Clark Atlanta fights for survival
Budget crisis: University plans layoffs, possible cuts in academic programs.

By ANDREA JONES
The Atlanta Journal-Constitution

• Atlanta/South Metro community page



Struggling to avoid financial disaster, Clark Atlanta University plans to slash spending by 20 percent, forcing layoffs and possible cuts to academic programs, school officials say.

The school's president, Walter Broadnax, said Clark Atlanta -- one of the six schools that make up the Atlanta University Center -- has been operating beyond its means for many years.

"We are facing substantial financial challenges," he said. "The bottom-line truth is that there is a gap that has occurred between our expenditures and revenues."

Broadnax, who took over for retiring President Thomas Cole in August 2002, said the financial woes have deepened in recent years as funding sources dried up in the downturned economy. Last year, the university overspent its $100 million budget by $7.5 million.

Clark Atlanta University is the second historically black school in the AU Center to be buffeted by serious financial problems this year.

In April, the Southern Association of Colleges and Schools yanked Morris Brown College's accreditation, citing major problems with financial aid, record-keeping and institutional effectiveness. Morris Brown also is the focus of a federal fraud investigation into alleged mismanagement.

Unlike its hapless neighbor, Clark Atlanta has a growing enrollment, no short-term debt and a substantial endowment of about $30 million, which Clark officials say they will not use to pay bills. Most funds in endowments are earmarked for specific uses.

The 5,000-student school remains fully accredited and is not scheduled to undergo the Southern Association's stringent reaffirmation process until 2006, when representatives will visit Clark Atlanta and examine its financial health and academic programs. The private school must be free of operating debt at that time or face possible sanctions, according to the accrediting agency's rules.

Clark Atlanta currently has no financial reserves and a long-term debt of about $55 million, most of it payments on bonds for construction projects, according to financial statements provided by the school.

Clark Atlanta has the lowest possible rating for investment-grade bonds. If the university does not make budget cuts, it could risk missing bond payments, which could allow creditors to demand early repayment of the full debt, according to the financial statements.

Broadnax said the school is not currently in danger of that happening. He said the school will reduce its expenses by 20 percent -- $14 million -- in the coming fiscal year to get back in the black.

The cuts will translate into layoffs, which will begin in the next few weeks, he said. He would not say how many people might lose their jobs. The school also has started a campaign to strictly enforce tuition collection and prevent students who have not paid their bills from attending classes.

Figures show that over the last eight years, the school has collected only about half the money owed by students. In 2002, for example, the school collected just $5.5 million of the more than $10 million due in student accounts. Annual tuition is $12,312.

An analysis by Dun & Bradstreet gave Clark Atlanta the financial rater's worst possible credit score, saying the school pays its bills an average of 29 days late.

Broadnax said summer months are the most difficult for the cash-strapped school, and small vendors especially are often paid late.

"There is simply not enough cash flowing through," he said.

The school instituted a hiring freeze in February and has begun offering early retirement to eligible staff members to cut costs. Twenty employees have taken the buyout, which will save the school about $1.2 million in salaries and benefits, school officials said.

The cuts in programs will be phased in over the coming school year, but the specifics have not been worked out, officials said.

Broadnax said drastic changes are necessary to keep the school afloat. "These sorts of cuts cause tremendous anxiety on campuses," he said. "But we simply cannot continue on the path we were on."

Colleges and universities around the country are grappling with budget cuts and funding issues.

William Gray, president of the United Negro College Fund, said historically black colleges are especially hard hit in a bad economy because they rely heavily on corporations and foundations -- instead of alumni -- for money.

"Corporations give out of their profits, and if there are no profits, there's no giving," he said. "Foundations give out of their assets, and if there are no assets, there's no giving."

Clark Atlanta University was formed in 1988 with the consolidation of Clark College and Atlanta University, which were both struggling financially. But the new school never fully merged programs, Broadnax said, causing duplication in staff and programs that has remained to this day.

