University of Arkansas audit released; former official takes the fall | Arkansas Blog

Tuesday, September 10, 2013

University of Arkansas audit released; former official takes the fall

Posted By on Tue, Sep 10, 2013 at 12:01 PM

click to enlarge HAPPIER DAYS: The ousted UA advancement boss, Brad Choate (left), with Chancellor David Gearhart and a Chicago school official when Choate was still leading the UA's fund-raising efforts.
  • HAPPIER DAYS: The ousted UA advancement boss, Brad Choate (left), with Chancellor David Gearhart and a Chicago school official when Choate was still leading the UA's fund-raising efforts.

The Division of Legislative Audit released at noon today its investigative report on spending in the University of Arkansas's advancement division. This is the red ink-bathed operation that led to the ouster of the division chief, Brad Choate, and more recently, the firing of university spokesman John Diamond. Diamond said the UA had not been fully forthcoming in responses to media requests for information about the mess.



* Audit found deficit cash balances in the division of $2.14 million at the end of fiscal 2011 and $4.19 million on June 30, 2012.

* The treasurer's office posted account receivables of $2.1 million and $2.5 million in each year that partially obscured the deficits.

* The vice chancellor for the division (Choate) "did not exercise proper fiscal oversight and did not comply with University policies and procedures."

* Advancement revenues remained relatively constant over the four-year review, but expenditures increased significantly, from $7.94 million to $13.23 million, resulting in an overall decline in the combined advancement and foundation cash balance.
Sounds to me like deficits were greater that the UA has depicted. There was substantial failure to follow policy and procedures, the audit said.

Serious business,, it seems to me, that the UA treasurer masked shortfalls by booking money expected from the UA foundation when the foundation had already expended current-year funding in each of the two years. The treasurer also didn't disclose "loans" from the foundation in each of four years, ranging from $1.5 million in 2009 to $382,000 in 2012.

The audit says it found no fraud or personal gain from the activities. The driver of deficits was "the addition of staff with no permanent funding. " This is ironic in light of UA's recent decision that it needed yet another vice chancellor in this division.

The report has been forwarded to the prosecuting attorney in Fayetteville for review.

The University submitted a seven-page response. It said the audit in many respects reflected findings it had already made earlier in admitting the deficit balances. It first agreed that Brad Choate was primarily to blame, along with Budget Officer Joy Sharp, who was relieved of those duties. It defended the handling of receivables from the foundation and said it was not an effort to obscure the deficits. Similarly, it defended internal transfers among foundation accounts.

The legislature's audit committees will consider the report Friday. It was released early so that legislators could have time for study in advance. The university will take media questions this afternoon, likely around 3 p.m.

The University of Arkansas Board of Trustees audit committee will discuss the audit at 8 a.m. Saturday morning in Fayetteville. 

UPDATE: Chancellor David Gearhart and other officials met the press Thursday afternoon in person and by conference call. Also, UA System President Donald Bobbitt made remarks so similar to Gearhart's messaging that they seem clearly  coordinated.

The audit "confirms what we have been saying," Gearhart said. There was "no fraud, no malfeasance and no theft or misappropriation of public or private funds."

He said there some technical disagreements on accounting issues, but adjustments had been made.

Clearly, he said, there was "overspending by employees who failed to maintain proper budgetary oversight." But he said the spending was all legitimate — including the increased expenses — for a capital campaign and "every penny was accounted for."

Was it a black eye for the university?

Gearhart said no. 

"I don't think it's a black eye for the university at all," he said. He said the campus was in the best position it had been in in "the history of the university." He said enrollment was up, there've been hundreds of millions in physical plant improvemnts and alumni continue to give at levels equal to those of the past.

The supervision of the division was "not acceptable," he said. 

"We had two employees who were not watching the budget,, but they didn't steal anything....and two employees lost their job over it." 

UA System President Donald Bobbitt issued a statement hewing to the same line.

“The audit report released today by the Division of Legislative Audit regarding the advancement division of the University of Arkansas confirms the issues that contributed to the overspending in the division. While the expenditures were for legitimate needs leading up to a major fundraising campaign and the auditors found no theft or fraud, it’s clear that there was a lack of budget oversight within the advancement division. As Chancellor Gearhart has said, this was a case of overspending the budget of a division within the university.

“As leaders of a vital public institution, we must ensure that we are closely monitoring and appropriately accounting for all of the university’s resources. We will address all of the issues raised in the report and move forward in a positive way. Since becoming aware of the problem last fall, Dr. Gearhart and his team have worked steadily to identify the causes of the overspending and have taken steps to ensure this does not happen again. I want to reiterate and confirm my full support for Chancellor Gearhart in this effort. In calling for these audits, Dr. Gearhart invited a transparent review of the advancement division finances with the goal of determining steps needed to correct the problem. I am grateful to the auditors for their diligent work and for their recommendations, which we will begin to implement immediately.

“While the unanticipated deficit in the advancement division was and is unacceptable, the university itself remains in very good shape financially. With growing enrollment and strong reserves, the university is in the best financial shape in its history.”

Tags: , , , , ,


Comments (10)

Showing 1-10 of 10

Add a comment

Subscribe to this thread:
Showing 1-10 of 10

Add a comment

More by Max Brantley

  • TGIF: News roundup, open line

    The week-ending news roundup and open line.
    • Oct 19, 2018
  • Rich white people fund PAC behind racist attack ads supporting French Hill UPDATE

    More reporting on the people contributing to Black Americans for the President's Agenda, which is running racist ads in Little Rock in support of Republican Rep. French Hill. The money isn't coming from black Americans, but wealthy conservative Republicans such as an owner of the San Francisco Giants. GOP feeling heat, files ethics complaint on ad.
    • Oct 19, 2018
  • Another made-up Republican attack: The Saline County socialists are coming to take your business

    The latest in bogus Republican political attacks comes from Saline County, where Steve Lux, chairman of the county Republican Committee, has sent a letter warning members of the Benton-Bryant Chamber of Commerce that a progressive group working to elect Democrats in the county is allied with a socialist group that wants nothing less than "the elimination of private business." This is, of course, nonsense.
    • Oct 19, 2018
  • More »

Readers also liked…

  • Free Zinn book for Arkansas teachers

    Arkansas teachers! Get your free Howard Zinn book here! Whether Kim Hendren likes it or not.
    • Mar 3, 2017
  • Trump's strangulation of Obamacare

    If he can't kill it outright, Donald Trump will do all he can to cripple Obamacare. Vox has detailed reporting on deep cuts in federal spending that support nonprofit agencies that help people sign up for coverage under the Affordable Care Act.
    • Sep 18, 2017
  • Payday lenders on the march at legislature

    Payday lenders are working hard to get legislative cover for the reintroduction of their usurious loan business to Arkansas. Some are fighting back.
    • Mar 10, 2017

People who saved…


  • Arkansas vs Ole Miss at War Memorial stadium in Little Rock, Saturday, Oct. 13, 2018. After leading for much of the game, Arkansas lost 37-33 when Ole Miss scored the game winning Touchdown with less that 2 minutes left. 
  • Margaret Clark Adventure Park
    New sculptures, preschoolers play area dedicated in Riverfront Park in Little Rock.

Most Recent Comments


© 2018 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation