UA unit’s deficit on trustees’ plate

System board plans to look at audit files, related issues

Sunday, January 12, 2014

The long-running overspending drama involving the University of Arkansas at Fayetteville’s fundraising division and how the school’s top officials responded to it, soon will land in the laps of the decision-makers - the university’s board of trustees.

The 10-member board plans to address a state auditors’ report on the Division of University Advancement deficit at its Jan. 23-24 meeting at the University of Arkansas for Medical Sciences in Little Rock, according to a UA System spokesman.

The meeting comes after more than a year of debate, reports from auditors and prosecutors, and legislative hearings. At issue have been questions of improper accounting and financial management, and accusations of circumventing the state’s Freedom of Information Act regarding public records.

Some legislators say they would like to see more investigation. Others have said it’s time for trustees to decide if leaders of the state’s largest university, including Chancellor G. David Gearhart, have enough public confidence to go forward successfully.

“There’s a lot of facts, a lot of disputed facts,” Senate Minority Leader Keith Ingram, D-West Memphis, said in an interview last week. Legislators “could continue to hold hearings and bring in more and more people. But … I think it’s time now for the board to have their say.”

During a five-hour joint legislative committee meeting last week, Ingram asked one of the day’s most pointed questions of Gearhart: “Do you think that you have the [public] confidence to continue to lead with all the things that have gone on?”

“Yes sir, I do,” Gearhart replied at Tuesday’s meeting of the Joint Performance Review Committee, which consists of 10 senators and 20 representatives.

UA System President Donald Bobbitt expressed support in a statement Friday: “Dr. Gearhart has pledged to correct the problems that led to this deficit, and I’m confident in his ability to do so. There are many lessons to be learned from this, and I believe the university will be stronger as a result.”

Trustees’ chairman Jane Rogers of Little Rock said in an email Friday: “I know my colleagues have followed this issue closely and will have questions regarding the administration’s efforts to implement the recommendations and move forward. The board has already voiced its commitment to seeing that all of the recommendations are put in place. I think it would be best for us to reserve further comments on this until the meeting.”

The university’s Advancement Division, which oversees fundraising and public relations, accumulated a $4.2 million spending deficit through fiscal 2011 and 2012. The money was spent on such things as staff hiring for the fundraising division, and no theft occurred, school officials and prosecutors have said.

Since announcing the overspending on Dec. 3, 2012, Gearhart and later auditors blamed former fundraising chief Brad Choate for lack of budget oversight, which Choate disputes. They faulted the unit’s budget director Joy Sharp for incorrect accounting and budgeting. Sharp has admitted that she made mistakes because of overwork. Both left the university June 30.

State auditors, in a September report, agreed with those findings but also questioned the actions of university higher-ups.

Among the audit findings were improper accounting entries by university treasurer Jean Schook’s office, which “partially obscured the deficits in the financial statements.”

Auditors also faulted the school’s top financial officer, Don Pederson, for failing to disclose information about the deficit at a routine audit conference on Oct. 25, 2012. Schook and Pederson are the university’s top finance officers.

Possible perjury issues emerged at a Sept. 13 Legislative Joint Auditing Committee hearing, where Gearhart and former university spokesman John Diamond provided conflicting testimony under oath. Diamond accused Gearhart of ordering staff members to destroy documents to keep deficit information out of public view. Gearhart denies that.

A December report from Washington County prosecutors found no evidence of crime in these issues, though prosecutors noted they had no jurisdiction regarding the Diamond-Gearhart testimony, because it occurred in Little Rock. Pulaski County Prosecuting Attorney Larry Jegley has been asked to review the conflicting testimony for possible perjury.

Legislative committees have held three hearings on the deficit and related matters since September, and could hold more.

“We have not decided at this point,” said Rep. Terry Rice, R-Waldron, who is co-chairman of the Joint Performance Review Committee.

Several legislators contacted last week differed in their views on how the controversies may affect UA-Fayetteville’s future.

Sen. Jonathan Dismang, R-Searcy, said Friday that he was initially bothered by state auditors’ findings concerning accounting but thinks the university has made needed changes.

“Yes, it was troubling to begin with. But they’ve accepted the audit findings. They’re making the changes, and they’re moving forward differently. … I’m confident this won’t arise again,” Dismang said.

He also said he’s leaving related issues, like accusations of violations of state public-records law, up to other legislators.

“I do have confidence in the university itself,” Dismang said. “I would like some better headlines for the university in the paper.”

Rep. Kim Hammer, R-Benton, said he’ll now ask more questions of college officials across the state when they ask for money. He called the deficit saga “blatant mismanagement.”

“I think the U of A experience is going to cause me as a legislator to look at all institutions of higher learning and their requests for money and put them under tighter scrutiny,” Hammer said.

“I think Dr. Gearhart said in criticism of Mr. Choate that [Choate’s] inability to manage his division resulted in the overage,” Hammer said. “If you’re going to criticize Mr. Choate, then you have to criticize Gearhart equally. There’s enough blame to go around.”

Hammer is co-chairman of the Legislative Joint Auditing Committee, which adopted the state auditors’ report, and questioned current and former university officials in September.

Through a spokesman, Gearhart said Friday that he’s looking forward to the trustees’ meeting this month and answering “any questions that the board of trustees may have on any topic.”

The trustees are appointed by the governor to staggered 10-year terms. They oversee the university system, including UA-Fayetteville.

Bobbitt, as UA System president, works directly for them.

Other than board chairman Rogers, only one of nine other trustees returned calls or emails Thursday and Friday from the Arkansas Democrat-Gazette.

In preparing for the Jan. 23-24 meeting, C.C. “Cliff” Gibson III of Monticello said he suspects “all the trustees have been gathering information from many sources, primarily from the media.”

Asked if the board will look at all issues surrounding the deficit controversy or concentrate strictly on the state auditors’ report, Gibson said: “Certainly all those things are fair game. But to predict now what will happen on something that’s two weeks away and a moving target is a little difficult to do.”

Gibson also said he was disturbed by a Jan. 6 Democrat-Gazette article that said five university trustees turned out for a Dec. 13 legislative hearing “to show their support” for Gearhart.

The only trustee who spoke, John Goodson, talked about Gearhart’s achievements, such as campus expansion and motivated students, and described the chancellor’s tenure as progressive.

Gibson said he was present at the hearing only to hear testimony.

“I felt like it was my duty as a trustee to be there and hear that. … I came for that purpose, not to support anyone.”

About the university’s fundraising division deficit and related issues, the Monticello lawyer said it’s “extraordinarily complex. … Certainly the legislative prerogative to look into the matter is something everybody should recognize and respect.”

“We’re going to be looking at it, too,” he said of trustees, “because that’s our charge.”

Front Section, Pages 1 on 01/12/2014