College facing growing pains

Issue is cash flow, Hill says

“Does this look like a college that is having financial problems?” Arkansas Baptist College President Fitz Hill asked while showing off the nearly finished First Security Community Union during a tour of the Little Rock campus.
“Does this look like a college that is having financial problems?” Arkansas Baptist College President Fitz Hill asked while showing off the nearly finished First Security Community Union during a tour of the Little Rock campus.

The pants hem on Arkansas Baptist College President Fitz Hill’s neatly pressed, navy-blue suit lifted to reveal pinstriped socks tucked into black loafers as he bounded the stairs two steps at a time in the college’s new First Security Community Union.

On the second floor of the union - which Hill said will open next month - he pointed to the banks of Internet connection ports along the walls. He laid his palm flat in front of him to demonstrate the height of the yet to-be-delivered computer tables.

“Some students like to stand while they’re working,” he said, then walked to the windowsill. He swiped the sawdust off the ledge and leaned forward, pointing to the view of the 1,000-student campus. The silver cross on his lapel glinted in the sunlight.

The third floor showed more of the same: Internet connections, new furniture scattered throughout, meeting rooms with shiny white-boards and modern light fixtures dangling from the ceiling.

Hill smiled broadly and his eyes sparkled as he pointed to the nameplate on the door leading to a row of third-floor offices: Scott Ford Center for Entrepreneurship and Community Development. The naming was in honor of Ford, the former chief executive officer of Alltel Corp. who donated $2.5 million to the school in 2011.

But the first floor is where Hill becomes the most animated. He leaned over the curved glass covering stainless steel serving pans and pointed to the industrial equipment behind it. It is the future home of the college’s Chinese restaurant, Chopstix.

Hill waved a hand to the middle of the room where a coffee bar - complete with a pastry display case and bar stools - stands, then walked to the doorway beyond the coffee bar where a simple label says “bookstore.”

Dozens of small white light fixtures dangled from the empty room’s ceiling.

Hill extended his arm and swung an upturned palm around the bookstore then pivoted to take in the whole construction project.

“Does this look like a college that is having financial problems?” Hill said.

CASH FLOW, NOT FINANCIAL

Arkansas Baptist College has been hit hard in the past couple of years with what Hill refers to as “cash flow” problems, not financial ones.

Students reported delays in receiving financial-aid checks from the college; employees have gone several weeks without paychecks; and vendors have been left unpaid with at least one suing the college in Pulaski County Circuit Court recently.

Last week, the Higher Learning Commission issued a warning to the college that its accreditation was in jeopardy.

The commission - which accredits the historically black private college in Little Rock - gave Arkansas Baptist College until Aug. 18 to provide evidence that it has addressed concerns identified in a recent three-month review.

A forensic audit - to be conducted by a firm selected by the commission and working under its direction - was ordered by the commission to address allegations of “ethical and financial improprieties at the college.”

When Hill took over as the college’s president in 2006, the campus had fewer than 200 students and 45 employees. Revenue for 2006 was just over $4 million. He immediately began working to build up the college and strengthen it financially.

The college’s Internal Revenue Service Form 990 for 2012 - which covers the period from July 1, 2011, to June 30, 2012 - showed revenue at nearly $26 million, a 550 percent increase in six years.

The revenue increase between 2006 and 2012 was largely due to the college’s enrollment growth, which increased the amount of financial aid. Large private donations as well as the receipt of about $22 million in U.S. Treasury Department new market tax credits in 2011 financed the college’s nearly $30 million in new construction projects.

The new buildings increased the college’s assets and bolstered the bottom line. Hill said the college’s debt ratio is still solid and in compliance with the U.S. Department of Education requirements.

Auxiliary enterprises - operations that generate income such as student housing - grew from just over $300,000 in 2006 to just over $4.1 million in 2012.

It’s the cash flow that is the issue, he said.

It all began, Hill said, when the U.S. Department of Education placed the college on Heightened Cash Monitoring 2 status last year because of repeated processing errors by the college’s financial-aid office. The department moved the college from the typical “advance pay” of federal student aid to only receiving the funds after the college had made the disbursements to the student or parent borrower. The college is also now required to submit manual reports versus electronic processing.

The college had to resort to bank loans to pay its students.

Shane Broadway, director of the Arkansas Department of Higher Education, said the problems for Arkansas Baptist College began well before its change in student-aid processing status.

“The change came with the summer Pell,” Broadway said.

About 76 percent of Arkansas Baptist College students relied on the government-funded Pell Grant program - which assists undergraduates of low-income families. In February 2011, the national program absorbed a $5.7 billion cut, which pared the maximum individual student award amount and made about 1.7 million students ineligible under revised award guidelines.

“Changes that can occur at a federal level will impact them more than a typical college,” Broadway said.

Broadway became involved last fall - even though the Higher Education Department does not have regulatory power over the private college - because the state agency received numerous calls from students who had not received financial-aid checks from Arkansas Baptist College.

Hill - a former college football coach - said that he has had a learning curve when it comes to college administration and that sometimes the financial aspect of it is “like speaking a foreign language.”

“I’m not an administrator. I’ve never been a college dean or anything like that,” Hill said. “But what I realized is that in life you’re going to be known for three things: the problems you solve, the ones you create and the ones you do nothing about.”

PROBLEMS CREATED

While the revenue at Arkansas Baptist College is at levels never before seen in its 130-year history, the same can be said for its expenses.

In 2006 when Hill took the reins, the college’s expenses were just under $4 million. The organization’s 2012 IRS Form 990 shows expenses to be over $20 million.

