LITTLE ROCK — A spokesman for the University of Arkansas says much of the accumulated multimillion-dollar deficit from overspending in the Advancement Division still exists, but that the university is working to eliminate it during fiscal 2014, which began July 1.

LITTLE ROCK — A spokesman for the University of Arkansas says much of the accumulated multimillion-dollar deficit from overspending in the Advancement Division still exists, but that the university is working to eliminate it during fiscal 2014, which began July 1.

Mark Rushing, director of strategic communications for the university, said Thursday that in a story published on the Web on Wednesday, statements attributed to Don Pederson, chief financial officer, claiming the deficit already had been eliminated were incorrect. He said the deficit amount eliminated in fiscal 2013 amounts to about $600,000.

The Legislative Audit Division listed the deficit as a cumulative $4.19 million over fiscal 2011 and 2012, which included both university and UA Foundation funds. Rushing said the $600,000 reduction dropped the university-side deficit from $3.8 million to $3.2 million. Rushing said the difference in the two deficit amounts is based on different methods used by the university and Legislative Audit.

"It’s simply apples and oranges to compare the two," Rushing wrote in an email.

Legislative Audit lists $3.88 million as the deficit in university funds, but puts the overall amount at $4.19 million with adjustments.

Rushing said there was no additional debt accumulated since Chris Wyrick took over the division more than two months before the end of the fiscal year on June 30. Choate, the former division leader, resigned in February, seven months into fiscal 2013. Pederson said mismanagement led to overspending, which led to the deficits, which resulted in Choate leaving. The budget director in the division, Joy Sharp, also left in February.

Pederson clarified through Rushing that he attended the Legislative Joint Auditing Committee meeting when former UA spokesman John Diamond testified earlier this month, but said he was not at the Jan. 14 meeting that Diamond referenced as part of his allegations that he was ordered by G. David Gearhart, UA-Fayetteville chancellor, to destroy documents.

"Again, the university hopes to eliminate the Advancement Division’s cumulative defict in FY14," Rushing wrote.


Diamond: Auditors given names of witnesses to order to destroy UA documents

LITTLE ROCK — A former University of Arkansas spokesman who accused the UA chancellor of ordering the destruction of financial records said Wednesday he has provided state auditors with a list of people who witnessed the chancellor’s order.

John Diamond, who was fired as the university’s chief spokesman, also said he possesses documents proving his accusations but said no officials have contacted him about turning them over to auditors or the prosecutor who is looking into the matter.

Diamond made his accusation against UA Chancellor G. David Gearhart Sept. 13 during the Legislative Joint Auditing Committee’s review of an state audit report detailing a multimillion-dollar shortfall in the university’s Division of Advancement.

Rep. Kim Hammer, R-Benton, co-chairman of the committee, said Wednesday he would talk with co-chair Sen. Bryan King, R-Green Forest, on Thursday or Friday about scheduling another meeting of the panel to further discuss the audit findings.

If the committee calls a second meeting on the subject, Hammer said he would like to hear testimony from Brad Choate, who resigned as vice chancellor of the the university’s fundraising division in February after a multimillion shortfall in the division became public, and Joy Sharp, the division’s former budget director who also stepped down at the end of February.

Hammer said he didn’t know Diamond had given witness’ names to auditors.

"I can tell you from my perspective, if the names that John mentioned he had … they were probably immediately passed on to the prosecutor," Hammer said, noting that the audit’s findings, along with testimony during the Sept. 13 committee meeting, have been turned over to Washington County Prosecutor John Threet.

Legislative Auditor Roger Norman declined comment Wednesday.

The deficits incurred by the UA’s Advancement Division in fiscal 2011 and 2012 no longer exist, the university’s chief financial officer said.

Don Pederson told the Arkansas News Bureau on Wednesday that the $4.19 million deficit was covered by funds from the UA Foundation in fiscal 2013.

Accounting practices only allow funds received in the first quarter of the following fiscal year to be counted back to the year ending on June 30, so it made it appear the division was operating in the red, Pederson said. It was not the deficits that resulted in the February resignations of Choate and Sharp, he said, but rather poor management.

"They did not operate within the budget," he said.

The audit also concluded that university policies and procedures were not followed and that there was a lack of oversight, but that there was no evidence of intentional misappropriation of resources for personal gain, and that the "primary driver of accumulated deficit balances was the addition of staff with no permanent funding."

Pederson said although the budget in the division balanced in 2010, the wheels were set in motion through hiring additional people that continued in fiscal 2011 and 2012, resulting in the cumulative deficit of just over $4 million.

"They had enough budget to handle it in ’10, but they started making decisions that led to the deficits in ’11 and ’12," he said.

Legislative Audit found that the university’s Advancement Division recorded a deficit of $2.14 million in fiscal 2011 and that the amount increased by another $2.05 million the following year. State fiscal years start on July 1 of the previous calendar year and end on June 30 of the following year. Fiscal year 2012, for example, began on July 1, 2011, and extended through June 30, 2012.

Pederson said the university planned to modify its accounting procedures as a result of the report by Legislative Audit.

The university-side deficit in the division will be erased in fiscal 2014, he said, indicating that additional overspending occurred in the current fiscal year before Choate was replaced by Chris Wyrick, who had been executive director of the Razorback Foundation. The division receives university funds and UA Foundation money.

During the legislative committee meeting, some lawmakers accused Pederson of parsing words when he explained why he did not provide auditors during an Oct. 25, 2012, meeting with information related to the possibility of fraud in connection with the division’s overspending.

Pederson said Wednesday that there is a subtle difference in fraud risk based on budget reports and fraud allegations or actual fraud.

"We did not see that there was a fraud or an allegation of fraud," he said.

The legislative committee investigative report from the Division of Legislative Audit said the accounts receivable helped obscure the deficits. According to the audit, the university treasurer’s office posted accounts receivable of $2.1 million and $2.5 million on June 30 of fiscal 2011 and 2012.

Pederson insists those foundation funds were expected.

As for comments before the legislative committee by Diamond, whose dismissal from his job as associate vice chancellor of university relations was effective last week, Pederson said he could not speak to the veracity of Diamond’s comments.

Diamond described a "culture of deception that developed and grew" within the UA administration when he testified before the committee.

Diamond accused UA-Fayetteville Chancellor Gearhart and other officials of ordering the destruction of financial records requested by state auditors and media outlets during an investigation into the deficit.

Pederson said he was not there when Diamond testified.

"I don’t really have any information or comments on whether they have validity or not," he said.

Gearhart, who was sitting next to Diamond when the allegations were being made, denied them when questioned by lawmakers.

"That is not true and I would be delighted to see the evidence he has for that," Gearhart told the committee, calling Diamond’s allegations "astounding" and describing Diamond as a "disgruntled employee."