The University of Arkansas at Fayetteville’s chancellor said Friday that he doesn’t expect state auditors to learn anything more than has already been disclosed when they look into $3.37 million in overspending last year by the university’s Advancement Division.

“They overspent their budget,” G. David Gearhart said, referring to the vice chancellor and the associate budget officer who managed finances in the division, which directs fund-raising. “We think we know what happened. We feel pretty confident.”

Gearhart also predicted the Advancement Divisionwill close out fiscal 2013 on June 30 with a deficit again, despite cost-cutting efforts and the transfer of $2 million from other divisions. Gearhart couldn’t predict the amount of the shortfall but expects it to be lower than in fiscal 2012.

In a 90-minute interview Friday about the overspending, the chancellor talked about why he decided Tuesday to call for state auditors’ help, and his surprise and frustration with the attention the deficit has drawn.

“To be honest with you, I didn’t know this was going to be a cause celebre and [the subject of] so many articles,” Gearhart said.

Friday’s interview wasGearhart’s first since early December on the Advancement Division’s financial woes despite several requests from the Arkansas Democrat-Gazette.

Records show the chancellor learned July 13 that the division, which handles fundraising, communications and other outreach, had overspent its roughly $10 million fiscal-2012 budget.

He asked the school’s treasurer, Jean Schook, to look into the problem in July, he said Friday, and he received her report Oct. 17, records show. On the basis of information in the report, Gearhart informed Vice Chancellor Brad Choate and the advancement division’s budget officer, Joy Sharp, in early November that their appointments would not be renewed after June 30. He also removed Choate from administrative and budget duties.

As vice chancellor for university advancement, Choate is one of the university’s highest-paid employees at $348,175. Sharp was paid $91,086 annually as budget officer, but Choate reassigned her last summer after the deficit was discovered and cut her pay to $68,314, according to university officials.

Though audits and financial reports by government agencies are typically public records in Arkansas, the university has declined to release Schook’s report on the funding deficit. The university maintains the document is a personnel record that can’t be disclosed under the Arkansas Freedom of Information Act.

Gearhart repeated that the division hired too many people too quickly - without funds to back up the hires - in preparation for a fundraising campaign.

“The bottom line is they overspent,” Gearhart said of the findings of the four-page report. “It’s easy to do that when you’re hiring people into a [fundraising] campaign environment.” The Advancement Division is funded both by public money and interest from private donations to the University of Arkansas Foundation Inc. Gearhart said Choate and Sharp miscalculated the amount of interest the Advancement Division would receive from its foundation accounts.

The chancellor has said no one spent advancement money inappropriately or for personal gain.

The Advancement Division’s shortfall is the largest Gearhart remembers in his 15-year tenure at the University of Arkansas as chief fundraiser and, starting in 2008, as chancellor, he said Friday.

That it involved two top university employees is perplexing, he acknowledged.

“How could Mr. Choate and Ms. Sharp miscalculate?” Gearhart asked. “I think that’s a good question. I ask that question a lot. The bottom line is, they did.”

Choate and Sharp have declined the newspaper’s interview requests by phone and e-mail since early December. Choate released a short statement Dec. 3 pointing to backto-back, $100 million-plus fundraising years in 2011 and 2012 under his leadership.

MORE ON THE DEFICIT

The chancellor said people should keep in mind that the $3.37 million deficit in the Advancement Division last year applies to just one unit of the university. Overall, the financial picture is rosy, he said.

“We ended up last fiscal year with a $30 million surplus” for the campus as a whole, one of the highest in the history of the university. We have a budget of approximately $800 million.”

“A $3 million deficit is not good,” Gearhart said. “I feel we took action because of what happened. But it’s not of a colossal nature that we can’t handle.

”In working to trim this year’s deficit, Gearhart detailed several efforts, including cutting $750,000 for marketing and advertising.

One ad that didn’t happen was a new video for a halftime spot for broadcast during basketball and football games. “We’re using the same one as last year,” he said.