The college’s tax returns show that expenditures for travel and conferences grew from $72,825 in 2006 to $614,393 in 2012.

In an email Saturday, Hill said the increase in expenses is due to faculty and staff attendance at conferences for “accreditation and professional development.” The travel expenditures, he said, are largely from transporting the school’s athletic teams, such as the football program that he started, as well as “aggressive student recruitment program and fundraising efforts.” In the past, Hill added, donors paid for travel.

According to the tax returns, the salaries for Arkansas Baptist College grew by 533 percent from more than $1.2 million in 2006 when Hill took the helm to more than $7.6 million in 2012.

Hill’s salary has grown from $129,000 in 2006 to $241,051 in 2012. In comparison, David Burks, president of Harding University - a 6,700-student private college in Searcy and the largest private university in Arkansas - earned a salary of $270,605 in 2012, according to its Form 990.

Ouachita Baptist University - a private college in Arkadelphia with just over 1,500 students and 1,257 employees - paid its president, Rex Horne, $182,246, according to its Form 990 filing for 2013.

Hill said Tuesday that no staff or faculty members have been laid off because of the college’s cash-flow problem. He added that some positions have not been filled after resignations.

The institution’s Form 990 reports show that the college had 273 employees on its 2011 returns and only 195 on its 2012 returns.

The Higher Learning Commission - in three-page letter to Hill dated March 10 - cited the college for failing to enforce its own polices on “self-dealing,” a term that refers to school employees or board members who benefit financially from college through personal financial connections or business ventures.

While specific employees or businesses were not mentioned in the report, the Arkansas secretary of state’s office lists Hill as owner of the African Bean Co. and registered agent for Buffalo Development.

Hill said that the African Bean Co. - which sells the coffee brand Roots Java in retail outlets around the nation, including Dillard’s Inc. stores - is not benefiting from his position at the college.

“Roots Java and African Bean Company products are not sold anywhere on the ABC campus or its affiliated businesses,” he wrote in an email Saturday.

A 2011 media release from Arkansas Baptist College said the African Bean Co. was partnering with the college and Roots Java would be sold at the school. Hill said Tuesday that the news release was “not accurate.”

On Wednesday, Hill gave a Democrat-Gazette reporter a glossy, 56-page publication, produced by the college, titled “Putting the Neighbor Back in the Hood.” In architectural renderings on two pages of the publication, a banner with the Roots Java logo hangs from the facade of the First Security Community Union.

Hill also said Wednesday that the African Bean Co. is an “Oklahoma company” run by Clifton Taulbert and that he has no input in its day-to-day operations.

The Oklahoma secretary of state’s corporate filings for the African Bean Co. lists Arkansas as the company’s “jurisdiction.”

Taulbert is listed in the same 2011 media release as the developer of The Icehouse Project, an entrepreneurial program that will be offered at the college’s Scott Ford Center.

Buffalo Development Co., Hill said Wednesday, was used as a “conduit” for $22 million in new market tax credits that were used to secure a bank loan to fund campus construction. Hill said he did not receive any personal money from Buffalo Development.

The Buffalo Development Co.’s Form 1065 tax returns for the past three years - which Hill voluntarily supplied to the Democrat-Gazette - indeed show that Hill did not receive any income or profit from the company.

When asked, Hill said that he has not received any deduction on his personal taxes because Buffalo Development Co. showed a loss on its returns.

“In essence, ABC could not put its own money in the ‘pot’ and receive the tax credits and have a lien against itself,” Hill said in an email Saturday.

The college marked “no” to a question on its Form 990s - filed between 2008 and 2012 - that requires disclosure of family relationships between key employees or trustees with other key employees.

Hill said Saturday that his wife, Cynthia Hill, has been employed at the college since 2008. Fitz Hill wrote in an email that his wife’s role “includes external affairs as well as assisting with College recruitment efforts. She also represents the President in providing family support to parents when our students face a crisis. Other than the employee salaries listed on the 990 as required by law, the College does not publish employee compensation information.”

PROBLEMS YOU SOLVE

As a soldier in the Persian Gulf War in 1990 for Operation Desert Storm, Fitz Hill said Wednesday that he knows a thing or two about leadership in times of crisis.

“Those are physical bullets. Things that are happening here, these are emotional bullets. These are things that tug at your heart and tug at your mind. But you have to have an inner strength and an inner fortitude, and that comes from the word of God to Fitz Hill,” he said. “That’s what I stand on each and every day, to do the right things for the right reasons for the right people to get the right results. As long as you do right, you don’t have to remember what you say because what you say is the truth.”

Hill said he is facing the college’s problems head-on and will not “wave the white flag.” In fact, he said Wednesday, he recently signed a seven-year contract with the college.

Richard Mays Sr., a member of the college’s board of trustees, said Saturday that he could not speak for the whole board, but he would “strongly support” Hill staying with the college in his current role.

“A lot of people have invested in Arkansas Baptist College. I think if he were to leave that would be too disappointing to folks who have really put their confidence in the dollars through his efforts,” Mays said.

Hill said he has addressed the issues in the school’s financial-aid office and is sure the school will be removed soon from cash-monitoring status by the U.S. Education Department.

Last summer, Hill hired Gary Streit - a former peer reviewer with the Higher Learning Commission - to get the accreditation requirements on track.

Streit said in an interview Thursday that he was not surprised that the commission placed the college on notice status and raised concerns. He added, however, that he believes in the future of Arkansas Baptist College and the strides Hill is making.

“I believe the mission of Arkansas Baptist College is viable and valuable. And I believe in the vision of Fitz Hill,” Streit said.

Front Section, Pages 1 on 03/16/2014

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