Legislative Joint Auditing
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Speaker 5
4:00
Hey, members, let's get settled in our seats. so we can
call this meeting to order, please.
Thank you, sir. All right, we're calling today's meeting to order. The first order of business today is the adoption of minutes of the January 24, 2020 meeting.
I believe everybody received that via email. If we have no objections, we're going to consider those minutes adopted. Any objections? All right, thank you. We're going to consider those adopted. The next item of business, item C on the
agenda, is adoption of reports of executive and standing committees. Senator Pitch, you're recognized to present the report from the executive committee. Thank you, Mr. Chair.
Senator Mathew Pitsch
Unverified
5:32
The Executive Committee met Thursday, February 27th. Staff reported to the committee the audit, special investigative and shortage report scheduled to be presented to the standing committees and the full legislative joint auditing committee this month. The committee approved a request to perform limited procedures for the New Beginning Center for Alcohol and Substance Abuse Treatment and its facilities. other business, the committee approved the legislative auditor's employment of outside legal counsel to address an EEOC matter. With no additional business to discuss, the meeting
was adjourned. The next meeting of the committee will be held on Thursday, June
11, 2020. I move for adoption of this report, Mr. Chairman. Thank you,
sir. We have a motion. Do we have a second? Second. We have a second. All those in favor say aye. Aye. All opposed, no. All right. Thank you, committee. That'll stand adopted. Next will be the report on Standing Committee on Counties and Municipalities. Representative Watson, you're recognized.
Representative Danny Watson
Unverified
6:40
Thank you, Mr. Chair. The committee adopted the minutes of the January 23rd, 2020 meeting. Standing Committee on Counties and Municipalities met yesterday, February the 27th. discussed the towns having turn back withheld per Arkansas Code section 1459-117. Staff reported that the towns of Allport and Jericho remained in substantial noncompliance with the municipal accounting law.
Allport officials were first notified that their records were in noncompliance with the municipal accounting law in November of 2017. Per Arkansas Code section 1459-117-D1, if the town's records remain in noncompliance after 120 days, the legislative joint auditing committee may report to the treasurer of state. This would require the treasurer to withhold 100% of the town's turn back, but the town of Allport is currently ineligible to receive any turn back.
They are going through this process for the second time. The Standing Committee on Counties and Municipalities recommends to the Legislative Joint Auditing Committee that the provisions of Arkansas Code Section 1459-117 continue for the town of Allport. And the Standing Committee also recommends that the state treasurer be notified of the town's status regarding the municipal accounting law. Jericho officials were first notified that their records were in noncompliance with the Municipal Accounting Law in May of 2019, per Code Section 1459117E1.
If the town's records remain in noncompliance after six months, the Legislative Joint Auditing Committee may notify the municipality and the treasurer of state of the continued noncompliance. Per Code Section 1459.117.E.2, upon notice by the Legislative Joint Auditing Committee, the municipality forfeits all escrowed funds and Treasurer of State shall redistribute the forfeited escrowed turnback to other municipalities who receive turnback.
The municipality will not be eligible to receive turn back until Arkansas legislative audit has determined that their records are in substantial compliance with the municipal accounting law. The Standing Committee on Counties and Municipalities recommends to the Legislative Joint Auditing Committee that the provisions of Arkansas Code Section 1459-117 continue for the town of Jericho, and the Standing Committee also recommends that the state treasurer be notified of the town's status regarding the municipal accounting law.
There were four reports deferred from the January 23rd, 2020 meeting. Officials from three of these entities were present to address their repeat findings. The committee filed three reports and deferred one. The committee also reviewed 102 current reports, including one investigative report and two investigative letters. three of these were certified to the bond board and 18 were referred to prosecuting attorneys officials from eight entities were present to address
the repeat findings in their current reports the committee filed 96 current reports and deferred six mr. chair I move for adoption of this report thank you
representative we've got a motion may have a second got a second or is there Any question or comment on this report before we vote? Seeing none, all those. Representative Love,
Representative Fredrick J. Love
Unverified
10:20
do you have a question? I have a question, yes.
Thank you, Mr. Chair. Mr. Norman, because I've served on that committee with the counties for quite a bit sometime, and Jericho and the other county continues to come up. And I know before I did ask if there's anything that legislative audit could do, and now we're taking their turn back funds. I'm just thinking, is this something that if hired a CPA or a firm could not come in and assist in the record keeping or whatever audit finding that they're having,
Is this something that a CPA could not assist
Speaker 32
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them with? Yes, sir. A private firm could if the city or the town so chose,
Representative Fredrick J. Love
Unverified
11:22
they could hire a CPA to assist them. Okay. Because the reason why I ask that, and I'm talking to our members now, the reason why I ask that question is because if we're taking turn back, That does not really assist these small towns and cities moving forward.
And if this committee could or would consider the turn back that we take investing in and possibly investing in CPAs to assist these towns and getting them on the right track, I think that's a better investment than taking their turn back and then distributing it to other municipalities. because we are still not we are still not ensuring that they will they will get into compliance and so I would hope that in the future or moving forward we
would come up with some plan to assist these small towns and communities because they won't get any better unless unless we unless we move forward and help them so with that being said I hope that in the future that we can consider some sort of um solution to these to
these audit findings because they'll just continue to get worse and worse so thank you all right thank
you represent love we have a motion
and a second on well senator rye do you have a question
Representative Johnny Rye
Unverified
12:44
yes sir uh thank you mr chairman uh mr chairman
it seems like that you know this has happened two and three times it's not like it was just one time And, boy, you know, you hate to see cities lose money like that. But let me ask you this, Mr. Roger. At the end, if these counties and cities get theirself back into condition and compliance, do they not
Speaker 41
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go ahead and follow that lost term back? I believe
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after, there's procedures set up where they partially lose it, and it's held in escrow at the treasurer's office.
Speaker 44
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But after a certain length of time, I think it's a year, then they do lose it. But we notify them, we'll go back, we'll check, we'll tell them what's happening. And if it's not corrected, then after a year, then they lose that. You're right. And otherwise, there would be nothing to, there's no incentive for them to really follow the laws. Follow-up, please. You recognize?
Representative Johnny Rye
Unverified
13:53
Yes, sir. Thank you, Mr. Chairman. But it
Speaker 41
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does give them a year, doesn't it, Mr. Rogers?
Speaker 50
13:59
Yes, sir. It's at least a year, I believe. Is that
Speaker 32
14:05
correct, Frank? 60 days, 60 days, so a total of 180 days. Before
Speaker 51
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they lose everything? Yes, sir. Okay, it's
180 days, so it's a half a year. Okay, we have a motion and a second on the table for adoption of this report. All those in, Representative Cloud, are you recognized for questions or
Representative Joe Cloud
Unverified
14:26
comments? Representative Cloud? Is it? Representative Hodges then.
