by Gwen Moritz
Posted 12/23/2013 12:00 am
Updated 2 months ago
As I have previously confessed, I was born suspicious. Therefore, I was instantly prepared to believe that a majority of the members of the Legislative Joint Auditing Committee had been persuaded to spare University of Arkansas administrators — particularly Chancellor David Gearhart — further embarrassment by depriving the man blamed for a multimillion-dollar budget deficit his one and only chance to tell his side of the story.
Subsequent reporting suggests that some of the legislators who voted to accept the Legislative Audit report didn’t realize that the vote would shut down testimony by the fired vice chancellor, Brad Choate. Neither prospect is encouraging — either they tried to squelch information or they didn’t know what they were doing — but I prefer ignorance to an orchestrated cover-up.
Giving people the benefit of the doubt is a good habit, one that I need to practice more since it doesn’t come naturally, and one that I have needed other people to extend to me on more than one occasion.
Our legal system recognizes different burdens of proof needed to overcome the benefit of the doubt — reasonable suspicion, preponderance of the evidence, beyond a reasonable doubt, etc. When it comes to the deficit fiasco in the UA’s Advancement Division, I’m perfectly willing to accept Deputy Prosecuting Attorney David Bercaw’s conclusion that there was no criminal intent by Choate or his unqualified budget officer, Joy Sharp.
Bercaw investigated a $2,050 duplicate reimbursement payment to Choate and determined that it was just a clerical error. This is believable to me. Now, if I received a couple of extra grand from my employer, I’d know it immediately. But unlike Choate, I’m not pulling down nearly $30,000 a month. It turns out that while the UA didn’t owe him that particular $2,050, it did owe him more than $7,700 in other reimbursements. The preponderance of the evidence is that Choate just wasn’t very good at accounting for his own money either.
The prosecutor also investigated Sharp’s deposit of $1.35 million that the Tyson family had specifically intended for the Jean Tyson Child Development Study Center into a non-restricted account that happened to have a negative balance that was even larger. Ultimately, Bercaw concluded that this was also a clerical error.
Jean Schook, the associate vice chancellor for finance at the UA, had previously done her own investigation, and she had given Sharp zero benefit of the doubt. In fact, Schook concluded that the transaction was “an intentional effort to disguise a prior year accounts receivable that had not been cleared” and a “misdirection of funds.”
Bercaw also gave much more benefit of the doubt to Schook, a CPA and certified fraud examiner, than Schook had extended to Sharp, who has a degree in English. He found no criminal intent in a most astonishing accounting practice that Schook defended even though it doesn’t even pass the time-honored “looks weird” test.
The UA, where Schook was hired as treasurer in 2007, apparently had a habit of dealing with year-end account deficits — as in the Advancement Division — by inserting a place-holding account receivable on the last day of the fiscal year. Thus the year-end account looked fine. On the next day, the account receivable was removed so that the account started the year in the red — but no one, including auditors, who looked at the year-end account, would know that. And since this was done repeatedly, a growing deficit would never show up in the year-end accounting. Only superior accounting practices by the University of Arkansas Foundation, which provided some of the Advancement Division’s funding, put a stop to the numbers game.
I’m glad to learn that Choate will get his chance to tell legislators his side of the story. I don’t expect him to be able to overcome the preponderance of evidence of his own incompetence and Sharp’s. But there’s already reasonable suspicion that the incompetence extended far above just the two who have already lost their jobs.
This is the last regular issue of Arkansas Business for 2013. Next week subscribers will receive the 2014 Book of Lists, a compilation of those indispensable business lists we produced over the past year.
A word to the wise: Write your name on the cover immediately.
Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com.