UA won’t release its findings on unit’s $3.37 million deficit

LITTLE ROCK — Though audits and financial reports by government agencies are typically public records in Arkansas, the University of Arkansas at Fayetteville has declined to release its report regarding a $3.37 million spending deficit last year by the school’s Advancement Division.

Chancellor G. David Gearhart learned July 13 that the division had overspent its roughly $10 million fiscal 2012 budget. University officials asked the school’s Finance and Administration Division to perform a financial review that began July 20 and was delivered Oct. 17, records show.

The Arkansas Freedom of Information Act requires government agencies, including public schools and universities, to make documents about finances available to the public, said Robert Steinbuch, a law professor at the University of Arkansas at Little Rock. But Fayetteville campus officials contend the report is a personnel record exempt from release under state public information laws.

University officials said the financial review is in the files of two employees who were found to be responsible for the overspending. Brad Choate, vice chancellor for the Advancement Division, was removed from his supervisory role over the division, and then-budget officer Joy Sharp was demoted “around Nov. 9,” UA spokesman John Diamond has said.

Gearhart has said he will not renew Choate’s and Sharp’s appointments after they expire June 30.

The university’s financial review “documents are part of the Choate and Sharp performance evaluations and are part of their respective personnel files,” Diamond wrote in an e-mail declining one newspaper request for the report. “That material is exempt from release under Arkansas’ Freedom of Information Act.”

That argument is counter to the thinking of Steinbuch, whose specialties include freedom of information law.

“Classic examples of public records are spending and salary information,” Steinbuch said. “It does not appear to me that a financial review should ordinarily be exempt from disclosure.”

He said such a document is a public record “generally, and specifically under the [personnel] exemption” cited by University of Arkansas at Fayetteville officials.

State agencies that specialize in audits and special financial reports said they routinely make those documents public.

The Arkansas Division of Legislative Audit, for example, prepares more than 1,000 financial audits and reports each year. “I can’t think of any instances where they are not public,” said legislative auditor Roger Norman, who has been with the office for 35 years. “If we issue a report, it’s going to be out there.”

“Everything we do is public record,” said Ricky Quattlebaum, internal audit administrator for the Arkansas Department of Finance and Administration. The office provides audits and consultation services for the executive branch of state government. His staff prepared 43 formal audits and risk assessment reviews in the past 12 months.

“From my experience and interpretation of the freedom of information law, every audit and report is public once it is finished,” said Quattlebaum, who’s been with his office for 12 years.

‘LACK ... OF FUNDS’

University of Arkansas officials said they discovered spending problems involving the school’s Advancement Division in early July.

Records show cash management Director Susan V. Slinkard notified University of Arkansas Vice Chancellor Don Pederson in an e-mail July 6, according to university records obtained by the Arkansas Democrat-Gazette.

Her two-sentence message explained that the University of Arkansas Foundation had delayed an Advancement transfer request for funding, which other records show was for $225,000. The reason: “due to a lack of availability of funds.”

The nonprofit foundation invests the university’s private donations and disburses money back to the school. UA officials have said the Advancement Division historically depended on investment revenue to supplement its budget. In explaining the deficit, Diamond has said Choate and Sharp had been using anticipated investment revenue from the foundation to meet current obligations, creating “an end-of-year budget gap [that] compounded quickly.”

The university’s fiscal year runs from July 1 to June 30.

A timeline of events prepared by Gearhart’s assistant said Pederson and Choate informed Gearhart of the problem July 13. A July 20 entry says Pederson was “doing an internal audit.” A notation on the timeline says Pederson delivered Gearhart a “document explaining Advancement issue” on Oct. 17.

Gearhart issued a message Dec. 3 explaining the problem after an Arkansas Business article disclosed the shortfall.

Since early December, the Democrat-Gazette has asked university officials whether any audits or financial reviews were conducted into the deficit and requested copies.

In a Jan. 17 response, Diamond wrote: “An internal review was conducted by Jean Schook, who is a [certified public accountant], a former Arkansas state auditor and currently the U of A’s treasurer and associate vice chancellor for finance & administration.”