Until 2002, the school also had been budgeting one-time cash donations into the operating budget, which masked the level of financial stress in audits, Broadnax said. "This is not something that happened overnight," the school president said.

The proposed staff cuts and program changes have led to contention among some of the 330 faculty members. Students and staff packed campus meetings as Broadnax's message of cutbacks spread. Some faculty members circulated memos alleging corruption among top officials.

Clark Atlanta's former attorney, Michael Baskin, sued the school in March, claiming he was fired for speaking out about wrongdoing at the school. He had said some alumni fraudulently claimed tuition payments as tax-deductible contributions.

The school countersued and settled the case last month for about $215,000, according to the Fulton Daily Report. Under the terms of the agreement, neither side is to discuss specifics of the case.

Broadnax said the cutbacks will strengthen the school in the long run.

"This is the courageous thing to do," he said.

http://www.sptimes.com/2003/11/30/St...moil_rac.shtml

Financial turmoil racks FAMU

C St. Petersburg Times, published 2003-11-30 10:00:00 Etc/GMT


TALLAHASSEE - Florida A&M University is on the brink of financial
disaster. The books of the historically black university are off by
$1.8-million. Students get financial aid months late. A former employee
is accused of questionable spending while others face theft charges.
Sloppy business practices might have cost hundreds of thousands of
dollars.

It got so bad that state financial chief Tom Gallagher
this month took a rare and drastic step: He cut off pay to the FAMU
president and 18 top administrators until they turned over crucial
financial records that were six weeks late.

"It's not something
we like doing," said Gallagher, who also temporarily suspended payments
to FAMU vendors. "But they needed to take it seriously."

Last
week, some members of the school's governing board said they had lost
confidence in president Fred Gainous, citing a "leadership crisis" in
the day-to-day operations of a school near the "financial brink."


"Some things we deeply regret," said Gainous, who succeeded longtime
FAMU president Frederick Humphries in 2002. "There was a lot to be done.
There still is a lot to be done to move the university forward. We must
get our financial house in order."

The Board of Governors,
which oversees higher education in Florida, will launch an investigation
this week. The state is auditing FAMU's books. Irate alumni have
threatened to sue over the mismanagement. School officials are
postponing a capital campaign and questioning whether under the
circumstances they are ready to move their football program to the elite
Division I-A.

It has been a hard fall for FAMU, which just six
years ago was named the nation's College of the Year by Time magazine
and the Princeton Review. The scandal has left the 116-year-old school
of 13,000 students suffering a national embarrassment.

"All of
this has been a tremendous blow to the university," said Jim Corbin,
chairman of the school's board of trustees. "I don't think there's !
any excu
se for it. We ought to be able to handle it like every other
school."



Sophomore Kelven
Davis didn't get his $2,000 in financial aid this semester from FAMU
until November. It was the second year in a row the check came months
late.

Davis, 19, of Lake Wales had to convince his landlord he
would eventually make good on his debt.

"I really don't know
what the problem is," said Davis, who last week was not able to find out
when another check would arrive because the school's computer system was
down. "They just get behind."

It has been that way for
years.

The Tallahassee school educates some of the nation's
brightest black students, competing with Harvard University every year
to see who can enroll the most. After almost collapsing in the 1970s,
FAMU earned national acclaim in the 1990s under Humphries, the popular
former president.

But his 16-year tenure also was dogged by one
financial crisis after another.

The school faced state and
federal investigations of its financial aid office, which doles out
$100-million each year in payments to more than 90 percent of the
student body. It also had trouble meeting its payroll.

"Dr.
Humphries has to accept a large responsibility for this," Corbin said.
"He left the place in a financial mess."

Now, two years after
Humphries' departure, school officials say they are just beginning to
learn of the problems he left behind. Humphries adamantly rejects the
criticism.

"I left no problems for FAMU," he said in an
interview last week.

Steve Uhlfelder, a member of the Board of
Governors and its predecessor, said state leaders knew about the
school's problems but never fully dealt with them because they were
afraid to be too hard on a black school.

