MOODYS IDENTIFIES CHALLENGES FOR ALABAMA STATE UNIVERSITY *ASU has had significant governance and management challenges, which have led to and been exacerbated by extraordinary events, such as a forensic audit, presidential turnover, and accreditation challenges that limit ability to focus on core operational improvement. *Managements inability or unwillingness to significantly address a growing structural deficit are symptoms of weak controls that will lead to continued financial deterioration absent material and timely corrective action. *Operating performance has markedly deteriorated as expense growth dramatically outpaced revenue growth over the last three fiscal years (FY 2011-13). Expenses grew a combined 9.4% over this time frame compared to just 0.5% growth in revenue. *Weak cash flow has required the university to draw on reserves to pay debt service costs and contributed to declining liquidity. The FY 2013 operating margin was -9.1%, with the operating cash flow margin of 7.1% providing 0.55 times debt service coverage and FY 2014 is expected to be similarly weak based on year-to-date projections. *ASU remains extremely leveraged, with the $235 million of direct debt for FY 2013 to operating revenues of 1.9 times and expendable financial resources covering debt a narrow 0.17 times. This limits flexibility to respond to current challenges. *Cash and investments have declined substantially due to operating deficits. Monthly days cash on hand was a very weak 64 days at September 30, 2013 and is expected to deteriorate further in FY 2014. The university is highly reliant on a $7 million operating line throughout the year. https://moodys
Posted on: Thu, 15 Jan 2015 00:06:37 +0000
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