UA chief invites auditing by state

— The University of Arkansas at Fayetteville’s chancellor has called for independent audits by two state agencies into $3.37 million in overspending last year by the school’s Advancement Division.

In a statement Tuesday, Chancellor G. David Gearhart also maintained that the school’s own financial review of the problem, normally a public record in Arkansas,will continue to be kept private.

“The university has been transparent and accountable about this situation,” Gearhart said in the statement. “I believe these audits will demonstrate that performance while still respecting the legal protections afforded public employees under Arkansas law.”

Gearhart disciplined a university vice chancellor and his budget officer in connection with the overspending that was discovered July 6. A university e-mail that day shows the University of Arkansas Foundation delayed a funding-transfer request to the Advancement Division a few days earlier “due to a lack of availability offunds.”

The Arkansas Democrat-Gazette reported Saturday that university officials had declined several requests for the school’s financial review, written by UA treasurer Jean Schook. A certified public accountant and former auditor for the state, Schook examined the Advancement Division’s overspending of its roughly $10 million budget.

State audit specialists told the newspaper they make all finished financial reviews public, in keeping with state public-records laws. A University of Arkansas at Little Rock law professor, Robert Steinbuch, said financial reports are subject to disclosure under state law.

Gearhart could not take questions Tuesday afternoon, said University of Arkansas spokesman John Diamond.

The chancellor’s statement Tuesday invited audits from the Arkansas General Assembly and the University of Arkansas System, which fund and help govern the state’s largest university.

University trustee Mark Waldrip of Moro welcomed Gearhart’s request.

“I think under the circumstances, it is probably a good thing,” Waldrip said. “The more information we can gather, the better position we’ll be in to evaluate how effectively the matter has been dealt with.”

Legislative auditor Roger Norman said he expects the Legislative Audit Division to take up the matter. Norman said he doesn’t know how long it will take for his auditors to perform a financial review of the Advancement Division’s overspending. He estimated an auditor might spend two weeks gathering documents, interviewing and writing a report.

But Norman said it is likely to be several months before an auditor can be freed to undertake the project.

University of Arkansas System officials were not available for interviews Tuesday afternoon.

Diamond said Gearhart made the request now to “underscore his desire to be transparent and accountable.”

The newspaper called and e-mailed university trustees and key legislators Monday and Tuesday asking whether they thought an independent audit might be needed. None had responded before Gearhart’s call Tuesday afternoon for the independent audits.

Diamond said Tuesday that no one had asked Gearhart to request the outside audits.

The Advancement Division’s spending deficit was discovered in early July, days after fiscal 2012 ended on June 30. The division oversees fundraising, alumni affairs, communications and other efforts.

E-mails and other documents obtained by the newspaper show the university first thought the overspending totaled about $500,000. Schook’s examination, which began July 20 and was delivered to Gearhart on Oct. 17, revealed the problem was much worse.

Gearhart briefed UA trustees on the matter Nov. 2 in an executive session during a trustees meeting at the Fayetteville campus.

The deficit became public about a month later when Arkansas Business published an article Dec. 3. Gearhart issued a statement later the same day that said the deficit was more than $3 million. Gearhart also said he had demoted then-budget officer Joy Sharp and cut her pay from $91,086 to $68,314 - actions that took place in late August. He also announced he had removed Vice Chancellor for Advancement Brad Choate from his administrative responsibilities “around Nov. 9,” according to interviews. But he let Choate keep his title and $348,175 annual salary.

The chancellor said he won’t renew Choate’s or Sharp’s appointments after June 30.

Choate could not be reached for questions lastweek and Sharp declined to be interviewed.

Also in December, Gearhart said the university’s own financial review of the problem found no inappropriate spending or misuse of funds, though he was critical of how the budget was managed.

UA officials have declined several requests to release the university’s financial report into what happened, which they said was performed by Schook.

Tuesday, Gearhart said he used Schook’s examination in making personnel decisions, a reason university officials said they believe it is exempt from public disclosure.

“As I explained previously,” Gearhart said in his statement, “the university’s treasurer ... reviewed the advancement division’s expenditures and found no misuse or misappropriation of university funds. However, she raised concerns regarding the job performance or lack of performance by individuals who had primary responsibility for the division’s finances. The treasurer documented thoseissues and job-performance concerns last fall.

“In making personnel decisions relating to this matter, I relied on the treasurer’s assessment of their performance,” Gearhart said. “Since that document is a formal assessment of specific individuals’ job performance, Arkansas state law prohibits the university from releasing it.”

Gearhart said the university will share Schook’s review with auditors.

Steinbuch applauded Gearhart’s audit requests. “I think these are positive steps toward openness in government,” said Steinbuch, whose specialties include freedom of information law.

But he questioned whether the chancellor’s use of “an otherwise separate audit document” to make job-performance decisions would exempt that document from public disclosure.

Arkansas law opens public documents to residents. It includes exemptions, such as Arkansas Code Annotated 25-19-105(c)(1), which the university cites in withholding Schook’s report.

That statute says “all employee evaluation or job performance records ... shall be open to public inspection only upon final administrative resolution of any suspension or termination proceeding ...”

Diamond also wrote Tuesday that the Arkansas attorney general’s office has issued opinions that have identified “a variety of records” falling within the meaning of a “job performance record.” Those include: “[W]ritten reprimands and letters of caution, documents on which a recommendation for dismissal was based, a request for a grievance hearing that contained the employee’s rebuttal of the reasons advanced forhis termination ...” Diamond wrote.

Diamond has said the university will cover the Advancement Division deficit that continued into this fiscal year by transferring $2 million from other campus units and cutting costs. The 2013 fiscal year ends June 30.

Front Section, Pages 1 on 02/06/2013

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