New ways of reporting financial information established by the University of Arkansas System should help keep administrators from allowing deficits to grow unchecked, said UA-Fayetteville's newly named interim chief financial officer.
"So much of it is identifying it as early as possible," said Timothy O'Donnell, who takes over as interim vice chancellor for finance and administration on July 1.
UA-Fayetteville's main fundraising arm, known as the Advancement Division, ran up a $4.19 million deficit over a two-year period ending on June 30, 2012. A special state audit report released in September found a lack of financial oversight within the division. The overspending led to scrutiny from state lawmakers.
In January, the University of Arkansas board of trustees approved changes to financial reporting policies for all campuses. For the coming fiscal year, UA-Fayetteville has an operating budget of about $700 million, O'Donnell said.
Requirements include more frequent deficit reporting and a new format for budget and financial reporting. The changes are in place for the fiscal year that begins July 1.
"We are now specifically required to identify to the System, to the board, where are the deficit-cost centers at across campus," O'Donnell said.
The deficit-reporting requirements will pertain to the third and fourth quarters of each fiscal year. Earlier in the fiscal year, UA-Fayetteville will internally monitor any deficits, O'Donnell said.
Auditors found in a report done by the UA system that failure to monitor deficits contributed to the Advancement Division's previous problems.
Threshold amounts on deficit reporting have not been set, said Ben Beaumont, spokesman for the UA System, but the intent is to have institutions report "significant" deficits.
Jim von Gremp, chairman of the UA trustees since March 1, said the change will help trustees in studying various financial reports from different institutions. The deficit-reporting requirement "just makes it easier to pick those up and ask whatever questions need to be asked," von Gremp said.
Other reports
O'Donnell joined UA-Fayetteville in October as its first ever vice chancellor for budget and financial planning. The university announced last week that he would replace Don Pederson, who is retiring at the end of this month.
"Universities, by their nature, from an accounting perspective, can be heavily decentralized," O'Donnell said. UA-Fayetteville has 10 colleges and schools, and O'Donnell said colleges and units have their own internal budget officers doing the "heavy lifting" of keeping track of day-to-day activity.
Reports that track accounts for colleges and units are nothing new for UA-Fayetteville, he said.
"We have had tools here, and these reports were available, and they were reviewed," O'Donnell said. "Obviously, we didn't do as maybe a thorough job in some areas as we should have done."
Brad Choate, head of the Advancement Division when the overspending took place, lost his job after the deficit was revealed. Auditors criticized Choate for failing to monitor the division's spending.
A big part of O'Donnell's job has been to meet with department budget officers to develop computerized reports that better highlight key information.
The reports can look daunting at a glance. For the Dale Bumpers College of Agricultural, Food and Life Sciences, a printed report displays hundreds of line-item accounts in tiny print. Some accounts are only $1,000, while others are much larger. Together, they add up to the college's $11.9 million budget.
O'Donnell said one important change in the internal reports available at UA-Fayetteville has been to devote a column to any "balance forward" amount. The "balance forward" is the money in an account at the beginning of a budget year before any allocations.
It's an example of making sure vital information isn't hidden away, O'Donnell said.
"It's a nice, push-a-button, clean report. Get it anytime you want, and it just provides a little bit more detail," O'Donnell said. Budget officers for UA units, as well as central office administrators, will be able to generate the reports, which also now show expanded details like planned expenses and expected revenue for the rest of the budget year.
more detail
For the purposes of reporting deficits to the UA System, O'Donnell said, UA-Fayetteville has identified about 30 "dean/director" units, not only the colleges and schools but also divisions like Advancement and what are known as auxiliaries, such as the university's parking department.
Auxiliaries, which include the Department of Athletics and the university's bookstore, essentially stand alone financially.
Traditionally, budget information submitted to the UA System was limited to auxiliaries and the main "education and general" budget. However, the new UA System budget and quarterly financial reports require campuses to regularly report on revenue from what are known as restricted funds.
One source of restricted funds is government grants, which can involve funding for a specific college -- like a $32 million, five-year grant to UA-Fayetteville's College of Education and Health Professions announced last year -- or to a researcher, like money from the National Science Foundation that supports a specific project.
"While we certainly kept track of it on a detailed level, we didn't really pull it all together for purposes of reporting to the system or reporting internally," O'Donnell said.
Another major source of restricted funds is the University of Arkansas Foundation, a separate legal entity from the university that has a mission to receive, hold and invest donations made to UA-Fayetteville. Such money may flow into the university's budget in the form of a return on endowment funds.
"From an accounting perspective, from a business perspective, it's easier to kind of see the whole flow," O'Donnell said under the new reporting system.
A Section on 06/06/2014