Home » Kentucky State University outlines financial corrective action plan

Kentucky State University outlines financial corrective action plan

FRANKFORT, Ky. — The Kentucky State University Board of Regents were briefed on corrective actions implemented to stabilize and improve Kentucky State’s financial condition and guidance regarding the institution’s financial needs, cash position, and outlook going forward.

With financial reviews still ongoing, Gregory Rush, vice president for finance and administration/chief financial officer, reported to the Board findings to date of $13.5 million in pending, past due or unpaid items:

  • More than $3 million in unpaid vendor invoices ($1.7 million of which is more than 121 days past due)
  • Payment of an ongoing energy performance contract of $621,868 due in June but not paid until July
  • Approximately $5.5 million not yet paid to the state to clear construction invoices, and a
  • $5 million unpaid Revenue Anticipation Note not cleared by June 30

Although not yet utilized, University officials requested permission to draw down $2.5 million of the Revenue Anticipation Note. The University has made tremendous strides in cash management, processes to verify compliance with payment terms for all construction invoices, and began a master budgeted position listing. The University’s internal auditor will begin a review of expenditures for the past three years, while the purchasing department is updating and providing a list of all current contracts, which will be reviewed for necessity.

Based on documentation in the University budget office, expenditures exceeded the approved budget in each of the last three years. Unpaid invoices were pushed into subsequent years, resulting in a projected $10-$15 million shortfall for FY 2022.

Among the unpaid invoices are reimbursement payments to the state accounts that manage Kentucky State construction projects. Kentucky State stopped paying state reimbursements in December 2019, with a balance owed of approximately $5.5 million. Kentucky State has notified the USDA of the processing errors and delays in clearing payments owed to the state and is seeking an accommodation to adjust the payment plan.

Another budget gap on the horizon relates to deferred FICA payments from April 2020 through December 2020, as allowed under relief measures for COVID-19. Total deferral is $1,530,000, which must be repaid over the next two fiscal years. Unfortunately, provision for payments of $765,000 due in December 2021 and December 2022 do not appear to be reflected in University budget documents.

Also impacting, but not addressed in the 2022 budget, is nearly $457,500 of unexpended state-appropriated, dedicated land-grant match funds. By not expending these matching funds by the end of FY 2021, Kentucky State will need to expend these funds in 2022, which is in addition to the match requirement already budgeted for 2022.

President Stamps has requested the entire University leadership team review and improve financial and administrative policies and procedures.

Kentucky State University Board of Regents Chair Dr. Elaine Farris said transparency has been crucial in navigating this challenging time.

The board is committed to moving Kentucky State onward and upward to continue making a positive impact in the Commonwealth of Kentucky and beyond.

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