"I'm not sure we were
always tough enough because we were afraid of criticism. We walked on
eggshells with Florida A&M University," he said. "But I don't think this
is excusable !
at any u
niversity. It's just not acceptable. It's beyond comprehension."


The school failed to follow its policies and procedures or standard
business practices, such as balancing the books every month. Offices
that deal with finances haven't been modernized, leaving employees to
use paper instead of computers. A federal grant intended to strengthen
curriculum and student services was used for unapproved expenses, such
as travel to London and Paris for the former grant director. And when
Humphries served as a FAMU consultant this year, the grant paid some
travel costs that Gainous questioned.

Recent internal
investigations also show the school often used purchase orders instead
of more strict written contracts; planned to overspend for leased space;
and contracted twice for the same consulting work.

After
discovering accounting problems, Gainous' staff examined a decade of
completed budgets. The numbers, the president said, did not add
up.

The construction budget was off by more than $3-million.
The school spent $3-million from a grant program, but it never billed
the federal government for reimbursement. About $1.5-million in surplus
funds from last year had to be used to pay contractors who had never
been paid.

"This is the absolute worst it's been," said Al
McCoy, 75, a St. Petersburg native and a FAMU alum who worked there as
director of alumni affairs and the boosters. "It's the most humiliating,
embarrassing thing. It's not good at all."

Before the fall
semester, two former employees were charged with stealing more than
$21,000 by diverting almost a dozen financial aid checks to themselves.
Their boss, the school's vice president, left shortly before Gainous
arrived in July 2002 and has not been replaced. Gainous forced out three
other longtime financial administrators for failing to follow business
practices.

Gainous persuaded his friend Tom Hanna, a former
vice president at nearby Tallahassee Community College, to come out of
retirement!
and ser
ve as interim financial chief. But Gallagher and school trustees were
appalled to learn Hanna went on a three-week hunting trip to Canada
during much of the latest financial crisis. He returns this week.


The most recent trouble began Sept. 30, when FAMU missed the deadline
for key financial records that would account for more than $100-million
of taxpayer money spent last year. Without them, Florida's bond and
credit ratings were in jeopardy.

After several warnings,
Gallagher suspended payments to companies doing business with FAMU on
Oct. 31. A week later, he paid the vendors but halted paychecks totaling
$54,506.52 to 19 administrators until the paperwork came in Nov.
18.

"It is extreme but appropriate," said Carolyn Roberts,
chairman of the Board of Governors, who has been in contact with FAMU
and state officials. "There are rules we go by."

FAMU officials
hired private auditors and solicited help from rival Florida State
University, working into the night for days to complete the books that
detail how the $400-million budget was spent.

"What kind of
appearance does this give?" said Robin Kennedy, a FAMU physics professor
for 13 years. "They still can't get the trains to run on time."

FAMU trustees began the arduous task
last week of trying to fix the school's problems. But first they wanted
to point fingers for the mess.

They alternated much of the
blame between Humphries and Gainous, who remained stoic as trustees
berated him and questioned his credibility during a tense meeting last
week.

Humphries, who resigned in 2001 to lead a Washington
organization that supports the nation's historically black schools, said
financial audits show he left FAMU free of problems.

"If there
are difficulties, they didn't happen under my watch," he said.


Humphries acknowledged some trouble in the financial aid office during
his tenure, but he said he hired one of the best administrato!
rs in th
e country to fix them. She left after he did.

Gainous, a FAMU
alumnus and Tallahassee native who was hired amid much fanfare last
year, knew the school had some problems when he took the job. He talked
of beginning the "healing process," fired top administrators and
insisted on more technology and accountability.

But last week
angry trustees blamed him for not disclosing the severity of the
problems and for failing to make solving them a priority. They said
Gainous waited too late in the year to start on the financial statements
and questioned why the school doesn't balance its books every
month.

