LITTLE ROCK — The outgoing University of Arkansas chief spokesman accused UA Chancellor G. David Gearhart and other officials Friday of ordering the destruction of financial records requested by state auditors and media outlets during an investigation into a multimillion-dollar shortfall in the university’s fundraising division.
John Diamond, whose dismissal from his job as associate vice chancellor of university relations becomes effective Sept. 20, described what he said was a "culture of deception that developed and grew" within the UA administration during Friday’s Joint Legislative Auditing Committee meeting.
Diamond’s testified after lawmakers reviewed a state audit that revealed deficits in the division budget of $2.14 million in fiscal 2011 and $4.19 million in fiscal 2012.
Gearhart sat next to Diamond when the allegations were being made and stared directly at him, shaking his head back and forth several times.
Testifying later, the UA chancellor categorically denied ordering UA workers to destroy records.
"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 the school’s outgoing spokesman a "disgruntled employee."
The Division of Legislative Audit released a report this week that concluded poor fiscal oversight and a failure to follow school policies and procedures in the advancement division led to the deficits.
Gearhart requested the state audit in February after administrators discovered that the advancement division had overspent its $10 million budget last year.
Brad Choate resigned as vice chancellor of the division in February after the shortfall became public. Razorback Foundation Executive Director Chris Wyrick replaced Choate.
Joy Sharp, the division’s budget director also stepped down at the end of February.
The audit findings have been turned over to Washington County Prosecutor John Threet.
On Friday, the committee voted not to accept the audit findings, which Rep. Kim Hammer, R-Benton, said would allow lawmakers to continue to ask questions.
He said later that the panel could possibly invite Gearhart, Diamond and others back for more questioning.
"The legislators will probably take some time to think back, reflect back, on the meeting (Friday), and based on the interest of the committee, that will drive whether we have a future meeting or not," Hammer said.
State auditors said they found 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."
The audit found that account receivables posts made by the division "partially obscured the deficits in the financial statements." Also, while "revenues for the division stayed relatively constant" for both years, spending in the division rose dramatically from $7.94 million in 2011 to $13.23 million in 2012.
Don Pederson, UA vice chancellor of finance and administration, told lawmakers Friday that additional staff were brought in last year to help on a new fundraising campaign and that after the shortfall was discovered the employees were paid with other unbudgeted UA funds.
The audit recommended a number of changes, including that the university budget all anticipated revenues for the division and that policies and procedures be established for payment of vendors. Other recommendations included that computer login credentials not be shared among personnel and that university policies not be overridden by the vice chancellor of the division.
Pederson told lawmakers he expects the recommendations to be implemented.
Diamond was asked to address the committee after lawmakers had spent about two hours reviewing the audit findings and questioning Gearhart, Pederson, UA System President Donald Bobbitt and Jean E. Schook, associate vice chancellor for financial affairs.
Diamond, who was fired recently after he and Wyrick disagreed over how to respond to media demands for information on the budgeting shortfall, told the committee that employees in UA’s advancement division "received directives from key individuals that resulted in the destruction of documents relevant to the audits and the FOIA requests."
He said orders to destroy documents occurred twice, once before the state audit was requested in February, and once after the request.
"Those two reasons are in part why auditors could not find documents they sought and that’s why so few responsive documents were given to the media during the past several months," Diamond said.
He said witnesses could verify his testimony, as well as documents.
Diamond said Gearhart gave the order to destroy documents at a January meeting with several division employees. He said the chancellor got angry after learning that some documents pertaining to the division’s financial problems existed.
"Chancellor got very upset, got angry and made several statements which concluded with instructions to all of us to get rid of all those documents," Diamonds testified Friday.
After the audit had begun, Diamond said, the division budget director ordered boxes of old payment authorization forms be destroyed. Employees were told to save only the ones for 2011 and 2012, he said.
State auditors noted in their report that they had difficulty finding any payment authorizations dated prior to 2011.