Credit agency gives FVSU negative outlook

jmink@macon.comJanuary 26, 2014 

As historically black colleges and universities across the nation struggle, a credit rating agency has again given Fort Valley State University a negative financial outlook.

Moody’s Investor Service recently affirmed its credit rating on bonds that were issued in 2006 for student housing at FVSU. The investor service claims the university is facing a $2 million deficit, has a miniscule amount of cash available and has a grim outlook as enrollment drops and funds dwindle, according to a news release from Moody’s.

The rating of Baa1 is still considered a medium ranking by Moody’s (which rates bonds from highest quality to being in default), but that is lower than in previous years. In 2012, the university’s good quality rating was downgraded, and its financial outlook was revised to negative, according to the release.

FVSU President Ivelaw Griffith acknowledged declining enrollment and budget cuts have factored into the bond rating, but the university is taking steps to fix those issues, particularly campus growth.

“As we move forward, I am optimistic that our aggressive recruitment, corporate engagement, technology and other enhancements are setting the campus on the correct path for growth,” he said in a written statement.

Moody’s listed the university’s enrollment drop as a weakness contributing to its bond rating. Enrollment declined 11.5 percent in fall 2013. Other weaknesses include minimal resources, with 20 days cash on hand as of June 30, 2013, and a 9.4 percent deficit in fiscal 2013 compared with a break-even deficit in 2009. Additionally, state budget cuts are working against the university, according to Moody’s.

Still, the rating included some university strengths. Among those were more oversight by the Board of Regents, the importance of FVSU as a historically black land grant institution and improved financial stewardship, which has resulted in better audits and more cash.

“Lastly, but most importantly, we provide quality educational experiences for our students,” Griffith said.

Fort Valley State officials say they are taking an aggressive approach to improve the university’s financial health, and that approach already has yielded benefits, according to a university statement.

In December, the university received a clean audit for the previous fiscal year, an improvement compared with past audits. FVSU also has increased its cash amount. Its nearly $3.8 million balance on June 30, 2013, was an increase from the previous fiscal year’s balance of nearly $2.5 million. Funds and grants also increased, according to the statement.

Additionally, the university carried forward tuition reserves of nearly $390,000 last fiscal year.

“This was the first year that FVSU was able to carry forward tuition revenues up to the allowable 3 percent cap,” Melissa Lee, comptroller for FVSU’s Office of Business and Finance, said in a statement. “These fiscal gains, however, will not be enough to garner a Moody’s bond rating above Baa1, with a negative outlook based on Moody’s expectation of enrollment challenges.”

While Moody’s deems it unlikely the rating will go up, FVSU’s rating could improve if enrollment stabilizes and cash and operating performance improve.

Fort Valley State is part of a string of historically black colleges and universities that have received negative outlooks from Moody’s. Alabama State University’s credit rating was downgraded Tuesday, and Howard University’s was reduced in September. Morehouse College’s rating was downgraded last year. All had a negative outlook and received the same rating as Fort Valley, according to Moody’s.

When Griffith took the helm of FVSU in August, he vowed to fix the university’s financing through increased enrollment -- particularly among international students -- a boost in alumni giving and other methods.

“As soon as President Griffith arrived, he quickly recognized the challenges FVSU faces that could negatively impact our bond rating,” Govind Kannan, FVSU’s dean for the College of Agriculture, Science and Technology, said in a news release, “and he put in place a plan to proactively address several issues ... with these initiatives, we are confident that our rating will improve next year.”

To contact writer Jenna Mink, call 256-9751.

The Telegraph is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service