Another historically black university in Georgia faces weak finances, negative credit rating from Moody’s

By David Pendered

Another historically black university in Georgia has been dinged by a credit rating agency that reported the school had just 20 days of cash on hand on June 30, 2013 and now faces a $2 million shortfall.

Ivelaw Lloyd Griffith, who in 2013 became the ninth president of Fort Valley State University, greets visitors to the school’s website. Credit: fvsu.edu

Ivelaw Lloyd Griffith, who in 2013 became the ninth president of Fort Valley State University, greets visitors to the school’s website. Credit: fvsu.edu

Fort Valley State University received a negative outlook from Moody’s Investors Services in a rating action dated Dec. 18. The rating came despite Fort Valley’s affiliation with the University System of Georgia, a relation that has helped Fort Valley in the past.

In July 2012, the affiliation helped Fort Valley achieve an investment grade rating of A3 on bonds sold to finance student housing. In December 2013, Moody’s affirmed its previous decision to lower the bond rating from investment grade to Baa1, a medium investment grade with some speculative risk.

Among the challenges: Declining enrollment and an “extremely weak balance sheet and liquidity,” according to the rating.

Fort Valley’s financial struggles continue a trend of dim financial outlooks for the nation’s higher education system overall, with particular concerns for the nation’s historically black colleges and universities. HBCU’s tend to have less wealth than other schools to tide over a faltering economy.

A year ago, Moody’s downgraded Morehouse College’s bond rating and assigned a negative outlook, citing the school’s declining enrollment and softening financial situation.

Students at Fort Valley State University have a wide array of options to engage with the campus. Credit: fvsu.edu

Students at Fort Valley State University have a wide array of options to engage with the campus. Credit: fvsu.edu

Fort Valley has also contended with, and overcome, a warning issued in 2011 by the Southern Association of Colleges and Schools. SACS issued the warning based on faculty credentials, handling of federally funded student aid, and fiscal procedures. SACS rescinded the warning in late 2012.

To help continue the turn-around, Fort Valley advertised last autumn for a chief academic officer. According to the ad, Fort Valley was seeking a provost and vice president for academic affairs to oversee all academic programs and policies of the university.

The financial challenges have only worsened.

Moody’s rating action in July 2012 seemed hopeful, even as it warned of a possible downgrade later in the year. It was based on Moody’s apparent expectations of the Board of Regent’s involvement:

  • “The A3 rating reflects the Board of Regent’s (BOR) broad lease revenue pledge, strategic importance of the bonded project to Fort Valley State University (FVSU), and the BOR’s recent intervention at FVSU, which resulted in a new Vice President of Finance and the engagement of a financial aid consultant.”

What a difference 18 months can make. Here’s the current situation as outlined by Moody’s in the most recent rating action:

  • “Weak market position as evidenced by an 11.5 percent enrollment decline in fall 2013 following a 9.2 percent decline in fall 2012, leaving the university with 2,986 full-time equivalent students in fall 2013. [The schools website states  enrollment is, “nearly 4,500 active students.”]
  • “Extremely levered operations with debt to operating revenue of a high 1.2 times in [fiscal year] 2013 and with total cash and investments providing a near zero cushion of just 0.05 times to debt. The high operating leverage is unlikely to improve in the near term as FVSU faces revenue growth challenges such as state appropriation cuts and enrollment declines.
  • “Minimal resources with $3.8 million of total cash and investments and monthly liquidity providing just 20 day’s cash on hand as of June 30, 2013.
  • “Deteriorating operating performance, with a 9.4 percent deficit in FY 2013 as compared to near break-even operating performance in FY 2009. FY 2014 is facing
  • operating challenges with fall 2013 enrollment below budget resulting in a $2 million revenue shortfall.
  • “Challenging state funding environment with fluctuating state appropriations and cuts made to tuition assistance from the state.
  • “Board’s rental payments are annually renewable with no legal obligation to renew [referring to the Board of Regent’s decisions to lease space on campus].”

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

3 replies
  1. anon says:

    As a previous student, Fort Valley State University has an organizational problem.  If you gave this college a bailout today, it would be in the same situation a year from now.  An organization is only as good as its staff.  Most of the departments at this university are inefficient.  With hundreds of other college to choose from, why would a  student continue the admission process with a school that continuously loses information, only processes information if you call to alert them that you have sent it, rarely responds to emails or voice mails, and have advisors who did not respolnd to students’ requests in a timely manner.

    This is not an opinion, it is factual.  I have copies of 43 emails I sent to an advisor asking for assistance with getting registered.  I left dozens of voice mails for this advisor, and I only got a response when the advisor called to confront me for complaining about their lack of follow-up.  When trying to enroll in this school students are faced with barrier after barrier.  So again, I ask….why would anyone bother?  And you wonder why enrollment is down?  Get a dose of reality.  What this president should do is shadow a student attempting to enroll, and then he would see actually why enrollment is declining.

    I hate I ever enrolled in the school.  The things I had to go through just to make it to graduation has left a lifelong negative impression.  I hate to look at my degree because it brings back all the painful memories of my struggle….which is said.  However, I must give credit where credit is due.  Out of all the departments I had to deal with, I must say the Registrar’s Office, the Cashier’s Office (particularly Mr. Cagnina) and Office of Student Affairs were helpful and efficient.  In many instances, I turned to these departments for help when my advisor would not follow through.  The people in these departments helped me navigate around the barriers of my advisor and the nightmare of working with the financial aid department.
    I see this school following the steps of Morris Brown.Report

    Reply
  2. anon says:

    As
    a previous student, Fort Valley State University has an organizational
    problem.  If you gave this college a bailout today, it would be in the
    same situation a year from now.  An organization is only as good as its
    staff.  Most of the departments at this university are inefficient. 
    With hundreds of other college to choose from, why would a  student
    continue the admission process with a school that continuously loses
    information, only processes information if you call to alert them that
    you have sent it, rarely responds to emails or voice mails, and have
    advisors who did not respond to students’ requests in a timely manner.

    This
    is not an opinion, it is factual.  I have copies of 43 emails I sent to
    an advisor asking for assistance with getting registered.  I left
    dozens of voice mails for this advisor, and I only got a response when
    the advisor called to confront me for complaining about their lack of
    follow-up.  When trying to enroll in this school students are faced with
    barrier after barrier.  So again, I ask….why would anyone bother? 
    And you wonder why enrollment is down?  Get a dose of reality.  What
    this president should do is shadow a student attempting to enroll, and
    then he would see actually why enrollment is declining.

    I
    regret ever enrolling in the school.  The things I had to go through
    just to make it to graduation has left a lifelong negative impression.  I
    hate to look at my degree because it brings back all the painful
    memories of my struggle….which is sad.  However, I must give credit
    where credit is due.  Out of all the departments I had to deal with, I
    must say the Registrar’s Office, the Cashier’s Office (particularly Mr.
    Cagnina) and Office of Student Affairs were helpful and efficient.  In
    many instances, I turned to these departments for help when my advisor
    would not follow through.  The people in these departments helped me
    navigate around the barriers of my advisor and the nightmare of working
    with the financial aid department.
    I see this school following the steps of Morris Brown.Report

    Reply
  3. Burroughston Broch says:

    Fort Valley is not affiliated with the University System – it has been a unit of the University System since it was created in 1939 by consolidating two predecessor institutions.
    This article is reminescent of the recent unpleasantness at Georgia Perimeter College. The Board of Regents had to take control of finances at GPC and perhaps the same will happen at Fort Valley. If the Board of Regents were minding the store, finances would not get this far out of hand.Report

    Reply

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