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Financial turmoil racks FAMU

It was called the College of the Year just six years ago. Today, unbalanced books and halted paychecks have inspired lots of finger-pointing, but few answers.

ANITA KUMAR
Published November 30, 2003

TALLAHASSEE - Florida A&M University is on the brink of financial disaster.

The books of the historically black university are off by $1.8-million. Students get financial aid months late. A former employee is accused of questionable spending while others face theft charges. Sloppy business practices might have cost hundreds of thousands of dollars.

It got so bad that state financial chief Tom Gallagher this month took a rare and drastic step: He cut off pay to the FAMU president and 18 top administrators until they turned over crucial financial records that were six weeks late.

"It's not something we like doing," said Gallagher, who also temporarily suspended payments to FAMU vendors. "But they needed to take it seriously."

Last week, some members of the school's governing board said they had lost confidence in president Fred Gainous, citing a "leadership crisis" in the day-to-day operations of a school near the "financial brink."

"Some things we deeply regret," said Gainous, who succeeded longtime FAMU president Frederick Humphries in 2002. "There was a lot to be done. There still is a lot to be done to move the university forward. We must get our financial house in order."

The Board of Governors, which oversees higher education in Florida, will launch an investigation this week. The state is auditing FAMU's books. Irate alumni have threatened to sue over the mismanagement. School officials are postponing a capital campaign and questioning whether under the circumstances they are ready to move their football program to the elite Division I-A.

It has been a hard fall for FAMU, which just six years ago was named the nation's College of the Year by Time magazine and the Princeton Review. The scandal has left the 116-year-old school of 13,000 students suffering a national embarrassment.

"All of this has been a tremendous blow to the university," said Jim Corbin, chairman of the school's board of trustees. "I don't think there's any excuse for it. We ought to be able to handle it like every other school."

* * *

Sophomore Kelven Davis didn't get his $2,000 in financial aid this semester from FAMU until November. It was the second year in a row the check came months late.

Davis, 19, of Lake Wales had to convince his landlord he would eventually make good on his debt.

"I really don't know what the problem is," said Davis, who last week was not able to find out when another check would arrive because the school's computer system was down. "They just get behind."

It has been that way for years.

The Tallahassee school educates some of the nation's brightest black students, competing with Harvard University every year to see who can enroll the most. After almost collapsing in the 1970s, FAMU earned national acclaim in the 1990s under Humphries, the popular former president.

But his 16-year tenure also was dogged by one financial crisis after another.

The school faced state and federal investigations of its financial aid office, which doles out $100-million each year in payments to more than 90 percent of the student body. It also had trouble meeting its payroll.

"Dr. Humphries has to accept a large responsibility for this," Corbin said. "He left the place in a financial mess."

Now, two years after Humphries' departure, school officials say they are just beginning to learn of the problems he left behind. Humphries adamantly rejects the criticism.

"I left no problems for FAMU," he said in an interview last week.

Steve Uhlfelder, a member of the Board of Governors and its predecessor, said state leaders knew about the school's problems but never fully dealt with them because they were afraid to be too hard on a black school.

"I'm not sure we were always tough enough because we were afraid of criticism. We walked on eggshells with Florida A&M University," he said. "But I don't think this is excusable at any university. It's just not acceptable. It's beyond comprehension."

The school failed to follow its policies and procedures or standard business practices, such as balancing the books every month. Offices that deal with finances haven't been modernized, leaving employees to use paper instead of computers. A federal grant intended to strengthen curriculum and student services was used for unapproved expenses, such as travel to London and Paris for the former grant director. And when Humphries served as a FAMU consultant this year, the grant paid some travel costs that Gainous questioned.

Recent internal investigations also show the school often used purchase orders instead of more strict written contracts; planned to overspend for leased space; and contracted twice for the same consulting work.

After discovering accounting problems, Gainous' staff examined a decade of completed budgets. The numbers, the president said, did not add up.

The construction budget was off by more than $3-million. The school spent $3-million from a grant program, but it never billed the federal government for reimbursement. About $1.5-million in surplus funds from last year had to be used to pay contractors who had never been paid.

"This is the absolute worst it's been," said Al McCoy, 75, a St. Petersburg native and a FAMU alum who worked there as director of alumni affairs and the boosters. "It's the most humiliating, embarrassing thing. It's not good at all."

Before the fall semester, two former employees were charged with stealing more than $21,000 by diverting almost a dozen financial aid checks to themselves. Their boss, the school's vice president, left shortly before Gainous arrived in July 2002 and has not been replaced. Gainous forced out three other longtime financial administrators for failing to follow business practices.

Gainous persuaded his friend Tom Hanna, a former vice president at nearby Tallahassee Community College, to come out of retirement and serve as interim financial chief. But Gallagher and school trustees were appalled to learn Hanna went on a three-week hunting trip to Canada during much of the latest financial crisis. He returns this week.

The most recent trouble began Sept. 30, when FAMU missed the deadline for key financial records that would account for more than $100-million of taxpayer money spent last year. Without them, Florida's bond and credit ratings were in jeopardy.

