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UAMS audit finds $29M deficit; center used restricted funds, system trustees told

by Kat Stromquist | January 31, 2019 at 4:30 a.m.
The University of Arkansas for Medical Sciences' Little Rock campus is shown in this file photo.

An internal audit discovered accounting practices that had created a $29 million deficit over eight years at the University of Arkansas for Medical Sciences' Myeloma Center, university system chief audit executive Jacob Flournoy said Wednesday.

The audit, which was presented at a meeting of the University of Arkansas System board of trustees, had been initiated to integrate the Winthrop P. Rockefeller Cancer Institute and the Myeloma Center. Chancellor Cam Patterson had called for the assessment as part of "best practices" after assuming his role June 1.

"We've taken this situation [at the Myeloma Center] very seriously," Patterson told the board. "It's not something UAMS is proud of."

The audit's "major discovery," Patterson said, was a problem of using a restricted-funds account called a 279 account, which was incorrectly used for operating expenses. The audit identified a deficit in that account that had been growing since 2010 and should have been counted against the organization's net unrestricted position -- a way to measure fiscal performance -- on its balance sheet.

"So obviously, we have taken unrestricted dollars to now balance that out, and we will never, ever, ever let that happen again," he said. While the deficit has been resolved and the issue doesn't change the overall financial position of UAMS, "what this does indicate is that we didn't have appropriate oversight over one unit."

Flournoy told the board that auditors were still working through areas of clinical trials, grants and contract expenditures at the Myeloma Center, but so far they'd made five recommendations to right its books, including more detail and documentation in the way it made journal entries and additional oversight from accounting staff and Chief Financial Officer Amanda George.

One specific recommendation included a change to a policy that had allowed the CFO to delegate some responsibilities, including approving journal entries of $3 million or more, to the controller.

George said a recently reorganized financial division, which combines two separate departments that previously oversaw the clinical and campus sides of UAMS, is working to revise that policy by the end of February. Patterson said the new division is expected to improve controls, integration and transparency.

While typically an audit would not be presented to the board before it's finished, the bulk of the work was complete, Trustee Morril Harriman said. The audit won't be made official until after a final version is presented -- likely at the board's March meeting -- and voted on.

Trustees said they'd like for Flournoy at that meeting to identify an individual who was responsible for the issues.

The interim audit report comes at a time of transition for the Myeloma Center, which studies multiple myeloma (a plasma cell cancer) and related diseases and has long been a flagship program for UAMS. In addition to its ongoing integration with the Winthrop P. Rockefeller center, Patterson said the Myeloma Center's director, Dr. Gareth Morgan, will depart from his role Feb. 15.

Asked about a connection between the issues revealed by the audit and Morgan's resignation, Patterson said he had not spoken with Morgan about his reasoning and had not asked him to resign.

Morgan has served as head of the Myeloma Center since 2014, according to Arkansas Democrat-Gazette archives. At one point last June, his license to practice medicine in Arkansas was revoked by the state medical board after complaints of verbal harassment. (A directory on the state medical board's website says his license currently is active.)

Morgan's successor will be hired by the new director of the Winthrop P. Rockefeller Cancer Institute, a national search that is in the very end stages, Patterson said.

Dr. Frits van Rhee has been named interim director of the Myeloma Center.

Metro on 01/31/2019

Print Headline: UAMS audit finds $29M deficit; center used restricted funds, system trustees told

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