Speaker 56
14:30
I'm sorry. I hate to prolong this process, and I appreciate the comments that Representative Love made. And Representative Rye. the question I have is I know that the the city of Jericho yeah I'm sorry city of Jericho has had some issues with leadership I know they just got a new mayor and the mayor prior to them had some issues with the finances doing some
discrepancies with the finance and now they have a new mayor that's in office Or do we take those in consideration, the fact that the new leadership comes into office with these issues already lingering in the city, but yet they've been penalized for what happened prior to them coming in? And I think that's not fair to the new leadership, you know, taking money away from them when they're just getting started. yes sir well
Speaker 32
15:33
as soon as they correct the the issues then we can go out and look
at that and certify that they are in compliance and and they'll start receiving their turn back but if it's over a certain period of time they will they will not regain what's been lost because
Speaker 56
15:49
I know the city of Jericho has had some serious issues over the past several years I know the mayor prior to the new one there's some discrepancies in the finances the things that were done that weren't correct so all right members we have a
Senator Mark Johnson
Unverified
16:14
Senator Johnson you recognized thank you mr. chair I appreciate Representative Love's comments and certainly we've got situations where if If we can put a guiding hand on some localities that a lot of problems will be solved and the citizens will be better served. But sitting on some of these hearings in the subcommittee, it's clear that there are two situations. There's the ones you described, and it's not just someone that had a problem.
Sometimes it's a very small town. The recorder treasurer is the mayor's wife, and they just literally just don't have a lot of – They're trying hard, and they just make honest mistakes and give credit to the municipal league who's often there to guide them, and maybe they might be a great partner to do the kind of thing you're suggesting. However, I think we do have some situations, and it's coming clear sitting in several of these subcommittee meetings when these audits come up that there are some cities and counties,
but mostly cities, counties generally are more competent than that, but that are kind of thumbing our nose, their nose at us, and they have multiple, multiple, multiple findings. There's some things that you could see how they could honestly make a mistake, and others it's hard to even justify that they could make a mistake. It had to be something that someone should have been able to catch. But I believe it's just like our state troopers out on the freeway. They need to show compassion and everything, but we need to patrol.
And as I mentioned to someone recently, you know, if you never have radar out on 630, everybody's going to drive 90. Every now and then, you've got to have a radar gun set up, and you've got to pull somebody over and give them a ticket. And when you do, then the rest of them will get the idea that they better slow down. And so I'm hoping that we will at least take a serious look at enforcing what we are supposed to do from an audit situation. In the immortal words of Senator Dirksen, a billion here, a billion there.
pretty soon you're talking real money and and that's really what we're looking at we're looking at thousand here a few thousand there and and pretty soon it's a lot of money and it's also citizens that aren't getting the services that they deserve so thank you mr. chair I know this much of this is something to be done for another day but thank you for
allowing me to comment on that thank you senator all right the motion and second are on the table for adoption
of this report all those in favor say aye all opposed no thank you that will be adopted next up is the report for the standing committee on educational
institutions representative Barry you're recognized mr. chairman
Representative Stan Berry
Unverified
19:08
the committee met yesterday February the 27th and the committee reviewed 57 current school district audit reports for the year ended June 30 2019 the superintendent of Lee County District was present and answered questions from the committee relating the findings which of were some of which were repeat findings contained in the
district's audit report as well as the district's physical distress status the audit report of the Lee County School District were certified by the government bonding board as well as referred to the applicable prosecuting attorney. The audit reports of Baseville, Camden Fairview, Green Forest, and West Helena school districts were referred to the applicable prosecuting attorney. The committee adopted a motion for the staff to provide notification to all applicable
legislators prior to the Standing Committee on Educational Institutions before our meeting informing them of school districts within their legislative district which audit report is being presented with findings the committee filed the 57 of the current audit reports that were brought before the committee at this time mr chairman i move for adoption of the report all right may i have a second
second second uh is there any question
or comment before we vote? Seeing none, all those in favor of adoption, say aye. All opposed, no. Thank you. That one will stand adopted. Next item is a report for the Standing Committee on State Agencies. Representative Richardson, you're recognized.
You push the button again, yellow button.
Representative Jay Richardson
Unverified
21:11
Eight reports on the committee's agenda yesterday. Four current reports with findings were presented. The auditor of state continued to have errors in posting stock-related transactions to unclaimed properties, owner's accounts, as well as in calculating unclaimed property transferred to DF&A. The state insurance department failed to properly retire fixed assets and to receipt all items of income. The Arkansas teacher retirement system did not properly discontinue the benefits of two
members, resulting in overpayments totaling $320,000. Errors were also noted in the data used by the agency's actuary to calculate the retirement liability. The Department of Workforce Services paid for an independent assessment of software developed for the agency. However the vendor paid was also a lobbyist for the IT company that developed the software. In addition, the agency had question costs on the contract from the Temporary Assistance for Needy Families TANF Federal Grant.
Various agency staff members were present to report on how the agencies intend to address and audit findings and to answer committee questions. During the meeting, the committee adopted a motion to file the eight current reports. With that, Mr. Chair, I move to adopt this report. Thank you, Representative. Do I have
a second? You got a second? Any question or comment? All right, seeing none. All those in
favor of adoption, say aye. Aye. All opposed, no. Thank you. That will stand adopted.
Thank you, members. The next item of business is the review of reports. The first one to be presented today is the Comprehensive Annual Financial Report for DF&A for the Office of the Arkansas Lottery for the fiscal year ended June 30, 2019. Mr. Murchison, you are recognized to present the
Speaker 77
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report. This presentation covers the comprehensive annual financial report for the DFA Office of the Arkansas Lottery for the year ended June 30, 2019.
Operating revenues totaled just over $516 million in fiscal year 2019, an increase of 3.2% from fiscal year 2018. Instant ticket sales comprise 79% of revenues, while online ticket sales compose just under 21%. According to DFA, since the lottery's inception in 2009, more than $879 million in proceeds have provided more than half a million scholarship to Arkansas students. Game revenues are made up of a variety of instant and online lottery products.
The table on this slide is found on page 7 of the report and shows instant ticket and online game sales for fiscal years 2019 and 2018. Instant tickets are the most popular product, making up 79% of sales. However, the majority of the overall increase in fiscal year 2019 was in online game sales. The lottery's expenses totaled $421 million, a 2.9% increase over the previous year. This increase was primarily related to increases in online game prizes, gaming contract costs, and retailer commissions.
Prizes awarded to players represented just under $350 million, or 83.1% of total expenditures. Lottery proceeds are used to fund two scholarship programs, the Academic Challenge Scholarship and the Workforce Challenge Scholarship. The latter, created by Act 613 of 2017, uses excess lottery proceeds to provide scholarships of up to $800 for students completing certificate programs
or other workforce training programs in high-needs areas. Act 456 of 2019 created the Arkansas Concurrent Challenge Scholarship, and Act 1026 of 2019 created the Academic Support Scholarship, both of which will be funded with proceeds remaining after Workforce Challenge scholarships are awarded. Net proceeds available for scholarships at June 30, 2019, total over $98 million,
which was 19% of total revenues and a 7.4% increase over the prior year. Of this amount, $76 million was transferred to the Department of Higher Education for scholarships, and excess net proceeds of $22.6 million were transferred to the Workforce Challenge Trust account. For the year ended June 30, 2019, the Department of Higher Education awarded over 59,000 academic
challenge scholarships totaling over 89 million and 208 workforce challenge scholarships totaling over 161,000. The report did not have any findings. This concludes my presentation of the CAFR for the Office of the Arkansas Lottery for the year-ended June 30th, 2019. Representatives from DFA and the Lottery Office are present to answer any committee questions.
