WINSTON-SALEM — Despite beating its fundraising goal and selling property near its downtown campus, Salem College will remain on probation with its accrediting agency for another six months.
The Southern Association of Colleges and Schools Commission on Colleges announced Thursday that it has extended Salem College's probation to December. A commission spokeswoman said Salem still is out of compliance with the agency's standard for financial resources.
The private women's college remains fully accredited, as it has since last June when the commission initially sanctioned the school. Accreditation is crucial for colleges and universities. Without it, students can't use federal grants and loans to pay for higher education.
But things are looking up for Salem. In a telephone interview Thursday afternoon, the college's interim president said Salem has balanced its budget and greatly improved its financial picture in the past year.
"This is a remarkable turnaround story," Sandra Doran said. "What this school has been able to accomplish in 12 months is remarkable in many respects."
The commission that accredits colleges in 11 Southern states put Salem on probation a year ago because it said the college fell short on four of its standards.
According to a disclosure statement issued June 14, 2018: It lacked "sound financial resources and a demonstrated, stable financial base"; it failed to provide financial statements, including an audit and an annual budget; it was unable to show that it could manage its finances responsibly; and it couldn't demonstrate that it was exercising "appropriate control over all its financial resources."
This time around, Salem satisfied the commission's concerns over its financial controls and documentation. But the commission said the college hasn't yet demonstrated that it has sufficient financial resources and wants until December to evaluate Salem's overall condition.
The college said the commission wants to see an audited financial statement for the fiscal year that ends June 30. That report won't be ready until the fall.
"Essentially what they're saying to us ... is they want to make sure we're continuing on our path of financial strength," Doran said.
Salem's financial difficulties date back to 2013, when the college's enrollment peaked at nearly 1,200 students. By fall 2018, enrollment had dropped 21 percent to 940 students. (Salem Academy, the school's high school division, had another 150 students enrolled as of last fall.)
The college seemed slow to respond. In 2014-15, Salem posted a narrow budget surplus of almost $129,000, according to federal tax records reviewed by the News & Record. Over the next two years, tax records show that Salem ran annual operating deficits of $3.4 million and $1.8 million.
Doran said the college operated at "a slight deficit" in 2017-18 but did not provide a figure.
However, the college has made progress since Salem hired Doran in April 2018 to replace former president Lorraine Sterritt, who left earlier that year to lead a college in Vermont.
Doran said Thursday that the school is expecting a budget surplus for the fiscal year that ends June 30 and is projecting a second straight budget surplus for 2019-20. The college reduced expenses largely through attrition and without layoffs.
There's good news on the enrollment front, too. The college is expecting a first-year class in August of 140 to 145 students. That's 25 to 30 students more than Salem's freshwoman class from last fall.
Its Step Up For Salem fundraising campaign, launched last fall, has raised more than $14 million — $4 million more than its goal.
Also in the past year, the college sold downtown properties for nearly $5.3 million. One property sold was the McHugh Sisters Flats, a 90-bed residence hall that the college built in 2015.
The fundraising and property sales have trimmed about $10 million off the college's debt — Salem has about $18.3 million in outstanding loans, Doran said — and increased the college's endowment to $68 million. Doran called that number "healthy."
Dara Folan, chairman of the Salem Academy and College Board of Trustees, said the college has "every intention" of increasing the size of the endowment, which provides student scholarships and other support for the school.
"Salem is a much stronger institution today in a number of ways than it was a year ago thanks to the efforts of many in the Salem family," Folan, a retired Winston-Salem attorney, said in a statement.
The commission's Board of Trustees handed down its latest accreditation decision regarding Salem after a meeting in Charlotte. The commission typically announces accreditation actions twice each year — in June and at its annual meeting in December.
Doran said meetings with commission representatives in Charlotte on Wednesday were largely positive. Doran on Thursday said she appreciated the commission's guidance and thanked the school's alumnae, employees and board and the Winston-Salem community for their support.
But Salem is approaching a reckoning. The commission's rules say that schools can generally remain on probation — the most serious sanction short of revoking accreditation — for no more than two years. In December, then, the commission can extend Salem's probation for another six months, give Salem the less serious sanction of warning, remove accreditation or lift the last sanction altogether.
Doran said she expects Salem will be in full compliance with the commission's standards by the December meeting.
"We made a very strong case (at Wednesday's meeting) ..." Doran said. "We need to remain strong in other metrics, and we feel confident we can do that."