BRADENTON, Fla. — Another college in the Southeast is dealing with financial problems.
Moody’s Investors Service said that Georgia Perimeter College faces more negative credit pressure because its accreditation has been placed on warning by the Southern Association of Colleges and Schools, or SACS.
The action follows several years of ongoing structural operating deficits at the state university system’s largest two-year institution, which led to a precipitous decline in the college’s finances in fiscal 2011 and a deficit of $9.5 million in fiscal 2012, according to a report Thursday by Moody’s analyst Caitlin Bertha.
The deficit was remedied by a special allocation from the Board of Regents overseeing the University System of Georgia.
Moody’s downgraded GPC’s bond rating to A3 from A2, and revised the outlook to negative from stable, on July 27.
“The current A3 rating and negative outlook incorporates the level of risk entailed in this development,” Bertha said. “However, we will monitor the situation closely and take rating action if it appears that the accreditation status may worsen further.”
The Newton County Industrial Development Authority issued $22.7 million of revenue bonds in 2005 on behalf of Georgia Perimeter College Foundation Real Estate Newton LLC. Proceeds were used to build a new campus in Newton County, about 35 miles east of Atlanta.
The bonds were originally insured by CIFG Assurance North America Inc. Assured Guaranty Corp. became the new insurer in 2011, according to a notice on the Municipal Securities Rulemaking Board’s EMMA website.
The warning status by SACS will last for 12 months, and requires the college to submit a monitoring report. If the report fails to demonstrate compliance with core requirements and comprehensive standards, the college could remain on warning status for another year.
The college also could be placed on probation, which can be a precursor to losing accreditation, though that is not currently anticipated, Bertha said.
Georgia Perimeter has made “notable strides” to correct budget issues and return to solid financial footing, the college said in a statement on its website.
“We will continue to implement and strengthen the controls put in place during the summer of this year so that we may resolve any remaining deficiencies and bring the budget back into balance,” the statement said. “While GPC is under this warning, the institution’s full accreditation remains in place.”
The college’s A3 rating is based on the support of the Board of Regents, the fundamental credit strength of the college, and the strategic importance of the bonded project, Bertha said.
“We view this SACS [warning] action on Georgia Perimeter College as part of an emerging sector risk as evidence mounts that accrediting organizations are increasing their scrutiny,” she said, adding it is anticipated that the number of warnings, probationary, and adverse actions will increase.
Recent intervention at Georgia Perimeter by the BOR included replacing six senior managers, including the president, as well as a comprehensive internal audit to review the circumstances leading to GPC’s fiscal issues, and funds to cure the fiscal 2012 deficit, according to Bertha.
GPC has campuses in Newton County, Alpharetta, Clarkston, Decatur, and Dunwoody. More than 20,000 full-time students were enrolled in the fall of 2011.
Other colleges in the Southeast have struggled in recent years.
Mountain State University in West Virginia redeemed its outstanding tax-exempt debt earlier this month as the private nonprofit institution winds down its operations. It will lose accreditation and shut down at the end of this year.
In August, the 131-year-old, private nonprofit Morris Brown College in Atlanta filed for bankruptcy after a long financial struggle and losing its accreditation. The historically black institution also filed for bankruptcy to prevent foreclosure by a secured creditor of its bonds.
The private, nonprofit Lambuth University in Tennessee lost its accreditation, filed for bankruptcy, and closed last year.
On Dec. 11, SACS placed the University of Virginia’s accreditation status on warning, according to Moody’s. The action, related to governance issues not financial issues, came after the university’s board forced the president to resign in June. The president was reinstated two weeks later. UV’s general revenue pledge bonds are rated Aaa by Moody’s.