Thank you, sir. Do we have any committee question? I'm not seeing anything come
up on the queue. Seeing none, we will consider that report reviewed. Thank you, sir. next item of business is Henderson State University audit report for the year
end of June 30th 2018 Mr. Solorio you're recognized to present
Speaker 85
27:05
Thank you, Mr. Chair. This presentation covers the 2018 and 2019 audit reports for Henderson State University. Located in Arkadelphia, the university had an enrollment of 3,300 students in the fall 2017 semester, and nearly 4,000 students
in the fall 2018 semester. During recent years, the university has experienced significant financial difficulties. The university's unrestricted net position at June 30th, 2019 was a deficit of $14.6 million. In addition, the university's cash and cash equivalents decreased from $9.1 million to less than $1 million over a two-year period. The university president resigned in July 2019. The next six slides present the 2018 audit findings and management responses.
University's internal control system did not detect or prevent material misstatements in the financial statements. Allowance for doubtful accounts on student accounts receivable was understated by $2.3 million, which resulted in net student accounts receivable being overstated by the same amount. Accounts payable was understated by almost $184,000. debt deficiency was understated by a net amount of $78,000. Student tuition and
fees revenue was overstated by $474,000. Athletics auxiliary revenue was overstated by $31,000. Housing and food service auxiliary revenue was overstated by $200,000. A restatement for a prior period adjustment of almost 1.8 million dollars was not recorded. Supplies and other services were overstated by a net amount of almost $118,000. Bond issuance costs were understated by $150,000 and interest and fees on long-term debt were
understated by a net amount of over $72,000. The university corrected these misstatements during the audit. University had an unwritten policy of allowing students with a current balance of less than $4,800 to register for the upcoming semester and of automatically enrolling students in an installment plan each semester. During our examination of 26 student accounts, we noted 17 students were allowed to enroll with a balance that exceeded $4,800 and 17 students did not make any payments during the fall but
were allowed to re-enroll for subsequent semesters additionally we examined 12 delinquent student accounts to determine compliance with the university's policies and procedures and state regulations regarding collection of outstanding debt our review revealed that the university was not diligently and actively pursuing collection of outstanding balances for eight students and three students were allowed to enroll with a balance that exceeded the university policy. The
university concurred with finding one and stated that a new vice president for finance and administration had been hired and additional review procedures will be implemented. The university also concurred with finding two and stated that a plan to address the student account issues has been developed. Additionally the board of trustees approved student account policies for current and future students. The next three slides present the 2019 audit findings. As in 2018, the university's internal control system did not detect
or prevent material misstatements in the financial statements. Net pension liability was overstated by over $530,000. Deferred inflows related to pensions were understated by $364,000. Deferred outflows related to pensions were overstated by $685,000 and cash and accounts payable were understated by over $196,000. The university corrected these misstatements during the audit. As noted in the previous audit, the university allows students with a
current balance of less than $4,800 to register for the upcoming semester and to automatically enroll students in an installment plan each semester. During our examination of 10 student accounts we noted that eight students were allowed to enroll with a balance that exceeded $4,800 and five students did not make any payments during the fall but were allowed to re-enroll for subsequent semesters. Additionally for eight of ten delinquent student accounts we examined the university was not diligently and actively pursuing
collection of the outstanding balances in non-compliance with the university policy and state law. It should be noted that legislative audit is currently reviewing the university's student financial aid program and will issue a report at a later date. Management concurred with the 2019 findings and provided responses that were similar to those provided in 2018 as shown on the slide. Due to financial issues detected in the audits presented today, we were
required by auditing standards to question the university's ability to continue to exist and operate as a going concern. As stated previously, the The university's unrestricted net position at June 30th, 2019, was a deficit $14.6 million. For purposes of evaluating going concern, the net pension and other post-employment benefits liabilities are excluded, making the deficit unrestricted net position approximately $4 million. In July 2019, the university requested a $6 million advance on its general revenue appropriation from the state,
and Moody's Investor Service downgraded the university's bond rating. In response, the Board of Trustees and university management have implemented several corrective actions. First, the university implemented a $3.5 million budget reduction for the current year, including reductions in professional staff and faculty salaries, retirement match contributions, and supplies and services budgets. the University also implemented a hiring freeze and travel restrictions second
the Board of Trustees voted unanimous unanimously in November 2019 to merge with the Arkansas State University system with an estimated effective date of January 1 2021 finally the University has determined it will not be feasible to repay the six million dollar advance by the end of the 2020 fiscal year as initially agreed upon. Discussions with state officials to extend the repayment terms are ongoing. This concludes my presentation of the 2018 and 2019 auto reports for Henderson State University. Officials from the university and from
the ASU system are present to answer committee questions.
Thank you, sir. Senator Dismang, you're recognized for a question. Thank you, Mr. Chairman,
Senator Jonathan Dismang
Unverified
34:32
and I I think my question is probably for the – I don't know how this works. So do we have past staff here that's still on, or – I'm trying to follow the report. We have findings, recommendations, and then –
As far as staff, we have current people and past people that are no longer employed there and past people that are still employed there.
Senator Jonathan Dismang
Unverified
34:56
We've got some of everybody. All right, so I guess my question would be really on the accounts receivable and it's understatement by 2.3 million. So what I'm wondering is, why did that exist? Was it because there was just not enough knowledge to know how to create a formula and a reasonable estimate of what was collectible or not? Was it intentionally left off to help bolster the books because they were such in a bad position financially? You know, I think it's important to understand why that understatement existed.
okay I agree let's uh in in light of that question how about we call uh Dr. Brett Powell who's a former CFO of Henderson to the table maybe
he can shed some light on that and uh just just to get it out there the our guests today that are here under order of subpoena uh that subpoena is not retired until this meeting is adjourned so if you leave the table after giving testimony please don't leave until the meeting is adjourned today we may need you back at some point. Dr. Powell,
would you mind standing, please? As is our custom here, we're
going to put you under oath. Please state your name, employer, and position for the record. Brett
Speaker 104
36:12
Powell, former vice president, finance administration at Anderson State University. Thank you, sir. Would you
please raise your right hand? Do you solemnly swear
or affirm that the testimony you're about to give will be the truth, the whole truth, and nothing but the truth, so help you
God? I do. All right. Thank you, sir. Before we get into questions, do you have a statement prepared that you'd like to share with us?
Speaker 104
36:39
have several slides that I think would help illustrate and provide some context, if I could show those.
Speaker 112
36:56
Yeah, please do. Thank you. So there's a good bit of context that I think is necessary to understand the audit reports, the results that you all are looking at.
And there's really three pieces of this. So what I want to spend some time on is to talk through organizational context, an overview
Speaker 104
37:20
of the finances of the university that led up to the period where I came as vice president, and then talk through the events that occurred in my time that I was there. So starting with organizational
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37:37
context, there's several things that are important to this to understand the financial challenges of Henderson.
And it starts with enrollment trend that was negative for a number of years, and I'll provide data
Speaker 104
37:55
to support all of this shortly. In addition to that, the net tuition revenue, of course, declined in years when enrollment declined, but even when enrollment was increasing, it didn't necessarily have a positive impact on net tuition revenue, which, again, I'll provide some context to.
Speaker 112
38:17
And the third part of the budget challenge is really about how the budget was allocated, and essentially that
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was that resources were quite limited. and were not being used in the way that led to student success, which exacerbated the enrollment
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challenge because of retention and graduation issues. So that's the first part of the context you need to understand, and
Speaker 104
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I'll provide much more detail behind that. The second is a result of what I mentioned as budget allocation issues,
and that is underinvestment in really the three most critical areas of operating a university. Universities are essentially the people and the facilities, and there was no investment in any of those areas in recent years, and I have data to show that. So salaries were lagging. Facilities were in significant. There was a significant lack of investment in the facilities at the university, And technology, in many cases, was 10 to 20 years behind what was necessary to operate the university.
