway continues to make headlines. The state auditor’s new report details issues across nearly all of the college's operations. 

Some were as small as missing signatures in vendor contracts and lack of a detailed policy for use of an institutional Amazon account. But some findings represented potentially massive oversights, such as issuing $13.6 million in bonds to buy a parking garage that cost more to demolish than the land underneath was worth. 

More reports and details could yet emerge. Faber’s office noted in the Nov. 25 release that its Special Investigations Unit has an ongoing probe into Eastern Gateway’s operations that could produce future reports on the institution. The unit, together with several state law enforcement agencies, executed a search warrant in January 2024 related to the investigation.

Meanwhile, nearby Youngstown State University — with which Eastern Gateway established a teach-out plan — plans to absorb what remains of the smaller institution. The university’s board last month approved a plan to acquire property belonging to the community college. Youngstown State officials have said it’s the first time a community college has operated under a four-year university in Ohio.