Legislative Audit Committee to discuss UA file shredding

Another chapter in the saga of the University of Arkansas Advancement Division troubles will be written next Friday, December 13. It will be the main topic at the next Legislative Audit Committee meeting. At the September meeting, the committee voted to reopen the audit and prosecutors were asked to look into allegations of intentional destruction of relevant files, as well as into some financial irregularities.

Meanwhile, an extensive investigative report by Lisa Hammersly in the Arkansas Democrat Gazette raised additional serious issues about file shredding and will be sure to be considered by auditors and legislators. Here’s a flavor of what UA officials seem to regard as standard record-keeping practice:

“The chief financial officer for the University of Arkansas at Fayetteville’s fundraising division, Denise Reynolds, directed staff members to destroy hundreds of pounds of documents this year, according to emails and interviews obtained by the Arkansas Democrat-Gazette. The document-disposal project at three storage sites took place as state auditors investigated millions of dollars in overspending by the fundraising division, officially called the Division of University Advancement. (…) University emails obtained by the Democrat-Gazette and interviews with Advancement Division officials show at least one instance in which Reynolds approved the destruction of “payment authorization” records dated as recently as fiscal 2011. (…) The email and phone call took place within a week after Gearhart called in auditors from the Legislative Audit Division and the University of Arkansas System to investigate the division’s overspending. Reynolds’ response would have allowed for the destruction of payment authorization forms for fiscal 2011 and earlier. Since auditors released their report in September, university officials have said they aren’t responsible for retaining copies of payment authorization forms, which they say are available to auditors through the UA Foundation.”

This is consistent with allegations made by former communications director John Diamond:

“Testifying under oath, Diamond told the committee that Gearhart became angry during a Jan. 14 meeting of Advancement Division leaders and ordered Reynolds, Diamond and others in the room to “get rid of” budget-related records. Then in February, Diamond said, a directive was given to certain division employees to “destroy boxes of records as part of a housekeeping matter.” Diamond said he believed that’s one reason auditors couldn’t find all of the budget records they wanted.” (…)
Auditors’ Sept. 10 report cited two instances of difficulty obtaining records related to transactions with the UA Foundation:
Payment authorization forms. The report found 765 “payment authorization” forms for fiscal 2012. But when auditors looked back to fiscal 2011 and 2010, they located “only 20.”
“Worksheets and files detailing all foundation reimbursement requests” and budget reports prepared by former advancement budget officer Sharp. (…) The UA Foundation “payment authorization form” shows which university employee requested money from the foundation, how much, its purpose and who approved the transaction, as well as other information. After former UA spokesman Diamond told legislators at their Sept. 13 hearing that Advancement Division staff members were told to get rid of boxes of records, he said employees specifically asked about “payment authorizations.” They were told to discard those from fiscal 2011 and earlier, he said. “So they went to the shredder,” Diamond said. In response to Diamond’s allegations, university treasurer Schook told the joint auditing committee: “The [payment authorization] document is owned by the foundation.””

Notice what is going on here. The University leadership stubbornly claims that any financial transactions involving the UA Foundation are not of public record. The financial statements that the public gets to see are grotesquely incomplete (see also “The UA’s Athletic Budget”). Foundation records are shielded from the public eye, a practice decried by Freedom of Information experts. In the above case (of which many questions remain open), it appears that foundation records kept by the University were deliberately shredded to prevent them from becoming public (records stored by the UA are subject to FOIA – Schook’s claim that they are “owned by the foundation” is absurd). It is hard to believe that the people responsible weren’t aware how suspicious this shredding action during an ongoing audit investigation must look, and that it might even be illegal. That they went ahead anyway shows to what extraordinary length the UA leadership is willing to go to keep public scrutiny away from foundation finances. And that may be the real scandal behind the scandal.

Worth noting also is a new report showing that the Advancement Division is still in the red:

“The University of Arkansas at Fayetteville will transfer $2 million from its publicly funded reserves to offset overspending in its Advancement Division this fiscal year, said Mark Rushing, a UA spokesman.
A total of $6 million from reserves has been committed to the Advancement Division since a multimillion-dollar deficit was discovered in the division in July 2012. A $4 million transfer was made from reserves in January.”

Chancellor Gearhart has said that had he known about the division’s additional funding needs, he would have provided the funding. If it was so easy, one wonders, why hasn’t he? Why does the division keep drawing on UA reserves?

Other relevant links:
When the University of Arkansas speaks, people listen — carefully
UA evasive on emails with a columnist
University of Arkansas gang can’t shoot straight

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