Alabama State University is issuing a statement one day after Moody's Investors Service made the decision to further downgrade the university's revenue bond rating.
ASU officials are blaming a "domino effect" from Governor Robert Bentley's forensic audit of university finances, as well as requests for information from its accrediting agency, the Southern Association of Colleges and Schools Commission on Colleges, for Moody's decision to downgrade the rating.
The university's revenue bond rating was downgraded to Baa1 from A3. The Series 2005 lease revenue bonds were downgraded to Baa2 from Baa1.
Moody's already downgraded ASU's revenue bond rating from A2 to A3 in October. At that time Moody's said the university's rating was under review and could possibly be downgraded even more if the results of a forensic investigation into the university "are found accurate and demonstrate severe deficiencies in governance and management."
Moody's says the recent downgrade "reflects the weakening financial health of the university as evidenced by five years of declining cash and investments." The downgrade also incorporates leadership, management and governance challenges, which will make returning to financial stability more challenging in the short term, according to Moody's.
Alabama State University released the following statement Wednesday:
As the University has stated previously, officials made a conscious decision several years ago to invest in "ASU," which means it allocated funds to develop new academic programs for its students, as well as to enhance ASU's physical facilities for its students – via new construction and renovation projects – that allowed it to remain in a competitive position with its peer institutions.
"While in the short-term, our investment in ASU's students has increased our debt service, we feel confident that our updated construction projects, as well as the enhancement of our academic programs and degrees and the successes that will be associated with them, will contribute to our institution's integrity and financial standing in the long term," said Freddie Gallot, vice president of ASU's Business & Finance division.
Gallot added "The uncertainty of the FSS audit not being completed in a reasonable period of time has caused a domino effect upon ASU and is one of the reasons for our downgrade, as has the request for information from the University's accrediting body (SACS) and the general negativity, which has kept ASU's management team off task from its regular daily duties of administering the University."
READ MOREon what ASU says are its current investments associated with its outstanding debt as well as its current plans