Regent Moyer asked if introductions had been completed, as he saw several faces he did not recognize. Chair Hatchett asked if everyone recognized Regent Fields. Ms. Shuo Han, Deputy General Counsel, introduced herself to Regent Moyer.
IV. Review of the November 2021 CPE Financial Assessment of KSU's Finances
Travis Powell, VP and General Counsel for the Council on Postsecondary Education, began his presentation on the 2021 Financial Assessment of KSU’s Finances. Mr. Powell introduced Mr. Greg Rush, who was available to answer questions. Regent Moyer asked Mr. Powell if he could characterize the $35 million in operating debt that occurred during the period from 2016 to 2020. Specifically, he asked if it was due to missed enrollment targets, expenses substantially exceeding the budget, an expense control issue, and/or an enrollment issue. He further asked what the major drivers were for running up that kind of deficit in that period of time. Mr. Powell responded that he would get to that later in the presentation, but explained that, simply stated, the debt was due to the University spending more than what was allotted in the budget and a failure of budgetary controls. Mr. Rush concurred with Mr. Powell.
Chair Hatchett asked about CARES Act Debt Forgiveness. He understood it to be a grant, and asked for clarification regarding Mr. Powell's characterization that it was debt forgiveness. Chair Hatchett inquired about the Revenue Anticipation Loans that KSU is apparently accustomed to receiving, as there was some indication in the CPE report that the Revenue Anticipation Loan was settled in 2021, yet it appears again on the financial cash position reports in the May report. Mr. Rush explained how the Revenue Anticipation Note had been used in the past, and stated that nothing is currently owed on it.
Regent Fields asked Mr. Powell about a chart included at the beginning of the presentation which showed the years in which the overspending began. He inquired as to how the University was able to continue to overspend and how the overspending was allowed to continue through 2020. Mr. Powell and Mr. Rush discussed several factors which contributed to the financial situation.
Chair Hatchett directed Regent Fields to pages 8 and 9 of the CPE report, and commented that the Committee was particularly focused on how KSU got into the situation and the inappropriate techniques that were used to generate or maintain enough cash to satisfy payroll obligations each month.
Chair Hatchett asked Mr. Powell about the recommendation of presidential reporting of expenses on a quarterly basis, commenting that he had not yet seen the recommendation and that it reminded him that it is something the Committee would need to look into further. Regent Moyer asked if net pricing included only formal scholarship assistance, or if it included unpaid tuition from students as well. Regarding slide 19 of the presentation, Regent Fields asked how the data for staff levels were defined. He noted that there are not many KSU employees in the area described as Computer, Engineering and Science.
Regent Moyer asked Mr. Powell if he had collected any data on full-time faculty teaching loads from the comparison group schools. Dr. Tidwell asked a question pertaining to first and second-year retention rates.
Regent Fields inquired about the finding that the Banner system and Argos tools are inadequate, and he wondered if that was due to staff training and high turnover in the finance area over the years more than the actual inadequacy of those tools. Mr. Powell replied that it was a bit of both, and Mr. Rush elaborated on this point.
Mr. Powell concluded his presentation with a list of key takeaways and recommendations to the Finance and Administration Committee. Dr. Tidwell asked that the report be sent out to Committee members, as he did not believe that he had received it. Dr. Tidwell also asked if CPE had an opportunity to look at the Foundation, and queried if it were possible that the finances of the institution were being propped up by monies from the Foundation.