“She tested the transaction controls, reviewed specific transactions and determined that there were no illegal transactions or misappropriation of funds. She found that the division over committed to personnel positions and related fringe benefit costs, which resulted in overspending,” Diamond continued.

The division, which had 139 employees in November, oversees fundraising, alumni affairs, special events and other efforts.

“Based on her review of transactions and processes, she concluded that a formal audit would come to the same conclusion,” he wrote.

Diamond said the university couldn’t release Schook’s report because of personnel exemptions under the state freedom of information law.

Steinbuch argues that despite exemptions, state law presumes government entities’ material “is public.” One of Steinbuch’s interests is exemptions for personnel records.

“It is one of the exemptions that has been consistently abused by government entities attempting to withhold what is public information,” he said.

Bill Kincaid, the university’s associate general counsel, said that to his knowledge the professor hasn’t “reviewed the record at issue ... ” and doesn’t “have a sufficient basis to offer an opinion.” He and other university officials declined further comment this week.

“It’s wonderfully convenient,” Steinbuch responded, “for the school to refuse to disclose the document and then turn around and argue that no one can opine whether the document should be disclosed because they don’t have a copy.”

‘IMPRUDENT, UNACCEPTABLE’

In response to numerous records requests, the university has turned over copies of e-mails, budget drafts, salary information and other records, but none paint a clear picture of what created the budget deficit. The university has also declined to release other records that it said fell under the personnel exemption, including Sharp’s response to Schook’s findings.

The chancellor has said the division’s excess spending did not involve inappropriate use of funds.But in his Dec. 3 statement, Gearhart also called the budget management “imprudent and unacceptable.”

He stripped Choate of administrative responsibilities but left his salary at $348,175, among the highest for state employees. Gearhart removed Sharp from budget management and cut her pay from $91,086 to $68,314.

University officials have said in interviews that Choate and Sharp were the only employees held responsible for the deficit.

Choate, who joined the university in 2008, was recruited by Gearhart to take over the chancellor’s former job running the Advancement Division.

Sharp has worked at the University of Arkansas for about 40 years, officials say. Personnel records show Gearhart promoted her to budget manager for advancement in 2003 when Gearhart was in charge of the division.

Sharp declined to be interviewed. Choate didn’t return email and phone messages left at his office. In December, he released a statement that said the university had “enjoyed back-toback $100 million philanthropic years” during his tenure “ ... and we are on track to extend that record this year.”

University officials are still struggling with the Advancement Division’s financial troubles.

A university report in November projected the division would outstrip its budget by $4.4 million this fiscal year. University officials have said they’re cutting costs and plan to provide $2 million in one-time transfers from other divisions to cover this year’s deficit.

THE LAW IN ARKANSAS

Arkansas state law, in describing the General Assembly’s intent in opening records to residents, says: “It is vital in a democratic society that public business be performed in an open and public manner.”

The Arkansas Code Annotated 25-19-102 says that’s necessary so citizens “shall be advised of the performance of public officials and of the decisions that are reached in public activity and in making public policy.”

The law also offers exemptions for some types of records, including medical and grand jury records and law enforcement investigations. One exemption is for certain personnel issues.

The statute exempts personnel records from public examination “to the extent that disclosure would constitute clearly unwarranted invasion of personal privacy.”

In declining to provide a copy of Schook’s report, Kincaid cited a clause in that statute, ACA 25-19-105(c)(1).

It says “all employee evaluation or job performance records ... shall be open to public inspection only upon final administrative resolution of any suspension or termination proceeding at which the records form a basis for the decision ... and if there is a compelling public interest in their disclosure.”

Steinbuch points to “an inherent difficulty when we ask government officials to turn over public information ... ”

“There will inevitably be times in which the public information itself exposes either wrongdoing by the government officials ... or if not wrongdoing, at least embarrassing information, or if not embarrassing, at least information the government official simply prefers not to disclose.

“As a consequence, we as public citizens must be vigilant in ensuring transparent and open government through mechanisms such as the freedom of information act,” Steinbuch said.

Information for this report was contributed by Tracie Dungan of the Arkansas Democrat-Gazette.