Speaker 112
39:29
And then you add to these challenges the cultural challenges that exist at Henderson. So there's a tension between the students that, and this is repeated many, many times during my years at Henderson. this tension between the students that we want to serve and the students that we actually
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serve. And that is we want the best and brightest, but we serve the students that are there, and those are not the best and brightest.
And if we're not investing in the students that we have, they're destined to fail, which
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40:07
is borne out by the data. There was a significant mistrust of the administration that existed when I got there in 2016, and certainly didn't get better during the time that I was there. And that was evidence. I put up here this culture survey because it's an indication of that level of mistrust.
Speaker 104
40:32
This culture survey was taken shortly before I came in 2016. The results of it were never released because they were so critical of the institution. That was the context around which we tried to operate from
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40:54
2016 to 2019 when I was there. So the financial overview of Henderson really need to start here.
And this is the unrestricted fund balance of the university. So I've not included the most recent year because I didn't have access to that data. But you can see that these challenges obviously go back far before 17, 18 financial statements that you all are looking at. These are
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longstanding issues. Dr. Powell, would you,
that is so small and we don't have a paper copy.
Would you mind stating those numbers? Sure.
Speaker 112
41:39
So unrestricted fund balance at the end of the 13-14 fiscal year was $8.6 million. It declined in 14-15, 15-16, 16-17, and 17-18. So by the end of that period, unrestricted fund balance was negative. Declines in each of those years from $8.6 million to $4.1 million, $2.8 million, $1.2 million, and then negative. And what is that negative?
Speaker 104
42:07
Negative 1.7. Thank you. So there are a number of drivers that led to these declines that I think are helpful to understand, again, to provide context. So this is
Speaker 112
42:26
the first. This is spending per student. so these next several slides what i what i'm providing here is information that i provided to the faculty and staff at henderson in several different venues hey dr powell i hate to interrupt
but if you don't mind those more critical points the actual numbers if
you could provide them because i know there's many members here
Speaker 126
42:52
that can't read that sure i know that's going to It would be
Speaker 112
42:59
a little difficult, but we need those numbers, please. So this chart is
Speaker 104
43:04
spending per student. This is the average expenses per student. And the comparisons here are to how does Henderson compare to similar institutions. And the best way to compare is by Carnegie classification.
This is how every college and university is classified with the type of institutions that is
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43:22
most similar to. So Henderson is what's considered a master's, college, and university medium programs. There are 68 similar public universities in the U.S. So what this chart shows is,
Speaker 104
43:36
and I'm having a little trouble reading the numbers myself, what this chart shows
Speaker 112
43:42
is that the expenses are divided into what's really critical for the mission of the institution,
Teaching, research, public service, versus academic support, student services, and then institutional support. Institutional support being the administrative and non-teaching function of the university, what it takes to operate the institution. So the bottom line of this is that the institution was under-investing
Speaker 104
44:15
in its mission, teaching mission, when you compare to other institutions, just like it.
It was under-investing in academic support, the services that students need to be successful. It was under-investing in student services, but
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spending at slightly above its peers in institutional support, the expenses that don't make any
Speaker 104
44:38
difference to the success rate of students. These numbers are from 15, 16, the year before I came to Henderson. So all of this information is what I compiled to try to get a better understanding of where we were when I stepped into this role.
So under-investing in the mission, under-investing in the success of students, under-investing in anything that had a direct relationship to student success. Then if
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45:12
you look at spending as a percentage of the budget, how was the budget allocated? The bulk of it was allocated to the mission, which it should be, so 53% of the budget went
to instruction, research, and public service, which compares very well with peer institutions. So it was slightly above what like institutions, how they allocate their budget. Academic support was significantly under-allocated. Again, academic support is the resources that students need to be successful. And institutional support was significantly over-allocated, right? So if you put these two
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45:55
things together, the budget is not allocated correctly, right?
too much being spent on institutional support, not enough being spent on student support, the support of students. So there's not enough resources, which is what the spending per student says, and there's not a good allocation of resources to ensure that students are going to be successful. The most significant expense at virtually every university is salaries, because universities
are about the faculty and
Speaker 112
46:34
staff. This is the most significant area of underinvestment that had occurred in the period up to 2016 when I arrived. So this is average salaries by type of employee, instruction, non-instruction, and management. And they're all under, right? So that means that
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46:56
in every case, faculty and staff were being underpaid in comparison
to their peers. And this was
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47:03
the most important priority when I arrived, and it was still the most important priority when I left in 2019, was to get these salaries up to peer levels. There was a compensation plan that had been developed before I even arrived that we were trying to make the top priority in spending. So for example, faculty salaries in comparison to peers were 15,000 less than peer institutions,
which is about 30% below peers. So faculty at Henderson were being paid 30% less than their peers at other institutions. And, as I said, underspending
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across all types of employees. If you look, though,
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at the head count, how faculty and staff were the hiring patterns,
how many faculty were there compared to students, how many staff are there compared to students, a little bit of a different picture here. And this goes back to the institution that Henderson wanted to be versus what it is. So there are two important numbers on this page. One is Henderson's enrollment at the time of this data, 2015-16, was 3,500 students. That peer group that I mentioned, the 68 other institutions that are just like it, their
Their average enrollment was above 6,000, which means that to be the type of institution that it is, it's entirely too
Speaker 104
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small. You need a certain level of revenue to support the type of activities that a master's granting institution is trying to, what am I trying to
Speaker 112
49:00
say? You need a certain level of revenue to support the activities of a master's granting institution, And because the enrollment was so low, Henderson does not have the resources to be the institution
that it wants to be. And that is the most significant issue in these financial challenges at the time that I arrived, and they're still there today. And despite this fact, there was an effort to add even more programs. There was an effort to add doctoral programs at an institution that's struggling to survive. It's a mismatch between what we want to be and what we are. So if you take that enrollment and you plug that into what does that mean in terms of
how many people do we have to serve students? Institutions like Henderson have 27 students per faculty, right? So on average, there's 27 students sitting in every classroom. At Henderson, that's 20 compared to 27. That is a significant difference, 20 to 27. If you look at management staff, like institutions, have 146 students for every management staff
member. At Henderson, that's almost half. And that, again, is size related. are too few students based on the size of institution, the number of people that are employed. So this is directly related back to why are salaries so low? It's because there's too many people.
Speaker 104
50:41
If you right-size the staff, you right-size the salaries. So here's the result. And again, I apologize that you can't read all this very well, but I'll make sure
that you all have copies of this if that's what the chair desires.
Speaker 114
51:02
So I started, for my own analysis, to understand what needs to happen. I started comparing what results come
Speaker 104
51:08
from this. And if you look at institutions
Speaker 112
51:13
that the profile is the same, and there's three lines there that are highlighted. It's Henderson State, Northern Michigan University, and Winona State University.
Speaker 104
51:22
They enrolled the same students. If you look at the profile of the student that comes in based on ACT score, they're the same students, average of 25, spend about the same.
