Moody's credit rating service lauds changes at Penn State

UNIVERSITY PARK, Pa. -- Ratings agency Moody's Investors Service recently provided good news to Penn State by releasing comments indicating the University is on a positive path with governance and oversight changes, as well as the implementation of a large number of internal reforms.

On Thursday (May 17) Moody's reported that the "overhaul" of the Board of Trustees and its policies, as well as changes made to increase the oversight of University administrative practices are "credit positive because they strengthen the platform for more effective governance and management of the university."

The ratings agency also acknowledged that the culture of Penn State "is now being pushed toward more transparency and openness by university leaders."

"This information is certainly good news and a boost to Penn State's credit profile as tracked by Moody's," said Penn State President Rodney Erickson. "We plan to continue on our path of reforms and enhancements to make Penn State a stronger institution and to remain a leader and an innovator in higher education." 

Last October, Moody's downgraded the University's long-term credit rating from Aa1 to Aa2 with a stable outlook because of the expected financial costs from pending lawsuits related to the sex abuse scandal involving former assistant coach Jerry Sandusky. The ratings move placed Penn State in the same category as the Commonwealth of Pennsylvania.

Some of the recent reforms cited by Moody's in its positive credit outlook report include:

-- The reduction in the number of voting members of the Board of Trustees and revised board functions. The president of the University and the governor of Pennsylvania are now ex officio, non-voting members. There will continue to be six trustees appointed by the governor representing a minority of the board’s members. Penn State’s other stakeholders, including alumni, agricultural societies, business and industry, and students, will continue to be represented by the remaining board members – equaling 30 in total; 
-- Term limits for all trustees, except ex officio members;
-- Board quorum requirements changed to a majority of voting members from 13;
-- A longer wait period for former University employees before serving on the board;
-- A codified process for removal of a trustee;
-- Enhancements to the conflict of interest policy for the board; 

The Moody's release also said the implementation by Penn State of 118 of the 119 recommendations outlined in an investigative report written by an independent consulting firm is also advancing the outlook for the University. Known as the Freeh Report, the independent report written by the law firm of Freeh, Sporkin & Sullivan, it identifies and recommends ways to improve Penn State's responses in the areas of safety and governance. Under the Freeh recommendations, the University has already changed or implemented a number of administrative processes and procedures; hired new safety and compliance personnel; expanded its Office of Human Resources; and a host of other initiatives all focused on enhancing operations at Penn State.

Moody's also noted that Penn State is one of the nation’s largest public universities and "student demand has remained strong, with student deposits for the fall 2013 semester higher than last year."

The "credit positive" isn't an official upgrade but a suggestion of the potential impact of the recent actions.


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Last Updated May 20, 2013