LITTLE ROCK — The Arkansas Arts Center ended the fiscal year June 30 with an operating loss of about $2 million, according to a draft financial statement distributed Friday.
The loss included $400,000 in improperly accounted for expenses that center officials say were uncovered as part of an in depth review of the center’s finances conducted after management changes and financial problems earlier this year at the museum.
The financial statement, which was prepared in advance of an annual audit scheduled to begin Monday, also showed that the center had paid little on lines of credit, totaling more than $2 million, from the museum’s foundation.
The city-owned center is governed by a 30-member board of trustees, while the nonprofit Arkansas Arts Center Foundation, with a 13-member board, raises funds and provides financial support for the center’s programs and art.
The center also ended the year with more than $600,000 in cash on hand, according to the statement, which center officials say was preliminary and subject to change. That figure provided a bright contrast to the cash available at the end of the last fiscal year,which totaled $25,281.
Bob Birch, a bank executive who is on the center’s board of trustees and serves as its spokesman, termed the cash on hand “significant.”
“You need to have cash to operate,” he said. “The Arts Center has cash to operate.”
The cash puts the center in a “strong position moving forward,” said Ellen Vangilder, the board’s treasurer.
The center staff also reported a strong windup to the money-losing “World of the Pharaohs” exhibit, as well as encouraging development efforts and robust sales for its children’s theater programs, long popular with schools. The heartening developments, for the moment, halted discussion of potential layoffs, furloughs and decreases in retirement plan contributions.
“We are all encouraged by where we are at this point,” Birch said. “It is premature to say we are going to hit revenue, but we are off to a great start.”
Last month the center trustees voted to accept a provisional $6.4 million budget for fiscal 2011, which began July 1. The budget calls for $2.55 million in donations in the fiscal year - a $1 million increase from 2010. The 2011 budget includes payments of more than $200,000 toward the $2.3 million the museum owes the Arkansas Arts Center Foundation. The foundation, which holds title to the museum’s art and provides much of its funding, extended three emergency lines of credit during the past year.
Birch said he would recommend that any cash left after expenses go toward paying down the lines of credit. But with the new fiscal year just 3 weeks old, a decision on that may not come before October, when the audit will have been completed and the board of trustees holds its next meeting, he said.
The draft financial statement was released Friday at a meeting of the financial and executive committees of the Arts Center’s board of trustees. Joe Lampo, the center’s interim director, welcomed the document, which he said represents a solid financial foundation and would allow the staff to devote its full attention to the planning and executing the Arts Center programs.
Disappointing attendance at the “World of the Pharaohs”, which was on display from Sept. 25 through July 5, led the museum to borrow money from its foundation and reduce its hours. In April, director Nan Plummer resigned, saying she wanted to pursue “new opportunities.”
More recently, an internal review of finances at the center found that its former chief financial officer used his museum-issued credit card for personal expenses. Records relating to those findings have been submitted to the Little Rock Police Department.
Birch said the purchases by former Chief Financial Officer Rocky Nickles, who was fired in January, were discovered during a review that began earlier this year in response to board members’ questions about the museum’s finances. The review began after Nickles’ firing for “performance” problems on Jan. 13, but the firing wasn’t related to the purchases, which board members didn’t know about at the time, Birch said.
At Friday’s meeting, center officials said the improperly accounted for expenses were a separate matter from the allegations involving Nickles’ use of the credit card. The review found routine maintenance expenses, for instance, credited to accounts intended for asset appreciation when, in fact, the maintenance wouldn’t have appreciably extended the life of the asset, said Laine Harber, the center’s chief financial officer who began work in April.
Heather Haywood, the center’s deputy director and marketing director, said the biggest day of the “World of the Pharaohs” exhibit was its last, July 5, when 1,258 people toured the it.
The center store and a store set up for the exhibit did a combined $600,000 in sales for the fiscal year, double what the center store typically does, center officials said.
More than 107,000 people toured the exhibit during its run, which started in September. Attendance was a far cry from the 300,000 center officials initially predicted, but Birch said six months ago that he would’ve been surprised to see attendance surpass 100,000.
The finance and executive committees on Friday also approved paying $24,200 to the Little Rock auditing firm of Thomas & Thomas LLP, which first did an audit for the Arts Center in 2001, according to the center’s controller,Shannon Speer. The figure represented a 3 percent increase over the previous year, Vangilder said.
Birch suggested the board look at replacing the auditing firm, if only to give the center’s finances a fresh perspective, but Vangilder said it wouldn’t be prudent to replace the auditors in the same year key management is replaced.
Front Section, Pages 1 on 07/24/2010