CONWAY — The University of Central Arkansas obtained a $3.6 million advance in state funds this summer, even as the school’s leaders have talked of much-improved finances.
UCA is the state’s only public university that has sought an advance this year,said Stanley Williams, deputy director of the Arkansas Department of Higher Education.
Other universities have obtained advances in the past, including the University of Arkansas at Fayetteville and the University of Arkansas for Medical Sciences as recently as the past fiscal year, said Paul Louthian, administrator of the office of accounting at the Arkansas Department of Finance and Administration.
But Louthian said Tuesday that he knew of no other universities in recent years that have obtained advances for three consecutive years, as UCA has.
This year’s UCA advance came to light during a review of a stack of e-mails that the Arkansas Democrat-Gazette obtained about a week ago under the Freedom of Information Act.
The advance comes at a time when the university has had two straight years of declining enrollment. Lower enrollment can mean less tuition and fee revenue. Like other universities, UCA also has been hit hard by state funding cuts.
The university renewed a $6 million line of credit earlier this year but owes nothing on it, UCA spokesman Jeff Pitchford said Tuesday. Unlike a line of credit, a state advance is interest-free.
UCA officials have repeatedly spoken in the past year about the school’s improving financial condition.
When asking trustees in May to seek renewal of the line of credit, Diane Newton, UCA’s vice president for finance and administration, said, “I’m confident we won’t need it ... but it’s always good to have contingencies.”
She said then that she expected the school to have between $9 million and $10 million in cash reserves as of June 30. She said later, however, that all but roughly $2 million of that sum was restricted, or earmarked for use for specific purposes.
This is the third consecutive fiscal year since UCA President Lu Hardin resigned in August 2008 and left the school in debt that the school has sought and obtained an advance.
In October 2008, interim President Tom Courtway sought and got a $3.6 million state advance to deal with a cash-flow shortage then. Courtway talked about the loan publicly, noting that it came interest-free.
Since then, UCA has obtained two more advances - one in fiscal 2009 for $3.7 million and the one this year. Those requests did not go through the board of trustees.
In an e-mail interview, Newton said “it was not necessary” for the requests to go through the trustees.
After the Democrat-Gazette noticed a reference to an “advance” in the UCA emails, it contacted Williams, who confirmed in an e-mail Tuesday that UCA had received $3.6 million this year.
Asked “what reason UCA gave for seeking the advance,” Williams replied, “Cash flow.”
But Newton said in her email that “the reason for the request for the advancement was not a cash flow problem but is a prudent cash management decision.”
Asked if UCA officials still felt that the school’s finances are improving with each fiscal year, and how so, Newton replied, “Yes.” She did not elaborate.
Williams said Jim Purcell, the Higher Education Department’s director, and Richard Weiss, director of the Department of Finance and Administration, approved the latest request for an advance in July.
On July 15, UCA President Allen Meadors wrote Weiss and Purcell formally requesting it.
“The reason for the request is to levelize the cash flows of the University and to minimize the need for any draws under an existing $6 million line of credit (approved by each of you for this fiscal year),” Meadors wrote. “The advancement, if approved and made, may remain outstanding for the entire fiscal year, unless re-paid sooner, but it will be re-paid in full, at the latest, from distributions in May and June of 2011,” Meadors wrote.
On July 2, 2009, Meadors requested a $3.7 million state advance, citing the same reasons as he did this year.
In a Freedom of Information Act request Tuesday, UCA released copies of the requests for advances and the letters approving them. In the initial review of e-mails, there was one to Newton in late August. In it, Edmond Hurst, senior managing director of Capital Markets Group at Crews & Associates Inc. in Little Rock, asked her to provide him with “the request and approval regarding the ‘advance’ of the state funding.”
Crews & Associates has recently been handling the refinancing of some UCA bonds. UCA trustee Rush Harding III of Little Rock is the founder and chief executive officer of Crews & Associates. Harding abstained from a recent vote on the bond issue.
On Aug. 31 of this year, UCA issued a news release noting that Moody’s Investors Service had kept the school’s debt rating stable.
The release said in part, “The stable outlook reflects expectations of a gradual improvement in cash and financial resource levels, management’s ongoing successful implementation of cash flow enhancement efforts and continued support from the state, the [Moody’s] report states.”
The release quoted Newton as saying the Moody’s report “positively reflects the tremendous progress UCA has made and continues to make.”
“While we are pleased with the previously upgraded rating of A3 with a stable rating, we think when Moody’s receives the University’s audited statements later this year, there will be room for additional upward movement,” she added.
In the release, Meadors spoke of the university’s “steady march back to a solid financial position.”
“I truly appreciate the University community coming together and helping produce the healthiest financial position at UCA in nearly a decade,” he said.
Front Section, Pages 1 on 09/29/2010