Joint Legislative, UA System Audit Confirms University Findings

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FAYETTEVILLE, Ark. – An audit report released Tuesday by the Division of Legislative Audit confirms an earlier review by the University of Arkansas, finding that the deficit in the university’s Division of Advancement’s budget was the result of mismanagement that led to overspending. The two-part audit report includes sections by the Division of Legislative Audit and the University of Arkansas System Internal Audit Department, both of which looked into causes of the deficit.

Like last year’s university review, the audit report indicates no fraud, theft or misappropriation of public or private funds.

PDF of Legislative Audit report

The auditors found that the deficit was caused by overspending by managers who failed to maintain proper budgetary oversight. While there is some disagreement on technical accounting principles mentioned in the audit report, the university recognizes the recommendations and continues to make adjustments based on those recommendations and the findings of its own internal review.

“Our own review and now the legislative and UA System audits found that the division was, in effect, borrowing on anticipated revenues to pay current bills – that’s unacceptable and it cost two employees their jobs,” said Chancellor G. David Gearhart. “But no taxpayer dollars or private funds were lost, not one penny. All expenditures were for legitimate university needs in preparation for a major capital campaign. The division unfortunately overspent its projected budget.”

Based on its own earlier review and in anticipation of the audit report, the university has already taken steps to enhance its accounting procedures and system of checks and balances to prevent an issue like this from happening in the future. The university is also creating a new position in the administration focused solely on budgets and financial planning to strengthen the finance and administration division.

PDF of President Bobbitt's statement

“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,” said Donald R. Bobbitt, president of the University of Arkansas System. “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.”

Although the Advancement Division ended the 2012 fiscal year with a deficit because of the lack of budgetary oversight within the division, the university itself did not have a deficit. In fact, the U of A is in the best fiscal shape in its entire history, with solid reserves.

“No question, mistakes were made before I assumed leadership of the division and we have identified those errors,” said Chris Wyrick, vice chancellor for advancement. “The fact is processes and systems can always be improved. The good news is we were able to work proactively to enhance those procedures even before the audit report was released. The recommendations received as a part of the audit report will only enhance that effort. And now we’re ready to continue our work of promoting and supporting this wonderful institution.”

Under Wyrick’s leadership since April, the Advancement Division balanced its budget for fiscal year 2013 with a combination of cost containment, sharing of revenue between academic units for the benefit of the university, and increases in revenue needed to support the unit as it ramps up for one of the most important capital campaigns in the university’s history.

“I want to thank our legislative and UA System auditors for their efforts in helping us resolve this issue and bring it to a close,” said Donald O. Pederson, vice chancellor for Finance & Administration. “We are in essential agreement with the auditors in regards to the cause of the deficit and the corrective steps needed moving forward.”

The University of Arkansas completed its 2013 fiscal year on June 30 and recorded $108.4 million in private giving support, surpassing its goal of $107 million. This achievement marks the third year in a row that the university has raised over $100 million.

“We will continue to make improvements in every aspect of the university as we focus on enhancing the quality of our faculty and staff and the education we provide for our students,” Gearhart said.

The university recently announced preliminary enrollment figures including a new record total of 25,365 students. The Chronicle of Higher Education also recently ranked the U of A as the 13^th fastest growing university in the nation. The university’s growth includes record numbers of undergraduate and graduate students while also reflecting steady improvement in both academic quality and diversity. The U of A campus has been through an upgrade as well with an unprecedented investment of more than $1.3 billion in new construction and facilities enhancements since 2000, more than $450 million of that since 2011.