A University of Arkansas System request for $1.5 million from the state's restricted reserve fund received legislative approval on Friday after the system's top leader told legislators about financial needs related to the acquisition of an online-only university.
"The one thing that we can't forget is that when you acquire a university of 4,000 students, there is a time lag between when the students enroll in class and when they actually get paid, and that time lag varies from the federal government to Pell Grants and other financial aid," UA System President Donald Bobbitt said earlier in the week, during the Arkansas Legislative Council's Performance Evaluation and Expenditure Review Committee meeting Monday.
The state money is a part of the system's efforts to cover expenses associated with Lenexa, Kan.-based Grantham University.
On Friday, the University of Arkansas board of trustees approved a plan to seek a line of credit of up to $8 million that the UA System's chief financial officer, Gina Terry, said would be used "on an as-needed basis" to meet financial obligations associated with managing the school.
Trustees approved in August a $1 acquisition of Grantham University, agreeing to take on "certain discrete liabilities" while acquiring "substantially all the assets" of the institution.
In Monday's meeting, State Sen. Missy Irvin, R-Mountain View, asked why the UA System is requesting $1.5 million in restricted reserve funds to support the purchase of Grantham University for $1. Along with the lag in financial aid, Bobbitt referred to contract expenses.
"Also, day one we will then be responsible for the contract to the student information system to the online program managing system [and] other types of systems that we need to be able to manage in our environment," Bobbitt said.
"All of those ... actually comes to over $3 million," he said. "We are asking for less than half [in state funds] to help us and try to internally reallocate money to be able to cover this."
The state's restricted reserve fund totals $68.5 million, after the Legislative Council approved the $1.5 million request for the UA System and a $2.25 million request from the Department of Agriculture for grants to county and district fairs, Department of Finance and Administration spokesman Scott Hardin said.
Finance department Secretary Larry Walther recommended the council approve the requested transfers from the restricted reserve fund.
Grantham is a fully-online institution founded primarily by and in service to the members of the military and first responders, Bobbitt said in a letter dated Sept. 2 to Walther. The college's degree programs complement and expand on the UA System's current online programs and have a continued focus on workforce needs, the letter states.
The UA System's eVersity is an online-only venture created with board of trustees approval in 2014 to recruit working adults and enroll them in programs to finish their degrees. The eVersity program has roughly 700 students and employs about 20 full-time staff members and a pool of 36 faculty members, UA System spokesman Nate Hinkel said.
An acquisition proposal presented to UA System trustees back in August stated that "the new campus will eventually integrate with eVersity, resulting in a single online university."
"The acquisition comes as other public universities have acquired for-profit, online institutions across the country, including Purdue University's purchase of Kaplan University and the University of Arizona's more recent purchase of Ashford University," Bobbitt wrote in his letter to Walther.
The UA System is acquiring a respected, accredited university for the purchase price of $1, Bobbitt said.
"The transaction includes intellectual property to serve more than 60 degree programs and will bring approximately 4,000 students, 170 full-time staff and 240 part-time faculty into the UA System," he wrote.
Bobbitt said Monday that the owners of Grantham University eventually decided the best way to honor its legacy of serving military and first responders would be collaborate with an existing institution with the same philosophy.
"They have been willing to take a loss of probably $8 million to $10 million on their books in order to ensure the legacy," he said.
An independent appraiser appraised the business at about $27 million, Bobbitt said.
"While I am requesting assistance with startup funds, UA-Graham will not request general revenue for its annual operations," Bobbitt said Monday.
Hinkel said the system is aiming to close on the acquisition of Grantham in October.
At Friday's meeting of the UA board of trustees, Terry said the line of credit is proposed to be for a term of two years. She cited the leasing of office space among the expenses associated with Grantham University.
No financial terms for the credit line have been determined, Terry told trustees, with talks still ongoing with various banking institutions. Board documents stated that the interest rate will be approved by Bobbitt and Terry.
The trustees board approved the request for a line of credit without any opposition.