ALABAMA A&M UNIVERSITY INITIAL RESPONSE TO FY09-FY13 EXAMINERS REPORT

The University acknowledges that there are areas that are in need of improvement. Significant
progress has been made in the past, and the University is committed to continuing to improve
in the future. The University has implemented a number of policies and procedures which have
addressed the findings, many of which occurred prior to 2013. The University has also
restructured administratively and strengthened its fiscal management. Also during this period,
the University transitioned from the Legacy administrative support system to the Banner
administrative support system. As a result, some of the documentation needed to address the
inquiry is housed in the Legacy system, but is not readily retrievable. The Universitys initial
response to each of the findings is noted below.
Finding: 2013-001 The University did not ensure that the Trust for Educational Excellence was
administered in accordance with the Courts instructions.
Response: The University does not agree with the core facts presented, and believes the
presentation of the finding is misleading. At no point in time have funds been inappropriately
disbursed from the Trust corpus. The total value of the Trust was $38.6M in FY12, $40.5M in
fiscal year 2013, and estimated to be $42.0M at the end of fiscal year 2014. The Trust has
increased each year, thus the earning had to be reinvested. The apparent misunderstanding
results from the manner in which the balances were classified, i.e. temporary versus
permanently restricted. The Trust balances for the prior year have appropriately been
reclassified, placing all the assets in the permanently restricted category. The fiscal year 2014
report will show that the Trust was managed in compliance with the Courts instructions.
Additionally, the AAMU Foundation board was reconstituted in 2012, and has consistently met
since that time, for a total of seven times at which there was a quorum present, consistent with
its bylaws.
There is a legal question as to the continuing applicability for the Knight-Sims order. The
University is currently investigating this further. The Board will be notified when the University
when there is a final resolution of the issue.
Finding: 2013-002 Procedures did not ensure that entries to the payroll files were properly
reviewed resulting in overpayments to employees.
Response: The payroll errors are primarily the result of furlough miscalculations attributable to
the fiscal years 2010 and 2011 when the furloughs were applicable, and the varying
parameters. The University has placed procedures in place to mitigate reoccurrences.
Finding: 2013-003 Procedures did not ensure that support for incentive payments to the
President were properly reviewed prior to payment.
Response: The finding relative to the incentive payment is not based on generally accepted
counting norms for contributions. The issue is not the procedure followed but instead the issue
of what constitutes contributions for fundraising purposes. The contributions which served as

the basis for the incentive were based upon the fundraising reports generated by the Division
of Marketing, Communication and Advancement. This division follows the industry standard in
Council for the Advancement and Support of Education (CASE) Reporting Standards &
Management Guidelines when recording contributions. The fundraising standards are different
from the generally accepted accounting principles used by auditors and accountants when
determining revenue for financial reporting purposes under the Governmental Accounting
Standards Board (GASB). Said differently, CASEs standards for the fundraising industry should
not be used as a GASB accounting metric, and similarly it is inappropriate to use either GASB or
Government Auditing Standards to govern the fundraising industry practices.
CASE specifically excludes donations which derive from exclusive contracts, such as pouring
rights and fees. The amounts in question associated with the Aramark contract do not fall into
this category. The contract specifically indicates that Aramark shall, during each operating
year make an unrestricted grant to client in the amount set forth below (each, a Campus
Beautification Unrestricted Grant of $100,000 in 2010-2011 and $150,000 in 2011-2013; and
Scholarship Unrestricted Grant of $200,000. Clearly, the contract delimits these as grants and
should have been counted. Further, Mr. Jerry Smith, a fundraising expert with over 30 years of
experience who has assisted many universities, indicated in a correspondence to the University
that the amounts should have been counted. The conclusion is not based on the norm for
reporting in the fundraising industry nor the convention of counting employed at the other
universities which we contacted.
Nonetheless, the contributions have been returned from the Foundation to the University. It
should also be noted that the entire amount was directed to the Foundation from the very
beginning. In conclusion, the University strenuously disagrees with the finding.
Finding: 2013-004 A payment for reimbursement of moving expenses was not properly
supported.
Response: The University notes the finding, which relates to an incident in 2009. The University
now has a published policy on reimbursement for travel, including moving expenses.
Finding: 2013-005 Change Orders and record retention practices relating to the Wellness
Center construction project may not be in compliance with the Code of Alabama and applicable
regulations.
Response: The University notes the finding, related to the Wellness Center contract that was
entered to May 2008, will comply with the Code of Alabama, and has put in place corrective
procedures to ensure there are no reoccurrences.
Finding: 2013-006 The University may not have complied with the competitive bid law
relating to equipment purchased for the Wellness Center.

Response: The University notes the finding related to the competitive bid process of the
Wellness Center in August 2009, will comply with the Code of Alabama, and has put in place
corrective procedures to ensure there are no reoccurrences.
Finding: 2013-007 The University may not have complied with the Code of Alabama by
returning a bid bond to a general contractor that submitted the lowest bid on the Thigpen Hall
project without proper documentation to support this action.
Response: The University notes the finding related to the competitive bid process of the
Thigpen Hall in September 2009, will comply with the Code of Alabama, and has put in place
corrective procedures to ensure there are no reoccurrences.
Finding: 2013-008 The University may not have complied with the Code of Alabama by
negotiating a contract on the Thigpen Hall renovation project and by processing a Change Order
to add work not in the scope of the bid specifications.
Response: The University notes the finding, and will comply with the Code of Alabama, and has
put in place corrective procedures to ensure there are no reoccurrences.
Finding: 2013-009 The University failed to properly safeguard assets by operating without
fidelity bond coverage for over two years.
Response: This finding has no basis in either state law, or the state Division of Risk
Management guidelines. There is no requirement that the university specifically take out
fidelity bond coverage. However, the University has cured this issue, and renewed the bond
policy prior to the audit request.
Finding: 2013-010 The University may not have complied with the Code of Alabama by not
remitting unclaimed property to the State Treasurer.
Response: The University notes the finding, and will comply with the Code of Alabama, and has
put in place corrective procedures to ensure there are no reoccurrences.
Finding: 2013-011 The University may not have complied with appropriations acts by not
sending earmarked funds to Miles College as prescribed by the applicable appropriations acts.
Response: The University will remit the funds to Miles College, related to fiscal years 2009 and
2010, and has placed procedures in place to prevent a reoccurrence.
Finding: 2013-012 An employee of the University may not have complied with the ethics law
by requisitioning purchases from a company with which she has ties.
Response: The University has referred this matter to the State of Alabama Ethics Commission.
Finding: 2013-013 The University procedures did not ensure that travel payments to
employees were made in accordance with the Code of Alabama.
Response: The University notes the finding, and will comply with the Code of Alabama, and has
put in place corrective procedures to ensure there are no reoccurrences.

Finding: 2013-014 The University did not consistently reimburse Board members for expenses
in a manner which complies with the Code of Alabama.
Response: The University notes the finding, and with the clarity provided from the Attorney
Generals opinion, will comply with the Code of Alabama.