LITTLE ROCK, Ark. — Legislators on Tuesday criticized how the University of Arkansas managed the budget of its fundraising division and said they're still not clear how it built a $4.2 million deficit.
Two former executives at the Fayetteville campus testified that Chancellor David Gearhart created an oppressive atmosphere after the shortfall became known and tried to conceal budget information from the media and public, something Gearhart denied Tuesday.
No charges have been filed in the case. It went to the Legislative Audit Committee in December, but the panel decided to accept audit reports without hearing testimony. Tuesday's hearing was before the Joint Performance Review Committee.
There, Gearhart testified the deficit, amassed during the 2011 and 2012 budget years, occurred when the fundraising arm, known as the Advancement Division, hired about 20 new people without having enough money to pay them.
Brad Choate, the former vice chancellor for advancement who was fired over the deficit, had an annual budget of $10 million. He said the hires were planned for more than a year and he was surprised when his budget director informed him of the deficit.
Budget director Joy Sharp also lost her job and accepted responsibility for losing control of the budget, something she repeated Tuesday.
Gearhart said it was extraordinary that the account was $4 million in the hole, and stressed that university and legislative auditors found there was no fraud, misappropriation of funds or anyone who was personally enriched.
Choate and former top university spokesman John Diamond, who was also fired, claimed Gearhart worked to circumvent the Arkansas Freedom of Information Act and actively tried to deflect repeated information requests from the Arkansas Democrat-Gazette.
Sen. Keith Ingram, D-West Memphis, recited a long list of problems that have come to light.
"When the shortfall was discovered, we found there were accounting practices that led to concealing the deficit. We found that, by coincidence, as soon as Ms. Sharp left, documents began to be shredded. We received reports from employees in the division to not create any new FOI-able documents," Ingram said.
Gearhart told legislators: "I don't think there's anything wrong with destroying documents that haven't been FOI'd," and said numerous entities destroy papers regularly.
"This has taken a toll on everyone ... particularly the Advancement Division (and) you," Ingram told Gearhart.
Ingram went on to say a number of employees had been reassigned and others had been pressured to retire or quit, "with non-disclosure clauses." He also said a major donor, whose contribution was allegedly mishandled, left the UA board of trustees.
"The one constant in this, I guess, has been you, chancellor," Ingram said, and then asked Gearhart whether he had the confidence to continue to lead.
"Yes sir, I do," Gearhart replied, adding that he felt Ingram's assessment was inaccurate.
The afternoon meeting was nearing the five-hour mark and there wasn't time for Gearhart to address Ingram's assertions in detail. But earlier in the day, Gearhart said he agreed the budget deficit had "been an embarrassment."
A number of committee members said they were unconvinced they've gotten to the bottom of the issue.
"There is certainly enough smoke to indicate that there's some fire and I'm going to do everything I can right now to stoke the fire and make sure that this is not the end of these hearings," said Rep. Mark Lowrey, R-Maumelle.
Rep. Terry Rice, R-Waldron, and Sen. Jane English, R-North Little Rock, said they would wait to hear from committee members before deciding to reconvene.
Rice noted that UA System President Donald Bobbitt couldn't get a flight from Chicago to attend the hearing, and said he was "not totally" satisfied with the explanation of the overspending.
"As was said in committee today," Rice said, "if we're not teaching better accounting than that in higher ed, I think we're lacking."