So Henderson spends $10,900 per
Speaker 112
51:35
student compared to $11,000 for Northern Michigan and $11,000 for Wynonna
Speaker 104
51:41
State. So the spending is roughly the same. The students are roughly the same. The results are drastically
Speaker 112
51:48
different. Six-year graduation rate for Henderson at the time was 33%. 33% of students graduate. Northern Michigan's 47%. Winona State is 59%. And that is a
Speaker 104
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direct relation to where are the dollars spent.
If you don't spend money on
Speaker 114
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supporting the students that you enroll, you don't graduate students. And that's the picture
Speaker 112
52:23
that this chart shows. So there's one additional piece of the financial drivers that is important, and that's debt service. So I compared 2014-15 to 2017-18 because 2014-15 is the year before.
Sometime during that fiscal year, there was a significant new bond issue. I don't remember the numbers. I think it was $35 million. It may have been more than that. I don't remember the numbers. The debt service on that bond issue was fully absorbed into the budget in 2017-18, and it almost doubled
Speaker 104
53:00
the amount of debt service that was required. So any new resources went straight to paying debt. There was no opportunity to invest in all these priorities of taking care of salaries,
taking care of buildings, taking care of technology. So all of that financial context leads to
Speaker 112
53:21
this. So as I said, all of this is data that I compiled when I was trying to understand what do we need to do to right size the financial
Speaker 104
53:31
picture of the university. And obviously these are significant challenges, and there's two ways that you can address these kinds of challenges. You can do it with an ax, or you can do it with a surgical knife.
Speaker 112
53:46
Now in many cases, the ax is probably better because of the size of the challenges. But you also have to add in the cultural context that existed at the time. And
Speaker 104
54:01
acts would not have been accepted at that time. So the only real choice we had was a surgical knife to try to slowly and surely get to the point that Henderson could be the institution that it wanted to be.
So that was the path that we started on in the
Speaker 112
54:21
fall of 2016 when I got there to try to correct all of these issues. so now you need to add into this picture some tuition related drivers
Speaker 104
54:35
so the first one is enrollment related and really all that matters on that this chart is if you look
Speaker 112
54:45
at that blue line that goes down the side of the chart which is enrollment
It declined every year from 12 to 17, and that's, you know, there are certainly times in an institution's history where enrollment declines, and there are times when enrollments increase. Institutions go through cycles. It's not unexpected. But when enrollment cycles like this occur and there's no adjustment in spending, that's That's when you get to significant challenges, and that's where you land with the fund balance
chart that I started with directly corresponds with these years. There was no adjustment in spending as these
Speaker 104
55:40
enrollments were declining. An additional factor
Speaker 112
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in this is the net tuition revenue. So, enrollment was declining for a number of years. Actually, the last fiscal year before I left, enrollment increased that fall.
But let me fill in some of the detail related to that. So, this is a chart of tuition increases from fall of 2010 to fall of 2018. From 10 to 16, every year, tuition increases were approximately 4%. There was one year where it was less than 3.5%, but generally it was 4%. So if you add that together, that's a 27% increase over seven years to a population of students who could not afford the tuition, right?
So it increased from $6,400 to $8,100 in a seven-year period. Now, in the last couple years
Speaker 104
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on this chart, those are the years that we were trying to correct this
Speaker 112
56:51
financial picture. We drastically reduced those tuition increases because it needed to be done, because the bulk of the students who were paying that tuition couldn't afford to pay it. so here's another important point related to net tuition and that's who's paying and what are they
paying published tuition is not necessarily what students pay because there are a number of different forms of discounts that are are given to students at Henderson those discounts are all based on merit, where at most institutions there's a combination of need-based aid and merit aid. Merit just means you have good test scores or a good GPA, and we're going
Speaker 104
57:40
to reward you with a scholarship. Certainly not unusual. It happens at every institution
to award scholarships based on merit. But here's the result of that in the way that The scholarship program was
Speaker 112
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designed at Henderson. The columns on this chart are net tuition paid by student family income. So you would expect that as family income rises, we would expect students to pay more. Unfortunately, that was not the case.
The column with the lowest net tuition is the column with the highest family income. So here's the connection. Generally, merit scholarships are awarded to students who come from the highest families with the highest income.
Speaker 104
58:32
There's not a direct connection between ACT score and family income, but it's very close. So if you're awarding aid
Speaker 112
58:41
strictly based on merit, not based on whether the student can afford it,
this is what happens. You ask the students who can most afford to pay to pay the least, and those who can least afford to pay to pay the most. And that's the way this scholarship program was designed. So rolling that forward, this is actually from the fall of 2018, and I put this in here because this is an important point. In the midst of these financial challenges, as we're trying to correct and right-size a budget, there were decisions made to increase merit scholarships the number of merit
scholarships the dollar amount of merit scholarships and there were there were even scholarships added that were basically gap fillers so students from particular schools who didn't have enough financial aid they were basically given more money to encourage them to come so in the fall of 18 this analysis is the freshman class that fall, 855 freshmen. The top, these are the top scholarships.
These are not all of the scholarships that were awarded. These are the top-level scholarships. There were 375 students who received these scholarships. That's 43.9% of the freshman class. Those students, on
Speaker 104
1:00:10
average, paid $1,200. Out of the $8,000, 43.9% of the students paid an average of $1,200. That's $1.2 million net tuition revenue from 44% of the freshman class.
Speaker 112
1:00:31
This is a scholarship program that does not recognize the students that
Speaker 104
1:00:46
it serves. And I put this on there just to illustrate the top level
Speaker 112
1:00:52
scholarships were $12,000 with a tuition of $8,000. So essentially we're paying students to come to school. Those top three numbers, that's $1,900 negative.
That's the amount of money that students got back on top of their tuition. Same thing for the next two levels. That's about 100 of the freshmen that were all receiving scholarships in excess
Speaker 104
1:01:24
of their tuition. So here's what results from that. This is
Speaker 112
1:01:31
the accounts receivable balances going back to the 12-13 fiscal year and ending
with 17-18 because that's the last data I had. These balances are increasing every year because of a couple of reasons. One is what I was just describing about the financial aid practices where we're asking the students who can pay to pay less and
Speaker 104
1:01:56
those who can't afford to pay to pay more, and as that tuition got less and less affordable, these balances got higher and higher.
Speaker 112
1:02:07
So when I arrived, I came in the fall of 16, and the spring of 17, I became aware of what the student account practices were. And that was essentially send students a bill by email and hope they pay it. There were no efforts to follow up with students. There was no encouragement to pay those balances. There was no one working with students to pay their balances. That
was the practice. And the way it was designed, a student could essentially enroll for four semesters before they were asked to leave because that's what happened with many of them is these balances would accumulate to the point that they
Speaker 104
1:02:59
could no longer enroll and they couldn't afford to pay off the balance and they
Speaker 114
1:03:07
couldn't enroll again. So they were lost as a student. So when I discovered
Speaker 112
1:03:13
what those practices were, we implemented a different practice
And that was essentially, so part of the practice had been to consider $750 to be zero, basically. Right? So if a student had a balance of $750 or less, we would let that student continue to enroll. So we moved that to zero. Right? Zero is zero. But then implemented some practices to encourage students, to provide them some resources, is to provide them some assistance to help them understand how to get those balances paid.
And we had different efforts based on what their balances were. So if a student balance got high enough, we would make phone
Speaker 114
1:03:57
calls, we would send text messages, we'd send emails, anything we could do to
Speaker 112
1:04:03
get them in front of somebody to talk about their balance and get that paid. And most of that effort was unsuccessful because the Director of Student Accounts wouldn't do it.
