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Report finds poor financial management at Kentucky State

November 5, 2021 GMT

FRANKFORT, Ky. (AP) — A report by Kentucky’s Council on Postsecondary Education has found that poor financial management by Kentucky State University leadership in recent years has resulted in significant financial losses, Gov. Andy Beshear said Friday.

The report also recommended that the institution receive $23 million in special appropriations from the state budget to cover current budget shortfalls.

The Democratic governor ordered the review of Kentucky’s only public historically Black university after the university’s president resigned in August. The university is currently under state oversight.

“When I heard about KSU’s financial situation, I asked for a full, independent and transparent accounting of the university’s finances, and today we are releasing the findings of that assessment,” Beshear said in a statement. “We are committed to KSU and, as one of two Historically Black Colleges and Universities in Kentucky, KSU must be put on a path to stability so it is able to continue providing a high-quality education for generations to come.”

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The report, which includes an improvement plan, was required by the governor’s executive order for the university to be considered for additional funding.

KSU officials informed a legislative committee in September that the university will need emergency funding to stay open through the end of the academic year. They also reported that the school has a shortfall that includes $15.5 million from last year’s budget, as well as a $7 million shortfall for this year’s budget.

“We are confident we’re going to be able to make it to January. We believe we can make it through April,” KSU’s vice president for finance, Gregory Rush, told lawmakers.

While KSU reported earlier this year that it received positive results from its annual independent financial audit, the councils’ report found evidence of poor financial management by university leadership resulting in financial losses beginning in 2018-19.

For instance, cash flow as reported on the audited financial statements was relatively stable in 2016 and 2017, at $19.9 and $18.7 million, respectively, before declining to $14.0 million in fiscal year 2018. Then, in fiscal years 2019 and 2020, cash flows declined to approximately $2 million.

“The decline in cash reserves between 2016 and 2020 resulted from operating deficits totaling $35 million over the same period,” the report said.

The council’s report also outlines “several inappropriate techniques” used by university leadership to make payroll obligations. KSU failed to pay vendors in a timely manner and collect student debt owed to the university. Staff also indicated that they were told to “not answer their phones” when vendors called, and “that they were threatened with termination if they disclosed that the university did not have sufficient cash for its obligations.”

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In addition to the $23 million to cover the fiscal year 2021-22, the university also requests $1 million per year until 2024. At a council meeting Friday, President Aaron Thompson said the funds will help stabilize KSU into the future.

“Kentucky State University is vitally important to the landscape of higher education in Kentucky, and to our students, our workforce and our economy. This appropriation request supports the Council’s commitment and our work that it not only survives, but thrives,” he said.

Kentucky’s General Assembly will consider the state budget in the upcoming regular legislative session, which begins in January.

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Hudspeth Blackburn is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.