News Column

ASU trying to dig itself out of huge financial hole

July 10, 2014

By Josh Moon, Montgomery Advertiser, Ala.



July 10--After a nearly five-hour meeting of the Alabama State University executive committee on Wednesday evening, one thing was crystal clear -- ASU is in terrible financial shape.

How bad?

"I would've voted to downgrade us had I been on that (Moody's Investors Service) committee," said Trustee Herbert Young, chairman of the school's finance committee.

Young was referring to a recent downgrade by Moody's of ASU's credit rating -- the third such downgrade in nine months. Prior to that action, Moody's held a conference call with ASU officials, including Young and university president Gwendolyn Boyd, to discuss factors that were concerning to Moody's.

Chief among those concerns was ASU's significant debt and running yearly deficits.

"Right now, if we continued going at the rate we were going, we wouldn't be able to pay our debt service for the next year and a half," Young told the executive committee. "I'm not sure how we got into this shape, but we have to figure out a way out of it."

Young and other trustees noted again that the forensic audit of the school is a major factor in its problems. That audit, which Young said was approved by the ASU board when Gov. Robert Bentley requested it, is now approaching its 20th month with no end in sight.

A preliminary report released last October by the auditing firm raised serious questions, and that report, along with the uncertainty of what a final report will hold, was cited by Moody's in all of its downgrades.

"We have to get a final report," Young said. "It's that simple. I don't care what it says, who gets indicted, whatever -- we have to get something final so we can fix the problems and move forward. Otherwise, it's going to continue to hurt us. The unknown is worse."

But as trustee Robert Gilpin noted, final report or not, ASU's financial situation would likely have resulted in a downgrade.

In fiscal year 2013, which ended last October, ASU ran a deficit of $6.5 million -- the third consecutive year of deficits. Young said the outlook is much better for the year ending this October, saying if the school could simply hold off hiring personnel for 80 days, it might be able to put some money into reserves.

But that is easier said than done.

Boyd presented the board with a number of hires that she and her staff have deemed "critical hires," including personnel in the school's information technology department that could help it avoid a $286,000 software upgrade fee and dorm directors whose absence could be considered a liability.

"These are not random people we're bringing in here," Boyd said. "These are necessary hires for the university. They're critical to the daily operations. We have to operate and serve the students."

Trustees went through the proposed hires with a fine-tooth comb, and similarly picked through other expenses.

In one terse exchange that lasted several minutes and took on the appearance of a cross-examination at times, trustee Marvin Wiggins went down a checklist of items, asking Boyd about their costs. That list included the cost of Boyd's inauguration that will be held in September, several events surrounding that inauguration and her car allowance.

Wiggins claimed Boyd might be in violation of state law because she is often driven to events by ASU campus police officers -- an expense Wiggins estimated to be over $30,000. If so, her then accepting a car allowance of $1,000 per month, which is provided by her ASU contract, could technically be considered a violation of the law.

"You can do one or the other but you can't do both," Wiggins told Boyd.

Boyd fired back: "That's fine. I'll just walk."

In the middle of the search for savings, Wiggins also proposed a $100,000 allotment for the board of trustees to use at their discretion to hire necessary personnel or pay for events or trips. His proposal was approved to be passed on to the full board.

But other trustees, Young in particular, were skeptical of its chances.

Asked about the exchange with Wiggins after the meeting, Boyd said, "He had questions, and I guess this is the place for those. I have nothing to hide."

___

(c)2014 the Montgomery Advertiser (Montgomery, Ala.)

Visit the Montgomery Advertiser (Montgomery, Ala.) at www.montgomeryadvertiser.com

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Source: Montgomery Advertiser (AL)


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