By Jordan Meadows
Staff Writer
Saint Augustine’s University (SAU) is financially restructuring as the Raleigh-based historically Black university appears in federal bankruptcy court on Tuesday for a formal Chapter 11 hearing tied to its ongoing effort to stabilize operations amid mounting debt, lost accreditation, and federal scrutiny over millions in grant funding.
The hearing comes roughly two months after SAU filed for Chapter 11 bankruptcy protection in April, a move university leaders described in court filings as a “voluntary bankruptcy filing” intended to “strengthen its financial foundation” over the long term.
The filing, however, revealed the scale of the institution’s financial distress: between $50 million and $100 million in total debt, including $14.4 million owed to the Internal Revenue Service, and between 200 and 999 creditors.
Court documents show SAU’s assets are valued broadly between $1 million and $500 million, though much of that value is tied to its 105-acre Raleigh campus. University officials have acknowledged they are considering selling portions of the property as part of a broader restructuring strategy to satisfy creditors. Bankruptcy counsel has indicated that Chapter 11 proceedings are designed specifically to allow institutions like SAU to reorganize debt, shed unprofitable leases and contracts, and restructure operations into a more sustainable financial model.
At a prior hearing in May, SAU’s bankruptcy attorney noted the university had only about $426,000 in cash on hand, underscoring the immediate liquidity crisis driving the restructuring effort.
SAU’s accreditation officially expired on May 15, leading to the transfer of all remaining students and effectively leaving the university without an enrolled student body. In a major shift, university leadership also discontinued litigation tied to its accreditation status, ending a legal fight that had stretched more than two years.
Adding further pressure, federal agencies are now conducting a detailed review of SAU’s use of more than $30 million in grant funding across 34 federal awards.
According to federal court filings, the U.S. Department of Education, Commerce Department, and other agencies have demanded detailed documentation of how funds were spent, particularly those intended for student support, infrastructure upgrades, and institutional modernization.
Among the grants under review are more than $13 million from the Department of Education since 2020 aimed at strengthening management and fiscal operations; over $2 million for historic preservation projects, including campus chapel restoration; and nearly $2 million from the Department of Commerce in 2023 to expand internet bandwidth and connectivity infrastructure
The government’s filing requests that SAU provide current debt records tied to federal funding, documentation proving appropriate use of grant money, and a witness to answer questions under oath regarding financial decisions.
During a prior hearing, an attorney representing multiple federal agencies directly questioned Board Chair Sophie Gibson about possible misuse of funds. Gibson acknowledged uncertainty about specific allocations, stating that internal investigations were ongoing, while also noting that some funds may have been used for payroll rather than their intended purposes.
Court filings also reveal overlapping financial disputes involving contractors and vendors connected to federally funded projects. One company involved in chapel restoration work has sued SAU for unpaid bills tied to preservation efforts. Meanwhile, two IT firms contracted to improve campus network systems claim they are owed more than $25 million combined, with both cases now active in Wake County courts.
At a late May bankruptcy hearing, federal attorneys aggressively questioned university leadership about how grant money was managed and whether federal funds were misallocated.
In one exchange, attorney Benjamin Higgins asked whether outstanding debts were connected to the use of grant funds.
Chairwoman Gibson responded that she could not confirm specifics and reiterated that internal investigations were ongoing, while suggesting some funds may have been redirected to payroll.
The court also heard that SAU had effectively ceased operations as a traditional residential institution, with zero enrolled students following the loss of accreditation.
In an earlier ruling, the court approved a $200,000 emergency loan from the Self-Help Ventures Fund to keep the campus minimally operational during the bankruptcy process. University counsel is expected to return to court this week seeking additional borrowing authority, a move intended to sustain basic operations while restructuring negotiations continue.
Federal agencies are expected to continue reviewing SAU’s grant records following a court-imposed deadline requiring full documentation of spending. A follow-up court appearance is expected next month, where additional findings from federal investigators will likely be presented.
For now, the university stands at the center of one of the most consequential higher education financial collapses in North Carolina in recent years.
