The advancement office's budget was $10 million; half of its funding comes from interest on University of Arkansas Foundation assets and the other half from state dollars and tuition (Education & General Funds). Associate Vice Chancellor John Diamond said the division had been drawing down funds from the University Foundation, which provides half its funding from interest on the corpus, in advance of quarterly distributions for two or three years to keep the advancement office running. Gearhart has determined the office, which is properly staffed given the upcoming capital campaign, is underfunded by about $4 million; no malfeasance was discovered.
"... the division filled staffing needs while miscalculating the funding levels necessary to support those positions. The resulting imbalance was not detected because the division’s budget officers did not carefully monitor the flow of revenues and expenditures. This was not, and is not, an acceptable practice.
Diamond said that Choate notified the university immediately after discovering the shortfall. He also said that Gearhart would have funded the growth in the division had he been informed that its legitimate expenses were outpacing revenues.
The University will make up the shortfall from its emergency reserves fund with the understanding that the division will eventually repay the money. The division will also, starting Jan. 1, have a new revenue source: A cost recovery assessment fee of 10 to 15 percent on gifts to the university for such things as campus construction projects. "That will become part of the funding formula to keep the advancement division whole," Diamond said.
Choate will spend the remaining months on his contract working on the university's "long-term strategic plan for an upcoming capital campaign," Diamond said, and Sharp has been reassigned to the human resources office. Denise Reynolds, who works for Vice Chancellor for Finance and Administration Don Pederson, will handle the division's budget.
Diamond said no budget overruns of "this scope" had ever occurred at the university. "It's not uncommon for a division or unit to find itself toward the end of the fiscal year running short. But the natural thing to do is for the budget officer or whoever else is in charge to let the people higher up know there is a problem on the horizon."
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