State warns Hellenic College Holy Cross about grave financial challenges

Hellenic College Holy Cross has been running an operating deficit for nearly eight years, has borrowed money from its endowment, and suffers from declining enrollment and poor planning, the state said. Craig F. Walker/Globe Staff/Globe Staff

Another small private college in New England is in trouble.

Hellenic College Holy Cross, a Greek Orthodox school in Brookline, received a stern warning from the state last month about grave financial concerns, and on Tuesday it was publicly put on notice by regional accreditors about the same problems.

The college has been running an operating deficit for nearly eight years, has borrowed money from its endowment, and suffers from declining enrollment and poor planning, the state’s letter said.

The state said it reserves the right to revoke or suspend the school’s ability to grant degrees.

“The Department’s preliminary inquiry raises serious concerns,” said the letter, sent March 13 from Carlos Santiago, state commissioner of higher education.

On Tuesday, the regional accrediting agency also sent a notice to the school about its own concerns, which are also about institutional planning and finances. The New England Commission of Higher Education issued a “notation” to the school, meaning its accreditation could be in jeopardy if current conditions continue. The commission will monitor the school and reevaluate it within two years.

Hellenic is among a host of small private schools in New England that are struggling financially. They rely heavily on tuition and are in trouble as enrollment declines. Religious schools in the Northeast are among those that have seen the most precipitous drop in enrollment over the past decade. The College of St. Joseph, a Catholic college in Rutland, Vt., will close this spring.

In a statement issued by the New England Commission of Higher Education, the interim president of Hellenic College said the school is working with accreditors to “expeditiously remedy the situation.”

“Our academic programs and educational commitment remain strong, and we look forward to addressing the areas of notation to further strengthen Hellenic College,” wrote the interim president, Metropolitan Methodius.

Calls to the college on Tuesday seeking comment were not returned.

The letter from the state said the school is probably not in compliance with Massachusetts regulations about the financial stability of colleges. The state has asked the school to submit a correction plan but declined to comment on Tuesday about whether a plan has been submitted.

The school is running a deficit and has since 2011, the letter said. This year it has projected a $1.6 million cash-flow gap, the letter said. It said the school claims to have a strategy to eliminate the deficit but “there is no detailed and credible plan to do so currently available.”

The school has made some cuts to save money but the letter raised questions about whether those cuts have hurt academic quality and student services.

The school has borrowed $9.5 million from its endowment to fund operations since 2015, the letter said, and has no plan to repay that money.

The college failed to meet its enrollment targets for the past two years and only met its goal this year after shrinking the target by 100 students.

The school also has an inadequate budget and planning process, the state said in the letter. As of March 1, it had not passed a budget for fiscal 2019, and the draft document the school produced indicates “unrealistic and improbable planning.”

The letter said the school will have fewer students next year, meaning less revenue, but salaries, payroll taxes and benefits will stay the same, foreshadowing another deficit and cuts.

The state also found other questionable budgeting, according to the letter.

For example, one document said the archdiocese will contribute $1.5 million to the school each year for the next three years, but last year the school told its accreditors that the contributions would total less.

The “notation” issued by acceditors is a tool developed recently, after the abrupt closure of Mount Ida College last year. That unexpected shuttering caught regulators off guard, and they pledged to be more vigilant. This is the first time that such a “notation” has been issued. It is a first step that comes before a school faces the possibility of probation.