Legislative auditors have referred three items they found while investigating University of Arkansas at Fayetteville finances to the Washington County prosecutor for further scrutiny.
These included a duplicate reimbursement by the former chief fundraiser, a partial payment on a donor gift that was deposited in the wrong kind of account and improper postings by the university treasurer’s office, according to a referral letter released Wednesday.
On Tuesday, the state’s Legislative Audit Division released its audit of the university’s financially troubled Advancement Division, determining that its fiscal 2012 deficit totaled $4.19 million, more than the $3.37 million that university officials had cited previously.
Washington County Prosecuting Attorney John Threet said letters like the one he received Monday are often forwarded when further investigation by his office might be warranted.
“Sometimes in the letters, they will put down the statute numbers of what it is they’re looking under,” Threet said. “But they make it very clear to us that they’re not recommending anything.”
Of the three findings the letter highlights, one was a deposit of roughly $1.35 million in restricted funds that the Advancement Division’s former budget director, Joy Sharp, made in an unrestricted account in May 2012. Another was a pair of postings the university treasurer’s office listed as “accounts receivables,” which “partially obscured the deficits in the financial statements,” according to the letter.
The third was a September 2011 expense reimbursement for $2,052 that former advancement chief Brad Choate filed that duplicated an amount paid directly to a vendor a month before.
“The university’s treasurer discovered this duplicate payment and reported it to [Choate, then the vice chancellor for the Advancement Division] in June 2012,” the letter says, quoting the audit. “Subsequently, [Choate] reimbursed Advancement $2,052 in October 2012.”
Choate, reached Wednesday by telephone, said the reimbursement issue was an uncharacteristic mistake that he and others didn’t catch immediately. He was surprised the audit made a point of that error in the midst of finding so many bigger, “systemic” problems with university finances.
“Here’s this big audit,” Choate said. “Over five years I had thousands and thousands and thousands of reimbursements, and only one error like this. It was easily rectified.”
Choate also took issue with a part of the audit where it appeared that university administrators had defended him, saying they found $7,700 in expense reimbursements he could have filed, but didn’t.
“Ultimately the university owed me $7,000,” he said. “Some have tried to spin it that I wasn’t paying attention to my expenses.”
Choate said the reimbursement was for country club dues that the university paid on his behalf as its chief fundraiser, not a reimbursement for which he had to file expense forms.
“I was told those dollars were being processed when, in fact, they had not been processed,” Choate said.
Monday’s referral letter, citing Arkansas Code 10-4-419(c)(1), said the legislative auditors “shall notify and cooperate with the appropriate prosecuting attorney on all matters that appear to involve a criminal offense.” It then cites A.C.A. 5-54-121(a), involving tampering with a public record.
“The budget director, Joy Sharp, processed transactions in the University’s BASIS accounting system that included a deposit of restricted funds of $1.35 million on May 12, 2012, that the budget director incorrectly coded to the unrestricted account,” the referral letter read.
The university’s Oct. 19 treasurer’s report had found that Sharp appeared to have intentionally “disguised a prior year account receivable balance that had not been cleared” by depositing the restricted donation into the unrestricted account along with delinquent accounts receivable. Charitable gifts given for a particular use are kept in restricted accounts, whereas unrestricted accounts are used for money that can be spent at the university’s discretion.
According to earlier documents that the university released under the Arkansas Freedom of Information Act, Sharp said she’d simply made a mistake with the deposit. She could not be reached for comment Wednesday.
The Arkansas Democrat-Gazette has previously reported that the incorrect deposit involved a $1.3 million gift from the Tyson family of Springdale that was intended for a specific program.
According to an invoice, the $1,355,055.64 was for the Jean Tyson Child Development Study Center for which a Tyson foundation and the Tyson family donated a total of $2.5 million. When the mistake was discovered in July 2012, university finance administrators moved the money to the proper account.
John Tyson, a former member of the UA board of trustees, offered no comment Wednesday about the inclusion of the deposit problem in the letter to the prosecutor. But John Tyson, responding through a spokesman, Tyson Foods consultant Archie Schaffer, said he had given “no consideration” to pressing charges in regards to the deposit issue.
The third item Monday’s letter emphasized was the UA treasurer’s office’s posting of a pair of Advancement Division accounts receivables “which partially obscured the deficits in the financial statements.”
One was for $2,091,705 on June 30, 2011, and the other was for $2,451,360 on June 30, 2012. June 30 is the last day of the state’s fiscal year and the university’s budget year.
In an official response to the audit findings, university officials said the recordings of the receivables were based on the university’s interpretation of Governmental Accounting and Financial Reporting Standards. Those recordings were not done “as an effort to obscure a deficit balance, and we disagree that it is our typical practice to eliminate deficits this way.”
But the response said the UA would defer to state auditors and eliminate such postings.
Threet said Tuesday that he would assign Deputy Prosecuting Attorney Dave Bercaw to examine whether the referrals in the letter warrant further action. But Threet clarified Wednesday that he will make the final decision about any criminal charges. He doesn’t plan to recuse from the case.
“I’m ultimately responsible, but I’m going to really rely on Mr. Bercaw’s opinion,” said Threet, adding that he recognizes that people wonder about his family connections to the university.
His mother-in-law married former UA Athletic Director Frank Broyles after Threet’s father-in-law died a few years back.
A spokesman for the Legislative Audit Division said any clarification his office might make on the meaning of the letter will have to wait until a scheduled legislative meeting about the Advancement Division audit on Friday.
“Cannot comment till after Friday’s meeting,” Roger Norman wrote Wednesday in an email.
Front Section, Pages 1 on 09/12/2013