Now, I made a recommendation in the middle of this process that we move that person to a different position, and I was told no. So continued in that position, continued with the same practices. I moved a full FTE staff person there to help with this practice, with this work. And she did what she could do, but without the support of the director, there just was no real progress on this.
And then before I left, recognizing where this was going, I put in place another program that would move these balances to loans so that students could start amortizing the balance that they owed. And as far as I know, that's never been implemented. Again, same people involved. So let me move on to timeline.
In the 2016-17 fiscal year, this is the year that I arrived, I came in August of 2016, we had a balanced budget on paper. So that budget was balanced by removing several hundred thousand dollars of expenses without notifying the budget managers that their budgets had been reduced. So they were spending as if they still had it and expected to have it. Dr. Powell, the queue
is filling up with questions. I think we're going to be here quite a while.
Would you mind, if you can, just kind of hit the high points that you think are absolutely necessary through the rest of the presentation? I
Speaker 152
1:06:08
think it's all necessary, but I'll try to move as fast
as I can. Well, with the number of questions here, I think you're going to have an opportunity to present that information anyway. It may just
Speaker 114
1:06:22
make it a little more timely. Okay. I'd appreciate it if you could. So I'll skip over this other than to
Speaker 112
1:06:27
say we did have a communication plan in place. Because all of this was so significant, we had regular budget forums.
Speaker 104
1:06:33
We had regular forums to talk about the process to try to correct this, some of the
Speaker 112
1:06:38
planning that we had in place. I created a series of seminars open to anybody on campus. If you want to come better understand this, come listen to it. Laid all of this detail out. So this is not information that was foreign to anybody on campus. It was all available to anybody that wanted to listen. so when we started putting together the 2017-2018 budget here's what we had to
make up for there was a gap that came forward from 15-16 because it wasn't really balanced we had to start making comp progress on the compensation plan because that was such a significant issue in the culture of the campus our health insurance plan saw a 25% increase which followed a 15% increase the year before. There was that debt service issue that I mentioned that finally hit in the 17-18 budget. And this is a minor thing, but I put it in there because it's an important factor. Computer replacement
two years before, they had pulled that completely out of the budget, so there was no money left to replace a single computer on campus, and we had to get that back in the budget. So here are the things that happened during that fiscal year that prevented us from making any real progress at all and the first four are what i mentioned related to the facilities issues on campus and we can come back to all these details if if there's time but there was a major
Speaker 104
1:08:05
mold issue in the nursing building that was about a half million dollar issue to take care of we had a major failure in
Speaker 112
1:08:13
a building that housed academic programs athletic programs etc happened right before the fall semester started there's another mold issue in another academic building had a chiller failure in a residence hall. All of these things are expenses that cannot be avoided because they're critical to operations of the university. Fall of 17 was another enrollment decline that was not expected.
So we did what we could to cut temporarily during that fiscal year to try to make up for some of these reductions. And I do need to make this point related to health insurance because this is the beginning of the significant public issues related to Henderson's finances. So in December of 17, as I said,
Speaker 104
1:08:56
health insurance increased twice, 15% the year before I got there, 25% the year I got there, and it was going to continue. So we made a change to our health insurance.
We switched to a different company, reduced the premiums, kept everything about the plan exactly the same. But this is
Speaker 112
1:09:14
where the significant divide between the faculty and administration blew up because of that change. And the remainder of
Speaker 104
1:09:23
that fiscal year was nothing but turmoil. So as we started putting together 18-19 budget,
Speaker 112
1:09:30
everything had to be on the table because the progress that we had hoped to make, we actually took a step back because of what happened in 17-18.
We talked about furloughs, and this is all going through a planning and budget committee that had broad representation across the university. Faculty
Speaker 104
1:09:52
representatives, we actually increased the representation from the faculty to ensure that they were
Speaker 112
1:09:59
heard. So there were, I believe, 20 members of this committee. We talked about furloughs. That was rejected because of the issues it created. We talked about salary reductions. That was rejected. so two things
that did make their way
Speaker 104
1:10:16
into this budget originally were cutting benefits by reducing the retirement contribution and reducing the number of staff
Speaker 112
1:10:26
so those two things were in the original budget that
Speaker 114
1:10:36
was presented but then as that budget was distributed out to the campus
Speaker 112
1:10:41
This is when the faculty held a no confidence vote saying that we were, I'm not going to remember this exactly and I shouldn't say me because, you know, this is, well, there was no confidence vote that basically said we were incompetent because we were trying to correct this budget.
So as a result of that, most of those cuts went back into the budget. The planned retirement reduction had to go back in the budget. The positions that we had planned to reduce had to go back in the budget. And this is a minor thing, but I think it's important to talk about. There's a multimedia center on campus. Essentially, it's a place for students and faculty to come. They can make buttons. They can laminate stuff. It's pretty basic. But it was a money loser.
And in a situation where you don't have enough funds to do anything that you need to do, a money loser for laminating projects is not something you invest in. But the campus uproar over that minor change was so dramatic that we had to put that back. And one other piece
Speaker 104
1:12:01
of this that I think is important.
As we're going through this process, there were two plans that were to be implemented. One was a non-academic plan to how do we make sure that we're putting resources in the right place.
Speaker 112
1:12:16
That plan was created and it was implemented in 2017-18. The academic plan never occurred.
Speaker 104
1:12:23
and what should have happened in that academic plan was go back to what I said about the number of faculty to serve the number of students that's where we should have started looking at where are
those faculty and and what programs are we too small it never happened Dr. Powell I'm going to
interrupt you right now we've got a lot of information in front of us and a lot of questions already out there if you don't mind I'm going to turn to some members for some some questions and hopefully the rest of the
information you have will come out in those questions senator rapert i want to recognize
you for the first question thank you mr chairman
mr powell thank you for actually coming and as you can imagine i'm already getting a lot of input on
this from university personnel and presidents around the state and it's already saying this should be required viewing for people about what not to do but we're here today about the inaccuracies the audit issues that were found so could you speak and maybe you were about to get to this point as to why were there under reporting why did these issues occur and who was responsible
Speaker 104
1:13:42
for that? Sure. To start with, I wasn't aware of the issues with the financial statement development until today. I hadn't seen that information, so I wasn't involved at the time. But the most significant factor in that is what I mentioned about technology. The university was operating on a financial and student system that was past end of life.
