Government releases Paul Smith’s from heightened monitoring

College says it proved its ability to handle financial aid

The federal Department of Education released Paul Smith’s College from special oversight that required heavier scrutiny of cash management, a move that suggests at least one overseer is less concerned with the school’s ability to fulfill its mission.

The college administration informed its staff and faculty on Monday that the DOE had notified Paul Smith’s that it has been removed from the department’s “heightened cash monitoring.” The DOE placed the school in HCM2 status about 13 months ago.

The college notified Middle States Commission of Higher Education, which accredits the college, of its return-to-normal status, hoping the accreditor would cease its reporting requirements.

Besides no longer having to document all the steps and self-funding students eligible for federal financial aid, the college’s release from the monitoring could allow Middle States to ease some of its oversight demands. The college has been funding students out-of-pocket and was required to seek federal  reimbursement, complicating cash flow and adding an extra layer of processing, under conditions of HCM2 status.

A representative of the DOE did not immediately confirm the action. A Middle States spokeswoman said it is too soon to know the impact of the status change because Paul Smith’s continues to owe Middle States information sought in November.

“This decision by the U.S. Department of Education recognizes our efforts and reflects further progress toward long-term sustainability,” Interim Paul Smith’s President Dan Kelting said in a note to the campus employees.

“We are now back on the standard advance payment method which means we no longer need to seek DOE permission to draw down funding,” he wrote. “We will immediately be allowed to draw down all our remaining funds from last spring and this fall.” 

He cautioned staff and faculty that the administration will continue requiring justifications for expenditures, under what he called “spending stewardship to ensure responsible use of our resources.” 

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Kathy Bonavist, enrollment and marketing director for the college, said Paul Smith’s is seeking clarification from Middle States on whether pending requests for reports remain in effect since the school is no longer on the heightened monitoring status.

That status caused Middle States to require a teach-out plan identifying how the college would proceed and ensure that students would receive their education should something happen to prevent Paul Smith’s from providing academic programs.

In November, Middle States notified Paul Smith’s that the teach-out plan it submitted was unsatisfactory. The plan had been provided in response to Middle States’ request in April. 

The accreditor also directed the college to provide “further evidence of adequate fiscal and human resources to support operations.”

Both the teach-out plan and the supporting operational information is due by Jan. 16.

 “We assume financial evidence is the release,” Bonavist said about being taken off HCM2 status.

Nicole Biever, Middle States’ spokeswoman, said Tuesday that the accreditor expects the report and the plan sought by Jan. 16.

The heightened status came about as a result of a data breach at Paul Smith’s from an Aug. 27, 2022, cyber-attack, the school and the DOE has said. The breach resulted in the DOE requiring proof that Paul Smith’s had the capacity to handle student financial aid.

The heightened monitoring status triggered Middle States’ requirement for a teach-out plan.

Besides those regulatory matters, the cyber-attack also disrupted the campus’ security camera system, which has been out of service since the fall semester of 2022, campus officials said. 

Bonavist said the school, with fewer than 600 enrollees, is weighing new recruiting strategies, potentially even subsidized tuition depending on donor generosity, and hopes to bring in 195 new students for the fall of 2024. The school’s enrollment has dipped by more than 40% since the peak in 2012.

Update: This story was updated to clarify Middle States Commission on Higher Education’s position at this time.