by Lance Turner
Posted 1/30/2014 03:02 pm
The University of Arkansas said Thursday that it will use existing reserves to "fully fund" annual operating expenses at its Division of University Advancement, and that a combination of reserves and private fund will eliminate a lingering $3.2 million deficit.
"The reallocation will come from the university’s contingency reserve funds, intended to meet necessary expenses that surface after the end of the traditional budgeting process," the university said in a news release. "These funds will be used to fully fund the division's annual budget for an interim period."
The moves come as the university tries to move on from controversey surrounding a $4 million shortfall in the division, which Arkansas Business first reported in December 2012. The deficit led to the dismissal of Brad Choate, the division's former vice chancellor, and Joy Sharp, its budget director.
Questions surrounding the deficit and the department's accounting practices led to a special legislative audit of the division, an investigation by the Washington County prosecutor and three legislative hearings.
Since then, the university has installed a new vice chancellor, Chris Wyrick, and adopted new accounting procedures recommended by the legislative audit.
But part of the deficit remains. On Thursday, the division said it will eliminate that shortfall, about $3.2 million accumulated from 2011 and 2012, with a combination of university reserve and private funds.
Laura Jacobs, associate vice chancellor of university relations, told Arkansas Business that "$2.7 million or some smaller amount" in one-time reserves will be required to eliminate the cumulative deficit. She said the exact amount won't be available until the end of the fiscal year.
The rest will come from private funds derived from the Advancement Division's annual share of its endowment, which now worth more than $825 million.
The university is now in "the quiet phase" of a "major" fundraising campaign to increase the endowment. Jacobs said while there's isn't a date set for a public launch of the campaign, it won't launch this fiscal year.
The university said it expects the growth of the endowment to "create substantial additional revenue, a portion of which will go to the Advancement Division to balance its annual budget and repay the contingency reserve fund."