HBCUs, Stakeholders, and Planning Documents Identified Extensive and Diverse Capital Project Needs

		HBCUs, Stakeholders, and Planning Documents Cited Substantial Need for Repairs and Building Replacement

Almost all the HBCUs responding to our survey (70 of 79) reported that,  on average, 46 percent of their building space needed to be repaired or  replaced. HBCUs Use A Few Funding Sources for Capital Project Needs and Fewer than Half Use Education’s Capital Financing Program

		HBCUs Rely on a Few Funding Sources to Address Capital Project Needs

HBCUs primarily rely on a few sources of funding to address capital  project needs, such as state grants and appropriations for public HBCUs  and private giving and tuition and fees for private HBCUs, according to  HBCUs responding to our survey and our interviews. Not all HBCUs face these challenges, however. Such  updates could help with student recruitment and, ultimately, help increase  student enrollment. Education Has Taken Some Steps to Help HBCUs Participate in the Capital Financing Program, but Further Action Is Needed

		Education Conducts Outreach, but Some HBCUs Reported Being Unaware of the Capital Financing Program

Education and its designated bonding authority have taken some steps to  increase awareness of the Capital Financing Program, but some HBCUs  and university system officials reported in our survey and interviews that  they were unaware of the 26-year-old program. The Consolidated Appropriations Act, enacted in  March 2018, requires Education to create and execute an outreach plan  to work with states and the Capital Financing Advisory Board to improve  outreach to states and help additional public HBCUs participate in the  program. According to our analysis of survey  responses and interviews, about one-third of non-participating public  HBCUs across four states (13 of 37) report being unable to use the  program due to at least one federal requirement placed on the college,  which conflicts with state law, policy, or practice. However, Education has not systematically coordinated with  states to address other laws or policies that create challenges or to  identify potential solutions to help more public HBCUs participate in the  program. For example, two HBCUs  defaulted on their Capital Financing Program loans in the last 2 years,  and 29 percent of loan payments were delinquent in 2017. Conclusions

HBCUs play a vital role in providing higher education opportunities for  African-Americans. However, HBCUs continue to face challenges in  securing financing to undertake needed capital projects. This will be  especially important as Education implements its required outreach plan,  which may increase program participation. (Recommendation 1)
The Executive Director of the HBCU Capital Financing Program  should lead an agency effort to analyze various Capital Financing  Program loan modifications, including the effects of the loan  deferments authorized in the 2018 Consolidated Appropriations Act as  well as other potential modifications, to assess the potential benefits  to HBCUs participating in the program, the potential cost of these  options to the government, and their effect on the program’s overall  financial stability. With regard to our second recommendation on analyzing the potential  benefits and costs of offering loan modifications, Education partially  agreed with the recommendation. Education noted it will continue to  analyze loan modifications and develop cost estimates. Appendix I: Objectives, Scope, and Methodology

We examined (1) Historically Black Colleges and Universities’ (HBCUs)  capital project needs; (2) funding sources HBCUs use to address their  capital project needs; and (3) the extent to which the Department of  Education (Education) helps HBCUs access and successfully participate  in the HBCU Capital Financing Program (Capital Financing Program). However, 79  HBCUs captures a substantial portion of the HBCU population. We  received master plans from 20 HBCUs. Using data from the Department of  Education’s Integrated Postsecondary Education Data System (IPEDS)  for the 2015-16 school year, the most recent data available, we matched  accredited HBCUs and non-HBCUs on four key characteristics: sector  (i.e., public or private non-profit (private)), highest degree offered, size  (enrollment), and location.
Why GAO Did This Study

HBCUs play a prominent role in our nation's higher education system. For example, about one-third of African-Americans receiving a doctorate in science, technology, engineering, or mathematics received undergraduate degrees from HBCUs. To help HBCUs facing challenges accessing funding for capital projects, in 1992, federal law created the HBCU Capital Financing Program, administered by Education, to provide HBCUs with access to low-cost loans. GAO was asked to review the program.
This report examines HBCUs' capital project needs and their funding sources, and Education's efforts to help HBCUs access and participate in the HBCU Capital Financing Program. GAO surveyed all 101 accredited HBCUs and 79 responded, representing a substantial, but nongeneralizable, portion of HBCUs. GAO analyzed the most recent program participation data (1996-2017) and finance data (2015-16 school year); reviewed available HBCU master plans; visited nine HBCUs of different sizes and sectors (public and private); and interviewed Education officials and other stakeholders.

What GAO Found

Historically Black Colleges and Universities (HBCUs), stakeholders, and planning documents identified extensive and diverse capital project needs at HBCUs and GAO found HBCUs rely on a few funding sources—such as state appropriations and tuition and fees—to address those needs. HBCUs responding to GAO's survey reported that 46 percent of their building space, on average, needs repair or replacement. Based on a review of master plans—which assess the condition of HBCU facilities—and visits to nine HBCUs, GAO identified significant capital project needs in the areas of deferred maintenance, facilities modernization, and preservation of historic buildings. The Department of Education's (Education) HBCU Capital Financing Program has provided access to needed funding for some HBCUs and has helped modernize their facilities to improve student recruitment. However, fewer than half of HBCUs have used the program, according to Education data, which was specifically designed to help them address capital project needs (see figure).
Education has undertaken several efforts to help HBCUs access and participate in the HBCU Capital Financing Program. For example, Education conducts outreach through attending conferences. However, some HBCUs in GAO's survey and interviews were unaware of the program. Moreover, public HBCUs in four states reported facing participation challenges due to state laws or policies that conflict with program requirements. For example, participants are required to provide collateral, but public HBCUs in two states reported they cannot use state property for that purpose. In March 2018, a federal law was enacted requiring Education to develop an outreach plan to improve program participation. An outreach plan that includes direct outreach to individual HBCUs and states to help address these issues could help increase participation. Without direct outreach, HBCUs may continue to face participation challenges. In addition, two HBCUs recently defaulted on their program loans and 29 percent of loan payments were delinquent in 2017. Education modified a few loans in 2013 and was recently authorized to offer loan deferment, but has no plans to analyze the potential benefits to HBCUs and the program's cost of offering such modifications in the future. Until Education conducts such analyses, policymakers will lack key information on potential options to assist HBCUs.

What GAO Recommends

GAO recommends Education (1) include direct outreach to individual HBCUs and steps to address participation challenges for some public HBCUs in its outreach plan, and (2) analyze the potential benefits and costs of offering loan modifications in the program. Education outlined plans to address the first recommendation, and partially agreed with the second. GAO continues to believe both recommendations are warranted.