- Associated Press - Monday, July 7, 2014

MONTGOMERY, Ala. (AP) - Alabama State University officials are re-evaluating administrative processes to respond to a recent credit downgrade and a warning from an accreditation agency, the university’s president said Monday.

It’s the school’s third credit downgrade by Moody’s Investor’s Service in almost nine months and ASU President Gwendolyn Boyd said in a written statement that she considers it a “very serious issue.” The school’s credit rating dropped Oct. 18, Jan. 21 and again on Thursday.

The Montgomery Advertiser reported last week (https://on.mgmadv.com/1jQSU8T ) that Moody’s found the school has drawn from reserves to cover debts this year and is expected to do so again in 2015 and possibly longer. Moody’s said the school is $235 million in direct debt and has declining cash and investments.

“We are committed to turning the tide through the new ASU reorganization plan, fiscal austerity and the implementation of sound financial best practices to restore our university’s credit rating,” Boyd said.

Gov. Robert Bentley said that although he’s disappointed by the downgrade, he’s confident the school will bounce back.

After a Monday news conference on an unrelated matter at the Capitol, Bentley said the warning letter from the Southern Association of Colleges and Schools and a forensic audit of the school likely factored into Moody’s decision to downgrade the university’s credit rating. A company performing the forensic audit released a preliminary report in October that raised concerns about fraud and waste by some university officials. ASU disputed the company’s findings and sued the firm that conducted the audit. The lawsuit was dismissed in late June.

SACS officials said ASU failed to comply with six accreditation standards and they put the school on a six-month warning period in late June. The penalty is less severe than the school being placed on probation.

Bentley said he’s confident that Alabama State University has the right president and board in place to guide the school’s recovery from the downgrade and accreditation warning.

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