After several warnings, Gallagher suspended payments to companies doing business with FAMU on Oct. 31. A week later, he paid the vendors but halted paychecks totaling $54,506.52 to 19 administrators until the paperwork came in Nov. 18.

"It is extreme but appropriate," said Carolyn Roberts, chairman of the Board of Governors, who has been in contact with FAMU and state officials. "There are rules we go by."

FAMU officials hired private auditors and solicited help from rival Florida State University, working into the night for days to complete the books that detail how the $400-million budget was spent.

"What kind of appearance does this give?" said Robin Kennedy, a FAMU physics professor for 13 years. "They still can't get the trains to run on time."

* * *

FAMU trustees began the arduous task last week of trying to fix the school's problems. But first they wanted to point fingers for the mess.

They alternated much of the blame between Humphries and Gainous, who remained stoic as trustees berated him and questioned his credibility during a tense meeting last week.

Humphries, who resigned in 2001 to lead a Washington organization that supports the nation's historically black schools, said financial audits show he left FAMU free of problems.

"If there are difficulties, they didn't happen under my watch," he said.

Humphries acknowledged some trouble in the financial aid office during his tenure, but he said he hired one of the best administrators in the country to fix them. She left after he did.

Gainous, a FAMU alumnus and Tallahassee native who was hired amid much fanfare last year, knew the school had some problems when he took the job. He talked of beginning the "healing process," fired top administrators and insisted on more technology and accountability.

But last week angry trustees blamed him for not disclosing the severity of the problems and for failing to make solving them a priority. They said Gainous waited too late in the year to start on the financial statements and questioned why the school doesn't balance its books every month.

"At no time was this board made aware of the dire state of the financials," trustee Challis Lowe said. "I have a sense once again that we are brushing over things in a superficial way."

Gainous, who has had to answer to the state's chancellor and the Board of Governors, apologized to the trustees.

"What happened should never have happened," he said. "It is simply events - some that should have been controlled and some we found out and attempted to fix."

On campus last week, some students said they supported Gainous, who has made an effort to meet students since his arrival.

"It seems kind of wrong they are coming down on Dr. Gainous," said Marie Edwards, an 18-year-old sophomore from South Carolina. "It's only his second year. They really can't blame him. There were problems when he came here."

Carolyn Collins, president of FAMU's national alumni association representing 50,000 former students, downplayed FAMU's role in the problems. Instead, she blamed Gov. Jeb Bush's swift and dramatic change in how the state universities are governed, which left them unprepared to take on responsibilities that had been administered by the state.

For example, last year was the first time the school had to turn over financial records directly to the state.

"I'm sure the governor didn't want us to fail," Collins said. "I'm not sure what the plan was."

* * *

FAMU is working with the state to track down the unaccounted for $1.8-million. It is paying auditors more than $80,000 to help determine which business practices need to be improved. It is searching for a new financial chief.

"We need an understanding of what broke down in the system," trustee Bill Jennings said. "And what steps are being taken so this doesn't happen again."

Meanwhile, trustees have hired a consultant to evaluate Gainous to determine whether he should remain at the helm while they begin the slow process of rebuilding FAMU's tarnished reputation.

"We flew by night," trustee Barney Bishop said. "We can't allow FAMU to fly by night anymore."

Bill Tucker, FAMU Faculty Union president, encouraged trustees last week to keep asking tough questions. He said he thinks other financial problems will surface before FAMU will be able to move on.

"It's not over yet," he said. "It'll be back."

- Times researcher Cathy Wos contributed to this report.

Troubles at Florida A&M

Who's involved

Fred Gainous, FAMU president, under fire for not taking financial problems seriously enough

Frederick Humphries, former president, blamed by some for "financial mess," denies leaving problems for successor

Tom Gallagher, state financial chief, withheld paychecks to 19 top FAMU officials to force them to turn over financial statements

Board of Trustees, cites "leadership crisis' at FAMU, hires consultant to evaluate whether Gainous should remain in charge

The problems

* Books off by $1.8-million

* Students get financial aid months late

* $1.5-million needed to pay overdue bills

* Contracted twice for the same consulting work

* Federal grants for students covered inappropriate travel expenses

* Two employees face criminal theft charges

What's next

* Board of Governors to launch an investigation this week

* FAMU's interim financial chief returns from three-week hunting trip this week

* State auditing university books

* FAMU paying auditors $80,000 to help improve business practices

FAMU facts

FOUNDED: 1887 as the Colored Normal School with 15 students

LOCATION: main campus in Tallahassee, law school in Orlando

STUDENTS: 13,000

ALUMNI: 50,000 across the world

FACULTY: 1,200 (700 full-time)

ANNUAL BUDGET: $400-million

ENDOWMENT: $69-million

AVERAGE GRADE POINT OF ADMITTED FRESHMEN: 3.18

SIGNIFICANT FACTS:

- Nation's largest single-campus historically black institution

- Leads the nation in the graduation of black teachers

- Fourth largest pharmacy school in the nation

- Second in black business and computer information systems degrees

- Fifth in black engineering degrees

- First in the Southeast in National Institutes of Health grants

- Source: Florida A&M University

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