Focused Report

Comprehensive Standard 3.10.1

The institution's recent financial history demonstrates financial stability. (Financial stability)

Off-Site Committee Finding

The information provided to the Off-Site Committee in the Compliance Certificate is inconclusive. The information provided to the Off-Site Committee does not include documents that substantiate a balanced budget. For example, there are two graphs; one shows a five year history of Expenses and the other the same time frame for Revenues. In every year the Expenses far exceed the Revenues, even when depreciation is not considered. There is no explanation as to how Expenses and Revenues are balanced, or any adjustments made using accounting. The Compliance Certificate stating "recent history demonstrates financial stability" requires additional corroboration to assure this comprehensive standard has been met. An increase of 475% in unrestricted net assets in and of itself is not an indicator of stability; end of year balancing of expenses and revenues would be an indicator. Additionally, without an unqualified opinion on the audit, the information provided to the Off-Site Committee is viewed as inadequate for determination of compliance. Further explanation should be provided for the Operating Expense changes that occurred from FY2004 to FY2006. The magnitude of the changes shown has an impact on financial stability. In the three years' audits in the section entitled Expenses (By Functional Classification) [FY2004 on page v, FY2005 and FY2006 on page iv] the following changes are shown:

The institution has indicated that both the size of the staff and the enrollment has not significantly changed and no mention is made in the Compliance Certificate of these significant changes. Explanation is necessary to enhance the affirmation of the institution's financial stability.

Additional issues are noted in areas such as the Title IV HEA Programs, where the only information provided to the Off-Site Committee was for FY2004-5. The Department of Education Final Audit Determination Letter states:

"The auditor issued a qualified opinion on compliance for the Title IV HEA programs [page 17of 27 Georgia Statewide Audit 2004-2005 FAC CAN: 04-2005-68231]. The issues were internal controls and material weaknesses. Review of the FY2006 audit shows a favorable position on resources, but the qualified opinion by the auditor causes a diminution of the validity and support for compliance. Further in the FY2006 audit there are several areas of "Questionable Costs" cited. A report by the institution indicates it agrees with all these findings, and it has proposed remedies. However, these remedies will be reviewed in the FY 2007 audit. Examples in the FY 2006 audit are:

Finding FS-521-06-10

3.) b.) An examination of the statement of accounts receivable subsidiary ledger (BANNER) at June 30, 2006 revealed that $1,116,647.89 in receivables were over ninety days old and were not supported by Financial Aid.

3.) d.) Uncollectible accounts receivable reserve was set up as an estimate, which is against Board of Regents policy. In correcting the reserve to agree with accounts receivable aged more than 120 days the [institution] reduced the Resident Instruction reserve $415,250.18. The reduction was used to cover a current year deficit in the Resident Instruction Fund.

4.) a.) The failure of the [institution] to adhere to Board of Regents policies and recommendations results in an internal control structure that cannot be relied upon to ensure the accuracy of BANNER activity recorded in the General ledger.

Finding FS-521-06-02

CONDITION "The [institution] did not adequately monitor their Sponsored projects which resulted in funds due the [institution] becoming uncollectible.

INFORMATION "An examination disclosed $755,432.45 was reimbursed by the Resident Instruction fund to fund uncollectible Sponsored project accounts receivable.

Also included are statements regarding absence of controls and procedures in several other areas, including payments to Student Athletes, which is a repeat "Questioned Cost" from the previous year (FY2005 audit). i.e. it was not corrected as the institution stated it would be. There are also "Questioned Costs" in the distribution of Financial Aid.

The institution employs a traditional budget planning and evaluation process that incorporates all levels of the organization. It correlates the 2006-2011 strategic plan, and is consistent with the Board of Regents policy, which as stated in the Compliance Certificate approves the budget. However, the Off-Site Committee was not able to view a copy of the actual Board of Regents minutes via the CD provided. The process incorporates revenue and enrollment projections, a clearly published calendar and the appropriate procedures. The On-Site Committee should review evidence that addresses primary concerns raised by the Off-Site Committee.

Albany State University's Response

The included charts were not intended to show budget compliance, rather our growth. Documentation substantiates our balanced budgets. The [1] 2007 audited financial statements (page 25, Schedule "2") show a budget surplus of $0.0. The schedule also shows that budgeted revenues exactly matched budgeted expenditures. The following affirmative statement of budget compliance also appears on this page, "Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia , which is a comprehensive basis of accounting other than generally accepted accounting principles." The [2] 2006 audited financial statements (page 25, Schedule "2") show a budget surplus of $50.71, with the same statement of compliance with budgetary statutes. The schedule also shows that budgeted revenues exactly matched budgeted expenditures. The [3] 2005 audited financial statements (page 27, Schedule "1") show that budgeted revenues exactly matched budgeted expenditures and that revenues exceeded expenditures by nearly $650,000, with the same statement of compliance with budgetary statutes.

The University received its [4] annual audit report in November 2007. It includes an unqualified opinion. The only specific Questioned Cost was for $497.

We have now received the [5] Department of Education's Final Audit Determination Letter for FY2006. Its final determination on five findings was "Assuming continued compliance, this finding is closed." Its final determination on one finding was, "This finding is considered closed."

The university has submitted a [6] 2007 Audit Corrective Action Plan to address the unresolved or partially resolved issues.

Regarding concern over the magnitude of Operating Expense changes, the growth rate from 2004 to 2005 was 2.7%, the growth rate from 2005 to 2006 was 4.5%, the growth rate from 2006 to 2007 was 5.4%. The three year growth rate from 2004 to 2007 was 13.3% showing an average annual growth rate of 3.8%. This expenditure growth rate is generally consistent with our headcount enrollment growth of 10% from Fall 2004 to Fall 2007.

Supporting Documentation

[1] 2007 audited financial statements (page 25, Schedule "2")

[2] 2006 audited financial statements (page 25, Schedule "2")

[3] 2005 audited financial statements (page 27, Schedule "1")

[4] Annual audit report

[5] Department of Education's Final Audit Determination Letter for FY2006 .

[6] 2007 Audit Corrective Action Plan