Speaker 112
1:14:13
It was being held together by two people who had all the knowledge about how that system operated. One of those
Speaker 104
1:14:25
two people retired. He was the one that was responsible for the financial components of that system, and with
Speaker 112
1:14:31
him went all knowledge about how that system operated. so while i wasn't involved my assumption is that those numbers are inaccurate because
they weren't able to pull correct numbers
out of that system so my greatest concern anytime we see something melting down like this is there has there been actual malfeasance or any purposeful effort to conceal or to alter information were you at every time directed by university personnel staff the president or the board that you altered any information that was reported to the board or to a bank or to an entity in which you had a
financial arrangement were you ever directed to conceal that or alter that no never once no were you ever aware that what you were reporting to the board and updates may not be completely accurate not that i'm not to my knowledge okay
Speaker 110
1:15:36
i'll save my final questions for later thank
you mr chairman senator dismaying you're recognized for a question i
Senator Jonathan Dismang
Unverified
1:15:45
think thank you mr chairman i'll go back to kind of the original question and
then it piggybacks a little bit on senator rapert's
uh also so the allowance for doubtful accounts the overstatement of by you know 2.3 million dollars well I mean was that intentional to help bolster the books during the time you know that you were having the issues was that unintentional because there was just a lack of understanding of how to you know create a formula to you know assess the doubtful accounts account why did why was that misstatement so severe again
Speaker 112
1:16:19
I don't I don't have access to the information about the
calculation, but it is formula-based, so take total amount of accounts receivable, how many of them are past due, and it creates a calculation
Speaker 174
1:16:33
of what should the reserve be. I'm confused. What was your title with Henderson? Vice President, Finance
Senator Jonathan Dismang
Unverified
1:16:43
and Administration. Okay. But you weren't aware of how the doubtful accounts calculation was performed? Yes. that task then who did that controller the controller and then what was your review
Speaker 175
1:17:00
that's that's what i was describing it
Senator Jonathan Dismang
Unverified
1:17:02
was formula it was a lack of understanding i don't want to belabor that i i so then i guess my assumption would be based on what you're saying it was just a complete lack of understanding of how to how the formula worked and what to do with the formula on your part and the controller's part is that correct no okay but it wasn't then then then what is it why why was it overstated by 2.9 or 2.3 million dollars i've not
Speaker 112
1:17:36
i've not seen the calculation i've not been involved in almost a year i don't remember the details of it i would have to go back and look at the calculation to understand what the difference was between the way it was presented in the financial statements given to the auditors and the way it ended up. I don't have those details, unfortunately. All right, then one
Senator Jonathan Dismang
Unverified
1:17:55
of two answers. Was it intentional or unintentional, the $2.3 million understatement of that account? There's never been any
Speaker 128
1:18:00
intentional understatement of any of them. Okay, then I will
Senator Jonathan Dismang
Unverified
1:18:04
defer to the only other option, then it was just a lack of understanding.
One thing in this whole process, in us looking at this audit, Mr. Chairman, if I just make some comments. I mean, and even from your report, what it sounds like to me, we had a whole bunch of people running a university that had no business running a university. And I hope, you know, for the ASU folks that are in the room that are paying attention, that we do some very, very thorough vetting, because there seems to be some incredibly significant problems. If we have, you know, the lack of control of the controller, and we have people hired
in that place to, you know, to take on that responsibility, there are some issues. For us as members, and again, because I know we have a long queue, if I can say this, this is audit. We don't need policy and audit, but there needs to be some policies put in place that we learn from whatever this thing was that happened at Interstate, and we have the right controls in place so that we don't let something trickle along for three, five, six, seven years or whatever it may be to find ourselves in this position again. I would hope that there's some discussions between maybe JPR, who has that type of authority,
and the audit chairs of maybe some additional meetings where presentations like this could be made that we can learn from and that, again, we can have some type of policy put in place to ensure it doesn't occur again. Thank you for that. All
right. Senator Chesterfield, you're recognized. Thank you, Mr.
Senator Linda Chesterfield
Unverified
1:19:35
Chair, and Brett. Good to see you. Brett, you're a CPA. Are you not? Yes, ma'am. Please help me understand as a CPA why you did not go over the books efficiently
to make sure that what we're seeing did not happen. Because what I'm getting is it's everybody's fault but yours, and I don't understand that because you were the
Speaker 112
1:20:11
CPA on campus. No. I didn't say it's everybody's fault but mine. So, yes. If there were inaccuracies
in the financial statements, yes, that was on me to ensure that those are correct. All right. Let's go
Senator Linda Chesterfield
Unverified
1:20:34
here. Well, I'm not going to belabor that point because it was troubling me because I was not hearing sometimes when we make mistakes intentional or unintentional we just say a mistake was made and hopefully going forward this mistake will not repeat itself but I never heard that in what you were saying
and maybe the explanation became so long that I lost that somewhere in the deal but at the end of the day as a CPA it would seem to me that you would have looked at these books and you would have said that what we are presenting is totally incorrect and that's what's of concern to me right now because we're throwing the totality of Henderson under the bus you had a fund balance at one time it ended up in the negative while you were there and as the
CPA you had some responsibility for looking at that would you agree I do thank you. Senator Elliott you're recognized.
Senator Joyce Elliott
Unverified
1:21:36
Mr. Powell it just in the interest of time if you were just fill in this blank for me I'm trying to come up with it what's the thesis of your presentation so if you were to fill in this blank the major issue that with the major reason we've ended up in this situation is in a sentence or two?
Speaker 112
1:21:55
How would you finish that? Senator, I think the best way I can explain that to you is the way Henderson was described to me when I got there. And that was a it's good enough for Henderson attitude. It doesn't have to be exceptional. It's good enough. And that was repeated to me multiple times
by multiple people, that that was the culture
Senator Joyce Elliott
Unverified
1:22:31
of Henderson. And that culture was, that's a culture that had been over a number of years, I guess, incubating and living and having to do business that way. Is that the case? Yes. And, and, and then finally, I, I'm just bouncing off your answer to Senator Chesterfield trying to figure out what accountability is here.
So much of what you said had to do with lack of resources. And we are not going to make policy here, but I think this informs our policy. What is it, what do you consider to be the policy
reasons that we have a lack of resources for Henderson and universities so positioned as Henderson? Because I'm concerned about decisions that were made to try
to make things happen for kids that were difficult to do. So would you just answer that for me, and I think I'll move on from there,
Speaker 112
1:23:45
Mr. Chair. What can we learn about that? Sure. You know, I think the bottom line to that
Speaker 104
1:23:55
is really the lack of understanding the students that were enrolled there and still are and what it takes to serve those students. So if you're accepting students who come in with financial risk, academic risk, personal risk,
the bulk of the students are first-generation college students. They arrive on campus with no knowledge of what they've gotten themselves into. And if you don't have resources
Speaker 110
1:24:22
in place for them on the first day that they're there, there's a significant chance that they're not going to
Speaker 112
1:24:30
be successful. And that was what my focus was, was to get the resources in the right place. Now,
Speaker 104
1:24:41
what that led to is probably what you and Senator Chesterfield are trying to get at,
is why was I not paying more attention to what was happening in the Comptroller's Office? And if I said otherwise earlier, let me apologize for it now. Yes, I am responsible for the financial statements that were issued while I was there as Vice President for Finance and Administration. Well, actually, just to move ahead more closely, I
Senator Joyce Elliott
Unverified
1:25:09
just take that point. I just stipulate, yeah, I had that question, too, but I've got that answer. But what I want to learn from this, too, is we have to educate more kids in this state.
We're never going to get to where we need to be. So audits can give us information that will inform those policies. What I don't understand, I'm just saying, okay, people were wrong. If people are doing things right, this is a catch-22, it seems to me. If people were doing things right according to what you were saying, aren't we necessarily then going to fail on our mission that we need to educate even the hard-to-educate kids in this state? Is that not a learning from this audit?