"At no time was this board made aware of the dire state
of the financials," trustee Challis Lowe said. "I have a sense once
again that we are brushing over things in a superficial way."


Gainous, who has had to answer to the state's chancellor and the Board
of Governors, apologized to the trustees.

"What happened should
never have happened," he said. "It is simply events - some that should
have been controlled and some we found out and attempted to fix."


On campus last week, some students said they supported Gainous, who has
made an effort to meet students since his arrival.

"It seems
kind of wrong they are coming down on Dr. Gainous," said Marie Edwards,
an 18-year-old sophomore from South Carolina. "It's only his second
year. They really can't blame him. There were problems when he came
here."

Carolyn Collins, president of FAMU's national alumni
association representing 50,000 former students, downplayed FAMU's role
in the problems. Instead, she blamed Gov. Jeb Bush's swift and dramatic
change in how the state universities are governed, which left them
unprepared to take on responsibilities that had been administered by the
state.

For example, last year was the first time the school had
to turn over financial records directly to the state.

"I'm sure
the governor didn't want us to fail," Collins said. "I'm not sur!
e what t
he plan was."



FAMU is working
with the state to track down the unaccounted for $1.8-million. It is
paying auditors more than $80,000 to help determine which business
practices need to be improved. It is searching for a new financial
chief.

"We need an understanding of what broke down in the
system," trustee Bill Jennings said. "And what steps are being taken so
this doesn't happen again."

Meanwhile, trustees have hired a
consultant to evaluate Gainous to determine whether he should remain at
the helm while they begin the slow process of rebuilding FAMU's
tarnished reputation.

"We flew by night," trustee Barney Bishop
said. "We can't allow FAMU to fly by night anymore."

Bill
Tucker, FAMU Faculty Union president, encouraged trustees last week to
keep asking tough questions. He said he thinks other financial problems
will surface before FAMU will be able to move on.

"It's not
over yet," he said. "It'll be back."

- Times researcher Cathy
Wos contributed to this report.

class=subhed>Troubles at Florida A&M

Who's involved Fred Gainous, FAMU president, under fire for not
taking financial problems seriously enough

Frederick Humphries,
former president, blamed by some for "financial mess," denies leaving
problems for successor

Tom Gallagher, state financial chief,
withheld paychecks to 19 top FAMU officials to force them to turn over
financial statements

Board of Trustees, cites "leadership
crisis' at FAMU, hires consultant to evaluate whether Gainous should
remain in charge

The
problems

* Books off by $1.8-million * Students get financial aid months
late

* $1.5-million needed to pay overdue bills

*
Contracted twice for the same consulting work

* Federal grants
for students covered inappropriate travel expenses

* Two
employees face criminal theft charges

class=subhed>What's next

* Board of Governors to launch an investigation this week *
FAMU's interim financial chief returns from three-week hunting trip this
week

* State auditing university books

* FAMU paying
auditors $80,000 to help improve business practices

<font
face=Arial size=3 class=subhed>FAMU facts

FOUNDED: 1887 as the Colored Normal School with 15 students
LOCATION: main campus in Tallahassee, law school in Orlando


STUDENTS: 13,000

ALUMNI: 50,000 across the world


FACULTY: 1,200 (700 full-time)

ANNUAL BUDGET:
$400-million

ENDOWMENT: $69-million

AVERAGE GRADE
POINT OF ADMITTED FRESHMEN: 3.18

class=subhed>SIGNIFICANT FACTS:

- Nation's largest single-campus historically black institution
- Leads the nation in the graduation of black teachers

- Fourth
largest pharmacy school in the nation

- Second in black
business and computer information systems degrees

- Fifth in
black engineering degrees

- First in the Southeast in National
Institutes of Health grants

- Source: Florida A&M
University

WHERE ARE WE (HBCUs) GETTING THESE AUDITORS AND ACCOUNTANTS FROM? :mad:

Roscoe's Chicken and Waffles Business School? :eek: :mad: :eek:

My thoughts exactly. And where is all the money for said 'accountants' going?

