One of the most disturbing things about the Arkansas Legislative Joint Auditing Committee’s investigative report on the financial practices of the University of Arkansas-Fayetteville Division of University Advancement is that the picture could be even worse except for the lack of records.
Why that’s the case remains to be seen. In fact, a Washington County prosecutor has begun an investigation into accusations that UAF Chancellor G. David Gearhart ordered public documents to be destroyed to keep them from the media, auditors and the public.
The investigation was started in part because former UA spokesman John Diamond told the Legislative Joint Auditing Committee in sworn testimony on Sept. 13 that Gearhart had issued such an order in a meeting Jan. 14. Gearhart denies the accusation, saying that Diamond is a "disgruntled former employee."
Diamond was fired Aug. 23, allegedly for insubordination in dealing with Gearhart and his immediate supervisor, Chris Wyrick, who became vice chancellor for advancement after Brad Choate was relieved of his duties earlier this year (and later terminated).
Let’s set aside the question of whether the prosecutor’s investigation will reveal any evidence of wrongdoing. The issue of missing records is a major complaint in the Auditing Committee’s Sept. 10 report, a 48-page document which can be downloaded from the committee’s Web site, www.arklegaudit.gov.
You won’t find the report to be an easy read, but if you stick with it, you will find some interesting facts and assertions.
Here are some key findings:
• Only 20 payment authorization forms were maintained by the university for fiscal years 2010 and 2011. Some 765 such forms were found for fiscal 2012, but they were found in boxes in haphazard order. Those are critical in a review of spending.
• Worksheets and files could not be located detailing reimbursement requests to the UA Foundation (a private nonprofit corporation maintained separately from the university).
• Budget reports prepared for Choate by the budget director, Joy Sharp (who was also relieved of her duties and subsequently fired), could not be found.
• After Sharp was relieved of her Advancement duties, her computer was reissued to another employee without any attempt to copy or maintain its contents.
The auditors also alleged that during their exit conference university Finance and Administration Division officials did not disclose allegations of fraud or suspected fraud in the Advancement Division financial situation. In the management response to the audit, which is included in the committee report, UA officials deny they had knowledge of fraud or suspected fraud.
Bottom line: The investigative report shows the Advancement Division had negative cash balances of $2.14 million for fiscal 2011 and a cumulative $4.19 million by the end of fiscal 2012. That came about, according to the report, because during a four-year period ending June 30, 2012, Advancement revenues remained "relatively constant" while expenditures increased significantly from $7.94 million to $13.23 million.
Keep in mind that one of the main missions of a university advancement division is to raise money from private sources for the institution’s operations. The UA Advancement Division received $4 million annually in operating funds from the UA Foundation — an amount based on annual investment earnings from the private funds, or endowment, held by the foundation.
Apparently to cover the growing deficit for the division, the Treasurer’s Office in both 2011 and 2012 posted accounts receivable amounts of more than $2 million in foundation funds, even though Advancement had already spent the available foundation funding for the year. Those postings were later reversed, the audit report said.
The treasurer also did not disclose two of three loans made by the foundation to the Advancement Division. (The interaction of a public agency with a private foundation complicates public disclosure.)
The investigative report comes down hard on Choate and Sharp, as did the UA system’s internal audit report. And the UA management response to the criticism leveled at the two fired advancement officers agrees with most of those allegations.
That doesn’t explain how such mismanagement could go undetected for as long as four years, and the missing documentation perhaps could have helped there.
Why does all of this matter in the greater sense of what a university does, which is to educate our citizens? After all, as Gearhart said, no tax revenues or private funds were lost.
The answer lies in the fact that at the same time the Division of Advancement was squandering university resources, regardless of source, the UA continued to raise tuition and fees paid by the growing student enrollment. The average cost this year for UA-Fayetteville’s 25,365 students is $7,818.
To be fair, colleges and universities across the state and nation were doing the same thing — at a rate greater than the consumer price index or rate of inflation. The public institutions were doing so, in large part, because of declining state appropriations.
But an ever-increasing staff of administrators and administrative support personnel becomes hard to justify in the light of such mismanagement. As a result, the UA, and probably other Arkansas colleges and universities, will find it more difficult to convince legislators and private donors of the need for more money.
And don’t expect to continue to load the cost on students. Student debt has reached record levels and now negatively affects one in every five households, according to the Pew Research Center. The well is not bottomless.
Roy Ockert is editor emeritus of The Jonesboro Sun. He may be reached by e-mail at email@example.com.