Well just because something is not in the dictionary you checked doesn't necessarily mean it is not used. In this case it just means the "fold" is used more often as intransitive than transitive. TheFreeDictionary.com lists a transitive use as well (with the "informal" tag): a. <Informal> To discontinue operating; close: They had to fold the company a year after they started it. b. <Games> To withdraw (one's hand) in defeat, as by laying cards face down on a table. "fold the company" is fairly common, in if you can say that, you can also say "fold the school". Personally, I don't think there is anything wrong with this use.

You are correct, it's a poor use of the intransitive meaning of "fold". Native speakers would understand the meaning, because you cannot literally "fold a school".

I have never seen the verb "to fold" used like that. I highly doubt that is the verb that the writer intended.