UA board satisfied on deficit’s handling

Gearhart’s steps fitting, trustees say

Wednesday, February 20, 2013

Senior trustees of the University of Arkansas System board say that a multimillion-dollar deficit at the Fayetteville campus has been a concern but they have been satisfied with how leaders there handled it.

Trustees didn’t request an audit when UA-Fayetteville Chancellor G. David Gearhart told the board about the overspending during a Nov. 2 executive session in Fayetteville, UA board ChairmanMike Akin of Monticello said Tuesday.

“When we were made aware of it, we were more concerned at the time with how it happened, who was involved,” Akin said, recalling the private meeting in which Gearhart outlined the July discovery of a fiscal 2012 deficit in the university’s Advancement Division and hisplans to discipline two employees.

Last fall, an internal financial review by the university’s treasurer found that the two employees didn’t monitor income and spending adequately, and didn’t follow university policy on handling transactions, resulting in the Advancement Division overspending its roughly $10 million budget by more than $3 million in the fiscal year that ended June 30, 2012.

The most recent official deficit figure provided by the Fayetteville campus was $3.37 million, and officials expect that corrective action they’ve taken will result in a smaller deficit for the current fiscal year.

On Feb. 5, Gearhart asked that an audit be performed by the state Legislative Audit Division and the UA System’s internal audit section. Records show that Gearhart considered but decided against asking for an audit last year.

UA board Vice Chairman Jane Rogers of Little Rock said she felt comfortable with thesteps UA has taken to address the situation.

“I think everything is out in the open, and I feel like it’s been handled appropriately,” Rogers,who is next in line for the chairmanship, said Monday.

Akin is the outgoing board chairman. He said he believes that March 1 is when his term expires. In years past, the chairman has sometimes served a little past that date, depending on when the governor appoints a new trustee.

The 10 UA board trustees serve 10-year, rotating terms overseeing more than a dozen universities, community colleges and other educational institutions around the state. Each trustee serves his final year as chairman.

Akin said that in his time on the board overseeing the campuses, “there were things that pop up from time to time, but nothing of this magnitude.”

Trustee Ben Hyneman of Jonesboro, the board’s assistantsecretary, said Monday that when Gearhart apprised the board of the issue in November, “the issue was brought as a personnel matter.”

“As part of that, we became aware of the deficit situation,” he said, adding that it was the first time he and the otherslearned of the problem.

“Certainly nobody was happy about that,” Hyneman said. “It was alarming to all of us.”Trustees listened, then asked questions. Gearhart explained it well, he said.

“Obviously he was very distressed about it,” Hyneman said of the chancellor.

After that trustees meeting, Gearhart disciplined the employees he determined to be responsible for the deficit.

He relieved Vice Chancellor for Advancement Brad Choate of his administrative duties and reassigned his budget officer, Joy Sharp. Choate continues to work at UA-Fayetteville at his same $348,175 salary and title, but Gearhart said his appointment will end June 30.

Trustees who didn’t return messages or couldn’t be reached for comment by reporters Monday and Tuesday were board Secretary Jim von Gremp of Rogers, Sam Hilburn of North Little Rock, David Pryor of Little Rock, Mark Waldrip of Moro, John Goodson of Texarkana and Dr. Stephen Broughton of Pine Bluff.

John Tyson of Springdale, who resigned as a trustee this month, also didn’t return messages from reporters Mondayand Tuesday regarding the deficit and more specifics on his decision to leave. Tyson was the only trustee absent during the Nov. 2 executive session in which the overspending matter was discussed.

Part of documents from a financial inquiry into the deficit that the university released Friday revealed a misappropriated gift of $1.36 million, part ofa $2.5 million lead gift, that the Tyson family and a Tyson foundation donated to the university for a child development center named for John Tyson’s mother, Jean. Records show that the gift was later moved to the proper account.

In his resignation letter to the governor this month, Tyson didn’t list the gift among his reasons for leaving his trustee position before his 10 years are up.

Akin said the campus deficithas troubled trustees, but they are looking ahead.

“Well, the whole thing was a concern, and everybody was disappointed,” he said.

He thinks Gearhart’s job is safe, he added.

“Well, yes, yes, I think so.

That’s my opinion,” he said, adding that he sensed that there was a consensus on that.

“There’s no undercurrent to use this as a ploy or any means to make his job suspect.”

He could tell that Gearhart and his top staff “were as upset about it as anybody,” he said.

“We felt like the information we were given was correct, and that we still have no reason to doubt that,” Akin said. “We were more concerned with why and how it happened.

“The explanation Dr. Gearhart gave at the time was satisfactory.”

Asked whether he now thought an audit was needed, Akin replied: “Well, probably, just in the vein of transparency.

“So it’s probably a wise move that we’re having one done,” he said.

“It’s just an unfortunate situation,” he said, “and they just need to put the controls in place to make sure it doesn’t happen again.” Information for this article was contributed by Evie Blad of the Arkansas Democrat-Gazette.

Front Section, Pages 1 on 02/20/2013