Errors, not crime

Tuesday, December 17, 2013

Following two audits and months of investigation by prosecutors, I’m finally able to offer informed opinion about that $4 million budget shortfall in the University of Arkansas at Fayetteville’s Advancement Division.

The factual cause of that exhaustively publicized shortfall proved to be exactly what the university said it was all along: budgeting errors made under the direction of former Advancement Division head Brad Choate and his budget director, Joy Sharp. Both lost their jobs as a result.

The Washington County prosecutor’s office found no sign of criminal activity or abuse of pertinent public records. As in zero.

Earlier this year the state’s Division of Legislative Audit had referred budget-related matters to the Washington County prosecutor for examination. The first issue involved a double payment for an advancement staff event wherein Choate personally received a check for $2,052 to cover expenses after the vendor for that event also had been directly paid.

Deputy prosecutors David Bercaw and Mieka Hatcher determined it appeared the duplicate payment was “an error given that one payment went to the vendor [and] one payment went to Mr. Choate.” Choate had reimbursed the university.

The second issue was whether Sharp had incorrectly coded a restricted deposit into an unrestricted account, as she’d claimed. Said Bercaw: “We are not persuaded that this transaction was an intentional effort to cover the deficit in the Advancement Division or any type of fraud. … It should also be noted that the funds remained in the university’s bank account and were never out of the custody of the Treasurer’s Office. The effect … was a classification of restricted funds as unrestricted funds. The funds were not spent while classified as unrestricted funds.”

As to item three, after conducting at least 17 interviews, Bercaw examined the fact that the two separate audits requested by Chancellor David Gearhart had stated the university’s method of posting accounts receivable could partially obscure deficits in the school’s financial statements. “We can think of no reason that a cost center could not show a deficit balance at year end, if in fact, that cost center was running at a deficit. This is one of the things that you want your accounting system to tell you. … That is a matter for Legislative Audit, University Internal Audit and the University to work out.”

University officials say all auditing recommendations already have been implemented.

Then there was the question of contradictory testimony to a legislative committee over the alleged destruction of budget-related FOI-able records.

This was the one where former university employee John Diamond (dismissed from his position for other reasons) said Gearhart ordered some budget-related documents destroyed,which would constitute tampering with records and potential Freedom of Information Act violations.

Bercaw reported: “The University provided us with a notebook containing all of the relevant FOIA requests … and the University’s responses to those requests. After reviewing these documents, it appeared to us that the University was making a serious effort to be responsive and timely within the letter of the Freedom of Information Act.”

The university says it even provided the prosecutor with a copy of the very document Mr. Diamond alleged had been destroyed.

On a somewhat related matter concerning the university acting to save money by clearing and shredding outdated documents generated years ago by the Advancement Division in six rented storage units, the prosecutor found nothing amiss.

The Legislative Joint Auditing Committee last Friday accepted the prosecutor’s findings in lieu of yet another hearing on this matter where Choate had planned to make his own allegations.

The committee’s adjournment was followed by a news story in which Choate, who already had spoken with the prosecutor about his responsibilities in his department’s budget woes, basically faulted the university’s inadequate financial management controls, questionable accounting practices, Sharp and former administrative colleagues (including Gearhart) for contributing to the errors. He apparently contended he hadn’t had the chance to present his side of the failures under his management.

Asked about Choate’s comments (made despite a mutual nondisparagement agreement with the university), Mark Rushing, director of the university’s strategic communications, said, “Mr. Choate had every opportunity, even being interviewed by the prosecuting attorney, to communicate everything now being attributed to him. Yet the prosecutor felt no need to even bring up that information. I assume that’s because it’s the type of behind-the-scenes finger-pointing that often happens when an employee is terminated for poor job performance.”

Gearhart added: “Most of what Brad’s quoted as saying isn’t true or taken out of context. He’s never taken responsibility for the deficit on his watch. He’s also never explained or apologized to me, the Board of Trustees, his staff, anyone in our state for his lack of fiscal oversight.”

Thanks, David Bercaw, for finally clearing away months of smoke to disclose the actual facts of these budgetary mistakes made on the watch of former UA administrator Brad Choate.

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Mike Masterson’s column appears regularly in the Arkansas Democrat-Gazette. Email him at [email protected]. Read his blog at mikemastersonsmessenger.com.

Editorial, Pages 15 on 12/17/2013