Historically Black Colleges and Universities (HBCU), which number around 100, undertake capital projects to provide appropriate settings for learning, but many face challenges in doing so. In 1992, Congress created the HBCU Capital Financing Program to help HBCUs fund capital projects by offering loans with interest rates near the government's cost of borrowing. We reviewed the program by considering (1) HBCU capital project needs and program utilization, (2) program advantages compared to other sources of funds and schools' views on loan terms, (3) the Department of Education's (Education) program management, and (4) certain schools' perspectives on and Education's plan to implement loan provisions specifically authorized by Congress in June 2006 to assist in hurricane recovery efforts. To conduct our work, we reviewed applicable laws and program materials and interviewed officials from federal agencies and 34 HBCUs.
Recommendations for Executive Action
|Department of Education||To ensure that it obtains the relevant, reliable, and timely communication that could help ensure that program objectives are being met efficiently and effectively, and to meet statutory requirements, the Secretary of Education should regularly convene and consult with the HBCU Advisory Board. The Advisory Board could assist Education in its efforts to develop program performance goals and measures, thereby enabling the department and the board to advise Congress on the program's progress. Additionally, Education and the Advisory Board could consider whether alternatives to the escrow arrangement are feasible that both address schools' concerns and the need to keep federal costs at a minimum. If Education determines that statutory changes are needed to implement more effective alternatives, it should seek such changes from Congress.|
|Department of Education||To ensure program effectiveness and efficiency, the Secretary of Education should enhance communication with HBCU program participants by (1) developing guidance for HBCUs, based on other schools' experiences with the program, on steps that applicants can take to expedite loan processing and receipt of loan proceeds, and (2) regularly informing program applicants of the status of their loan applications and department decisions.|
|Department of Education||In light of the program's existing credit requirements for borrowers and the funds placed in escrow by borrowers to protect against loan delinquency and default, the Secretary of Education should change its requirement that borrowers make monthly payments to a semiannual payment requirement consistent with the designated bonding authority's (DBA) requirement to make semiannual payments to the Federal Financing Bank (FFB).|
|Department of Education||To improve its estimates of the budgetary costs of the program, and to comply with the requirements of the Federal Credit Reform Act, the Secretary of Education should ensure that the program subsidy cost estimation process include as a cash flow to the government the surcharge assessed by the FFB and paid by HBCU borrowers and pay such amount to the program's financing account. Additionally, the Secretary of Education should audit the funds held by the DBA generated by this surcharge and ensure the funds are returned to the Department of the Treasury and paid to the program's financing account.|
|Department of Education||To ensure adequate management control and efficient program operations, the Secretary of Education should increase its monitoring of the DBA to ensure its compliance with contractual requirements, including record keeping, and that the DBA is properly marketing the program to all potentially eligible HBCUs.|