Audit finds $4.19M deficit in U of A division
LITTLE ROCK (KATV) -
Worse than originally reported.
That sums up the financial shape of one division at the University of Arkansas.
A seven month examination by state auditors reveals a culture of minimal oversight...disregard for university policies and procedures... and constant hiring.
The Division of University Advancement didn't get deep in the red overnight.
It ended 2009 with nearly $400,000.00 in the bank. But four years later the division was over $4,000,000.00 in the hole.
According to the audit, "...the primary driver of accumulated deficit balances was the addition of staff with no permanent funding."
The Division of University Advancement exists to enhance the U of A's image and build support for Higher Education. During the audit period, 158 people were being paid to accomplish this goal.
During the four year audit period, funding for the division remained constant...about $10,000,000.00 per year.
But expenditures rose during the last fiscal year to over $13,000,000.00 a year...a 67 percent increase.
People were hired without revenue budgeted to pay them.
The audit details how this happened, citing a lack of oversight, inadequate/inaccurate accounting, deliberate efforts to disguise problems and a failure to appropriately budget.
But a little sentence on the third to the last page of the report summarizes a mindset that may explain the real reason such a deficit was allowed to occur: "Advancement's negative financial position was immaterial due to the reserves and contingencies available to the University." (comment made to auditors by the former Vice Chancellor for Finance and Administration).
If your business spent millions more than it took in, employees would probably be fired or laid off...assuming your business didn't go out of business.
In this case no one has been fired and as far as we know...no one has been laid off or even missed a paycheck.
Although the audit found "...no evidence of intentional acts to misappropriate resources for personal gain", the report has been forwarded to the 4th Judicial District Prosecuting Attorney.
The University's written response to the audit findings points out that most of the blame falls on two employees (VCAD Brad Choate and Budget Director Joy Sharp) who are no longer with the University and that recommended changes in the audit are already being made.
University of Arkansas System President Donald Bobbitt released a statement regarding the audit findings emphasizing that "...the auditors found not theft or fraud" and that "While the unanticipated deficit in the advancement division was and is unacceptable, the university itself remains in very good shape financially."
Air date: September 10th, 2013
If you would like to review the entire audit report now, click here.