The division also has cut educational conferences for staff members and instituted a partial hiring freeze.

Though he doesn’t have new deficit projections, the Advancement Division deficit this year “is diminishing,” Gearhart said. “I feel fairly confident we are making headway with that.” STRIVING FOR TRANSPARENCY

Gearhart announced the Advancement Division’s spending problem Dec. 3. That was almost five months after the problem was discovered and hours after an article about it was featured on Arkansas Business’ website.

“We’ve not tried to sweep it under the rug. We’ve had detailed meetings with people on campus” before the news came out, he said. “We told our deans what was happening.”

Asked whether the university would have issued a news release or other public notice if the news hadn’t leaked to media, Gearhart said he probably would not have.

“I’m not sure I have an obligation to call you and your publisher,” he said. “It’s a matter we’re trying to correct and deal with. So no, I don’t think we would put out a press release like this.”

Even so, Gearhart said the university has disclosed hundreds of documents and spent at least “20 hours” answering questions.

“I think we’ve been pretty transparent,” Gearhart said. “The bottom line is they overspent their budget. You keep asking questions. I keep trying to explain it for you.” SECRETING A REPORT

Though the university has released many documents and e-mails, it has declined to disclose the only formal written report into the problem.

Gearhart said Friday that Schook was assigned to look into how the deficit occurred and the managers’ roles.

“I asked her to do an evaluation of their performance and what happened,” Gearhart said Friday. “[I asked her] to tell me what in her opinion happened, so I can make an evaluation and what to do about it ... ”

Gearhart said school officials “feel pretty strongly” they can’t give out the document because it is related tojob performance. They have cited Arkansas Code Annotated 25-19-105(c)(1):

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.”

However, University of Arkansas at Little Rock law professor Robert Steinbuch, who specializes in the Freedom of Information Act, has said that reports into financial matters are typically public in Arkansas. He has questioned whether the chancellor’s use of “an otherwise separate audit document” to make jobperformance decisions would exempt that document from public disclosure.

“Moreover, even under the exception to disclosure the university cites, this document would still be public because the employees’ appointments have not been renewed,” Steinbuch said.

“We’re not going to give it to you because we don’t believe we legally should and can,” Gearhart said to a reporter and editor Friday. “I would suggest to you, if you disagree with that, the appropriate thing to do would be to file a lawsuit against us.”

CALLING FOR AN AUDIT

Though declining to release the university’s report, Gearhart issued a statement Tuesday requesting audits from the Arkansas General Assembly and the University of Arkansas System.

Legislative Auditor Roger Norman said he expects to meet within the next two weeks with internal auditors with the university system to develop a plan. “There’s no need for us to duplicate everything.” Norman said Friday that he’s not sure how long it will take to complete the financial report.

Why did the chancellor call for an audit now?

“Frankly,” Gearhart said Friday, “I woke up one morning after one of Mr. [Paul] Greenberg’s editorials” in the Democrat-Gazette that was critical of the university regarding the Advancement Division’s financial issues. “And I thought ‘What the heck, let them come in and look at everything. ... Let’s let the auditors come in.’”

The chancellor also said he had considered the idea earlier. In November, he talked with University of Arkansas System President Donald Bobbitt and university trustees “about asking our university system auditors to come in. In discussing it with Dr. Bobbitt and members of the board, they didn’t feel it was necessary to do it,” he said.

University trustee Mark Waldrip said he remembers hearing an oral summary of the problem from Gearhart last fall. “I’m satisfied with what we’ve heard,” he said this week. But Waldrip said he’s pleased Gearhart has asked for an audit, anyway.

Gearhart also said Friday he wants auditors to come in “and look at any document,” including Schook’s treasurer’s report.

“Will they find anything? I don’t think so,” the chancellor said.

He acknowledged that auditors might include the treasurer’s report in their audit documents, which will be publicly released.

“If they want to release it, fine,” he said.

Front Section, Pages 1 on 02/09/2013