Legislative auditors Thursday questioned whether the state Department of Human Services circumvented the Arkansas Constitution and state law with its two-month contract with Cindy Gillespie before she formally assumed her current position as executive director at a $280,000-a-year salary.
But the department's chief legal counsel, David Sterling, disagreed with the auditors' findings and said the department's contract with Gillespie didn't violate the constitution or state law.
The Legislative Joint Auditing Committee co-chairman, Sen. Jimmy Hickey, R-Texarkana, told fellow lawmakers, "We decided that we would just contact the governor's office [and] just let them know that there may be an issue with the way this was being done, and we thought this was the best way to handle it" before the department executed the contract with Gillespie.
In a statement issued after the meeting, Gov. Asa Hutchinson said, "We had the contract reviewed by our legal team, and we were comfortable with proceeding with that contract despite reservations by Legislative Audit.
"At the end of the day, though, the Legislature had the authority to approve or disapprove the executive director position at DHS, and they approved it," the governor said in a written statement issued after the legislative committee reviewed the department's audit.
Rep. Kim Hammer, R-Benton, said the Legislature could enact legislation in the future "where we could kind of close the loophole on this one, and take what we learn and move forward."
Gillespie is a former health care adviser to the former Republican governor and 2012 presidential nominee Mitt Romney. In February, Hutchinson announced Gillespie's hiring as executive director of the Department of Human Services, starting March 1, and her starting salary at $280,000 a year. But until April 30, she had a professional consulting services contract until the law on the director's salary could be changed to allow her salary.
Gillespie replaced longtime department director Jon Selig as the chief of the state's largest agency, which has a budget exceeding $8 billion a year and thousands of employees. Selig was paid $161,038 a year when he departed the agency.
Deputy Legislative Auditor Jon Moore said, "We question whether this contract circumvented the requirements" in the Arkansas Constitution's Article 16, Section 4, and Arkansas Code Annotated 19-11-1004 (d).
Article 16, Section 4, of the constitution provides that the General Assembly shall fix the salaries and fees of all officers of the state and no greater salary or fee than that fixed by law shall be paid any officer, employee or other person, Moore said.
Arkansas Code Annotated 19-11-1004 (d) states that no director or any other department head of any state agency shall receive additional compensation from professional or consultant services contracts, Moore said. Act 928 of 2015 established maximum-authorized salary for the Department of Human Service's executive director at $161,038 for fiscal year 2016, Moore said.
On Feb. 12, the department entered into a sole-source professional consulting services contract with Gillespie, starting March 1 and ending April 30, for a total of $49,000 or 30 percent of the originally authorized salary for the director's job, Moore said.
"The duties described in this contract are essentially the same as the duties associated with the legislatively established position of DHS Executive Director," Moore said. "The contract allowed the new DHS executive director to begin working before a new appropriation was approved by the General Assembly and to be compensated at a higher rate than that allowed by the current appropriation."
Act 2 of this year's fiscal session appropriated $280,000 for the maximum-authorized salary for the department's executive director, effective April 26, for the rest of fiscal year 2016, and Gillespie formally assumed the position of executive director on April 27, Moore said.
But Sterling said that Arkansas Legislative Audit's finding "is incorrect when it asserts that the duties assumed by Ms. Gillespie under the contract were 'essentially the same' as those of DHS director.
"As the executive head of DHS, the director is authorized by law and expected to promulgate standards and rules; to hire, fire and discipline staff; to conduct performance evaluations; to decide employee grievances; to execute contracts and agreements on behalf of DHS; to initiate and complete procurements; to allocate or transfer state and federal funds; and to authorize expenditures, among many other duties," Sterling said.
During the two-month period that Gillespie was under contract with the department, "she did none of these things, nor did the contract authorize her to do any of those things," he said.
Gillespie's responsibilities under the contract were limited to consulting services in organizational management for human services programs, and management consulting "is not equivalent to exercising the state's authority as an executive head of a state agency," Sterling said. During Gillespie's stint as a consultant, any or all exercises of state authority were undertaken by the department's deputy directors in direct coordination with the governor's office, he said.
Gillespie became the department's executive director -- a new position and new title created by Act 2 of the fiscal session -- on April 27, and she received no more compensation under contract for services provided after she was sworn in, so there has been no violation of Arkansas Code Annotated 19-11-1004 (d), Sterling said.
The limitations of Article 16, Section 4 of the Arkansas Constitution apply to state officers and employees, and she wasn't an officer or an employee when she was a consultant, so there has been no violation of the Arkansas Constitution, Sterling said.
But Frank Arey, attorney for Arkansas Legislative Audit, told lawmakers that there were a number of items and activities that occurred during this time period that "makes us feel comfortable with this assertion that she was in fact acting as director.
"DHS supplied us with a stack of documents that they say during this time were executed by other folks and that is in fact true..., but to our way of looking at this that was not inconsistent with her also serving as director at the same time," Arey said. "We feel like the effect of this personal services contract that Ms. Gillespie entered into was to pay her considerably more than this body had appropriated for this position."
Sen. Eddie Cheatham, D-Crossett, said Gillespie "is doing an excellent job.
"We don't want to start over trying to rehire her. She might change her mind," Cheatham said.
Metro on 10/14/2016