:mad: :mad:
and yes, I graduated from an HBCU.

I assume the money goes to the company (if private) or back to the state if the state auditor handles the audit. :confused:

"Our People" (sometimes)! :rolleyes:

I heard about this the other day! What the hayle is really going on down there! :mad: I knew things were slow in finacial aid but dayum...not this bad! Get the bastids that are stealing our money out of there!
As a FAMU alum this is really heartbreaking. I hope they get it together soon and clear this mess up!

I am getting upset as both an HBCU alum and as an Accountant (Future CPA). :mad:

Y'all know THEY already think that "black folks can't manage money" :rolleyes:

This saddens me a great deal. Never went to an HBCU but this is still sad. ClassyLady, don't you go to FAMU? How are you doing down there?

I agree w/ fellow FAMU alum 2Discrete. This mess needs to be cleared up. I love my school and want to see it thriving and growing. I do what I can to help like being a part of the local and national alumi associations to give back. This is heartbreaking.

Sad but very true....
 

That was the exact reason why I left Famu... I spent more time standing in line at the FA office than I could in class. And if I didn't I would be evicted from my dorm room or wouldnt be able to get books or eat. This is a stress that should not be put on anyone...especially a freshman! There would be lines forming in from of the FA office at 6a in the morning in order for people to get in to see someone about thier money and when it was coming.
I remember very vividly getting an eviction notice put on my door and after that having to spend 6 hours trying to get a stay of eviction and the FA officer to tell me that this happens all the time. If you know this happens and that yall wont be getting the money until the end of the semester why even try to kick people out or take thier meal card from them?? It seemed like every week or so there was something wrong. When the rest of the state systems universities are getting their money within the first weeks of school... FAMU doesn't get theirs until near the end of the semester.
I loved FAMU...lawd knows I did... but if i had to go through that nightmare again...it would have kilt ( yes kilt) me dead!

I couldn't be worried about whether or not they got their notes right when I have exams and studying to do.

I feel really bad for FAMU and the other black colleges. I go to Florida State and it hurts me to see that FSU doesnt even send there accountants there to help out. We share a college of engineering and have professors that teach at both places, but FSU can't help FAMU out. Plus, FAMU has so many top programs like the Pharmacy program, I would just hate for the school to get a bad name.

ya see!!!
 

pookie's school of cpa learnin' sounds more like it.

financial issues seem to be a common thread among hbcu's. that is why i preferred to go to a non HBCU. for me having my money straight was one thing that was important to me.

overall it is a sad state of affairs that so many schools like famu and morris brown are in such horrible situations. these universities have rich traditions and are a viable part of our communities. i think that this is a reflection on all of us. it is imperative now more than ever that we all invest the institutions that help to shape some of the most influential and keen minds our world has ever seen.


here's an idea, take some of these accounting majors and help balance the financial records. they can be paid a nominal salary and it is a mutually beneficial arrangement. the students receive the hands on experience and the school fixes their fiduciary issues.


something has got to give. how are the students who attend these schools suppose to be adequately prepared for life when they are investing in schools who don't invest in them? this is appalling. who's next? xavier, ncat, spelman?
:(

Co-sign. I also didn't go to an HBCU but my mom did (Howard in the late 1940s) and I have many sorors, soror-friends and acquaintances who did. This is disturbing.

Slight hijack -- HK, although the situation is very serious, I got a lil' laugh out of your "Roscoe's Chicken and Waffles Business School" crack.

I attended an HBCU, an until recently worked for a predominately black-operated school district. I don't understand. WHY DON'T WE TAKE CARE OF BUSINESS! It makes me sick. I pray for all of our schools. While, we HBCU alums are encouraged to increase our giving to out beloved institutions, we are not willing. One reason why people are not willing is the mismanagement of funds. I know this situation deals with federal funds, but I am afraid of the implications for other areas.

Re: ya see!!!
 

That sounds like a good idea.