Audit Explanation

By DInsider
Last Thursday, we promised to explain how FAMU arrived at its reported $8M surplus, later reduced to $2.7M. After reviewing the draft financial audit and the two previous financial audits, we began to compare Castell & Co.'s financial statements with those from ’04 and ’03.

After looking at the “Net Nonoperating Revenues” for ‘05 and comparing them with ’03 and ’04 it has become clear why Castell and Challis begin backing away from the $8M as was previously suggested.

The table below (taken from previous years financial statements) establishes a trend with regard to the university's finances. “Income (Loss) Before Other Revenues, Expenses, Gains or Losses” versus "Increase (Decrease) in Net Assets."

'03 (Gainous) '04 (Gainous) '05 (Bryant)
*Income
Before
Losses ($5,931,000.00) ($3,099,339.44) ($10,418,252.00)

Increase
in Net
Assets $7,763,000 $29,679,654.67 $2,736,119**

Financial Statement '05 (Draft)
Financial State '04 - Page 12
Financial Statement '03 - Page 13

*Income (Loss) Before Other Revenues, Expenses, Gains or Losses
**Castell reported surplus in net assets

Over the last three years, the “Income (Loss) Before Other Revenues, Expenses, Gains or Losses” has gone from -$5,931,000 to -$3,099,339.44 under Gainous to a whopping -$10,418,252 under Castell. Our “Increase in Net Assets” has gone from $7,763,000 to $26,679,654 under Gainous to $2,736,119 under Castell.

We asked two Certified Public Accountants to help demistify the FAMU audit and explain how the University ended up with a -$10M deficit in such a short period of time.

Here is what they had to say: "Under Castell it seems that “Revenues” – operating revenues have decreased drastically. The University is losing revenues from student tuition and fees; federal grants and contracts; state and local grants and contracts; and nongovernmental grants and contracts. Some factors to consider is the loss in tuition and fees as enrollment has declined (especially at the upper and graduate levels); back-to-back tuition hikes across the board; and fewer students taking full loads.

Although operating revenues have decreased, “expenses” have continued to increase. In essence, its sort of like spending money that based on projections, which isn't actually there. Under the “Operating Expenses Category” expenditures for compensation and employee benefits and utilities have increased. The University's operating income loss has gone from -$96,903,000 to -$103,069,068 under Gainous to -$140,575,884 under Castell.

Declining enrollment, low faculty and staff morale, increased lawsuits and the public perception over a sustainable period of time is clearly a sign that something is wrong at the university.