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            "text": "The team calculated four primary ratios using audited financial statements: primary reserve, net operating revenues, return on net assets, and viability. These ratios were then used to create a Composite Financial Index (CFI) score to measure KSU's financial health. It was discovered that KSU's primary reserve ratios were relatively financially healthy until 2018-19 when operating expenses exceeded operating revenues. KSU's descent into a financially unhealthy condition was driven by poor performance in the primary reserve and viability ratios, which make up 70% of the CFI score. Additionally, the net operating revenues ratio shows the structural imbalances causing the institution to finance operations with reserves, negatively affecting all three of the other ratios."
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            "text": "Mr. Powell provided a comparison of the CFI scores calculated by CPE versus the CFI scores previously reported in KSU's Management and Improvement Plan. He said that both scores were sound until 2018-19 when there was a drop in the score produced by KSU. Regent Harnice commented that the previous CFI scores were prepared by President Brown and CFO Allen and reported to the Board with the understanding that the information would go to CPE for further review. Dr. Thompson stated that under the HB303 management plan, CPE did not have direct oversight over KSU but did reach out to the former CFO to verify the scores and were provided with paperwork that corresponded with the scores. He further stated that the scores reported by KSU in the future will be verified."
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            "text": "Mr. Powell stated that CPE selected eight peer institutions for its Peer Group Comparison using the following criteria: HBCU; land-grant institution; located in continental United States; public four-year; degree granting, baccalaureate and above; and enrollment between 1,000 and 3,600. The comparison showed that KSU measured favorably in areas such as state appropriations, government grants, and student success but measured below in areas such as staffing levels and academic spending."
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            "text": "Mr. Powell asserted that all financial information provided to the KSU Board of Regents by KSU’s current CFO was validated using audited financial statements and other information from financial institutions, the Commonwealth of KY, federal agencies, accounting systems, and an internal accounting analysis. All information communicated externally since the issuance of the Executive Order has been accurate."
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            "text": "Mr. Powell then summarized CPE's review of KSU's financial controls. The team concluded that the Banner system currently employed by KSU is inadequate for financial control and needs a complete overhaul. Additionally, the internal audit function was down for three years and the tip line was discontinued, KSU does not have a policy related to treasury management, no long-range financial planning function or enterprise risk management function exists, KSU has a lack of sufficient budgetary controls, there was a failure to follow existing policies, has inadequate interim financial reporting, was subject to numerous external financial audit findings, and consistently missed audited financial statement deadlines."
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            "text": "CPE’s preliminary recommendations to improve KSU’s financial health include creating a culture of accountability and compliance, improving budgetary controls, providing a quarterly budget to actual report and GAAP statements to the Board of Regents, improving the accounting and reporting system and internal controls over financial reporting, outsourcing or co-source the Internal Audit function, reinstating the externally managed tip line, implementing a formal accounting and reporting framework for endowment distributions, improving collection of student accounts receivable, implementing a"
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            "text": "Page 21 of 93",
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