Community college loses money and doesn’t pay taxes, leaders think IRS will forgive penalties

A Sandusky County community college was placed on fiscal watch by the Ohio Department of Higher Education after an audit revealed a nearly $11.5 million operating loss, overdue vendor invoices, late payroll taxes, and health insurance contributions.

Despite all of this information, Terra State Community College leaders believe, however, that the Internal Revenue Service will forgive the penalties, according to Cleveland.com.

Trustees of the community college accepted the resignation of former President Ronald Schumacher on April 2. They appointed Cory Stine, the school’s senior vice president for innovation and strategic planning, as interim president, according to the college’s press release.

The Department of Higher Education will review the college leaders’ financial recovery plan that intends to “resolve current challenges within a three-year period,” the press release said.

“Terra State Community College remains fully open and operational,” the officials said in the statement. “Students, faculty, and staff should expect no disruption to academic schedules, campus services, or the daily operations of the college.”

An independent auditor performed the financial audit of Terra State for the fiscal year ending June 30, 2024, and then submitted it to Ohio Auditor of State Keith Faber, who recommended that the Ohio government put the school under fiscal watch, according to Faber’s website.

The audit was published one day after Ohio Chancellor of Higher Education Mike Duffy put the school on fiscal watch on March 23.

Faber’s spokesman, David Roorbach, told Cleveland.com that an audit can’t be completed until the financial statements are prepared and filed by the client. According to the news source, the community college was over six months late with its fiscal year 2024 financial statements, not submitting them until May 15, 2025.

“In the 2024 audit, there were also issues identified throughout the process that required more time to address,” he said. “Several of these items contributed to the fiscal watch declaration. Terra just filed its FY2025 financial statements, which were due last October, on March 23, so that audit is in progress.”

Faber issued findings for recovery totaling $22,255 from the college’s former vice president of finance, former CFO, and their insurers.

Jacqueline Foos, the vice president of finance from July 1, 2020, to June 30, 2023, or her insurer, faces a $818.71 repayment. Mary Johnson, CFO from July 1, 2023, to Oct. 15, 2024, or her insurer, faces a $21,436.75 repayment. Johnson noted the finding is preliminary.

In 2024, the college reported an $11.5 million operating loss but ended the year with an overall deficit of $343,369, offset by federal grants, gifts, investment income, and state funding.

Overall, operating expenses were nearly three times operating revenues in both 2023 and 2024. Expenses were about $17.3 million each year, while revenues were $6.8 million in 2023 and $5.9 million in 2024.

Additionally, starting in September 2023, Terra State failed to properly submit employment taxes and Medicare withholdings to the federal government. The college also owed $681,000 in unpaid taxes, plus $12,830 in interest and $16,550 in penalties, as of June 30, 2024.

Auditors identified numerous errors in the college’s financial statements, with corrections ranging from $47,000 to $5.2 million.

The college also failed to perform timely bank reconciliations, which resulted in payments exceeding available bank cash by $551,000. It improperly spent restricted cash on expenses. Additionally, 25% of sampled vendor invoices were paid late.