Yes. Because if we had done what you said we should do, and I get that from a numbers perspective, but what I constantly don't get is how we don't catch hold of this as a policy position, as legislators. And that's when I'm, this keeps coming up. We have kids that are hard to educate. You get so few resources she makes sometimes, maybe even decisions that are quote-unquote stupid because I'm loathe to use that word. But there's a big lesson in this because if we don't educate kids in the schools like Henderson, SAU, UAM, and so forth,
we go through this all the time. I just want us to be sure we understand that should be a learning out of this. I'm not excusing anybody making bad decisions, but it's a bad decision, and so many times if it's not a bad decision you don't educate the people we need to educate and we keep on wondering why our economic development is not moving as it should be that's just a state emphasis here and for all of you who might have been going to come to the my black history program we are not
going to be able to do it now because this has gone too long obviously and the governor has a press conference and we're going to be delaying that until another time and I have to go over there and deliver that along with my co-chair Jay and deliver that message to the
folks thank y'all excuse my absence Thank You Senator Dr. Powell you stated in your presentation that one of the chief issues at the beginning of this decline was that resources were simply
not allocated properly would you explain the committee like who ultimately bears
that responsibility to make sure that that is moving in the right direction I
Speaker 126
1:27:47
reckon that they're going, those funds are going where they
Speaker 104
1:27:52
need to go. Sure. Well, you know, I think there are multiple ways that you can say there's responsibility for how the resources of the institution are used. And I think it starts with, I mentioned the Planning and Budget Committee that was responsible for reviewing where are we,
how are we spending the funds, and how can we improve on that. So you start there. Certainly, that's part of my responsibility. Certainly, the president's responsibility, the provost's responsibility, and the board's responsibility. You know, I think we all have a role in that. And, you know, higher ed is for, since it's, as long as it's been in existence, higher ed has lived on this shared governance model where everyone has a role in the operations of the institution. And I think that's a part of this.
everybody had a role in ensuring that we were making the right decisions for for what
was best for the students so just in your remembering how this all played out was there was there unity in that decision among those parties i mean has this moved along or which decision uh
in how to allocate those funds i mean was it was that something that all those parties you just mentioned generally yeah i mean i know it's that's almost an impossible question but but generally we're in agreeance with this direction i mean how to allocate those funds or or was this a point of
contention among those groups involved generally speaking i know that yes
Speaker 112
1:29:18
generally yes there was agreement on the the decisions that were being made and the direction that we were going yes okay thank you senator stubblefield you're
recognized for question thank you mr chairman i don't know if
Senator Gary Stubblefield
Unverified
1:29:34
it's just me maybe this is true for everyone here this is very difficult to listen to and i'm not sure that anything you've said mr powell relates to why
henderson state is in the place they are and how they got there uh in late may you left henderson state correct 2019 that's correct and uh in may of in that month of may of 2019 you presented a document that projected a uh really a small
surplus for the school is that correct yes that would end just in a few weeks you provided the trustees with a budget document that showed a surplus
is that true yes and yet i recall and yet
Speaker 154
1:30:29
the university ended the year with a deficit around five million
Speaker 112
1:30:34
is that true uh that's what the financial statements show you can you explain that yes there's a difference between um gap audited financial statements and an operating budget. The biggest difference between the two is depreciation is an accounting number.
It's calculated and it's on those audited financial statements that you're looking at. At healthy institutions, depreciation is budgeted because that approximates the using up of facilities on the campus so that as you're allocating that depreciation in the operating budget, it's creating reserves that can then be used to renew those facilities so that they're maintained in a way that serves the institution.
Depreciation is not budgeted at Henderson. As far as I know, it never has been because there aren't enough resources to set aside that approximately $6 million in depreciation that's recorded on the books. So that's the biggest factor in that. And then you add to that that the depreciation number was growing each year because there were several new facilities added in 2014-2015. Mr.
Senator Gary Stubblefield
Unverified
1:31:51
Powell, I'm not talking about the financial statement,
Speaker 112
1:31:55
I'm talking about the operating budget. You asked for an explanation of the difference. That's the
Senator Gary Stubblefield
Unverified
1:32:02
explanation of the difference. Of the two? Yes. When you opened your testimony, you said in regard to the cultural differences, you made a statement saying basically that Henderson State was doing the best they could do with what they had to work with. Is that sum up basically what you said? That's fair. And then you later said that some of the reasons that Henderson State was in the shape they were in
was because not enough money was spent on students, and there was too small amount of students per teacher and that the teachers were underpaid. Correct. Which one of those is the reason? Or is it a combination of all of those? I'm not sure I understand the question. I'm sorry. Are these things that I just stated, are they reasons for the place where Henderson State finds itself
Speaker 104
1:32:54
in today? All of those are contributing factors, yes.
Speaker 220
1:32:59
i'll i have some questions later on mr chairman thank
you thank you senator if you will just get back in the queue and we'll keep moving um senator uh representative gonzalez you're recognized thank you mr chair
Representative Justin Gonzales
Unverified
1:33:16
mr pal it seems like you have explained to us that you saw this crash coming from the time that you were brought on board under henderson how often was that communicated to the board and did did you
tell them about the dire financial situation Henderson was was in all this information
Speaker 104
1:33:32
was shared broadly with faculty and staff with the administration with the board how often at no less often than at annual budget retreats where the you're talking about with the board yes specifically no less often than annually when when the board reviewed the budget but there were there were financial reports to the to
Speaker 122
1:33:53
the board virtually every time that they met so you you at
Representative Justin Gonzales
Unverified
1:33:59
least gave them quarterly reports on what was going on yes so the board was fully aware that this was
this was coming the information was shared yes thank you
Speaker 17
1:34:18
center pitch you're recognized thank you mr chairman thank you mr
Senator Mathew Pitsch
Unverified
1:34:22
powell for being here I'm an engineer, and we tend to walk down a path and think the facts take us to the end. And I'm still confused to Senator Stubblefield's question. And if you could back that slide up one slide, I believe it might be two. Yes.
Basically, that 2018-2019 budget, your statement is, I believe, there were dire consequences. there was a train wreck coming that might be an overdramatizing of it but we were in trouble financially we being henderson state the second thing i assume you're aware that moody's investor services came out with a report that you were the experts saying henderson state was in dire
straits in june of 2018 were you aware of
Speaker 104
1:35:13
that report the report from moody's in june of 2018 was an affirmation of the credit rating okay
Senator Mathew Pitsch
Unverified
1:35:21
so i think the real question comes down to our chairman
and senator disming's question did this just float along or was this malfeasance on purpose because i'm a believer in facts and figures and every figure that was misstated if it
was understated it was to the benefit of hiding something if it was overstated it was to the benefit of hiding something now that may just be a chance occurrence but we've got facts and figures being raised if it benefits and lowered if it benefits and i guess i put that fact and figure in there that you're telling us you knew we were headed towards a train wreck we've got experts in moody's telling us we're headed to a train wreck and yet in may of 2019 the month you left basically
you stood and said we've got a project surplus coming let's make decisions based on that surplus also i believe at that meeting a recommendation from you and administrative leadership for a three percent pay raise to faculty members thus identifying a university in solid footing and the facts and figures up until that time don't show any of that leading us to that conclusion the second major thing that this body has done in
regard to being told by Henderson State was that we've got our ducks in a row just give us this loan and we said yes we do it based on the facts and figures being promulgated out of that university and yet here we are a year later and we get to a point are we dealing with just facts and figures by chance being off are we in fact being told things that aren't true and it's getting to a point that we've had enough facts and figures to the benefit of the story whether
they're too high too low not agreeing with national experts on the subject that we have to say what is really going on here why did we give that loan to henderson state why did we recommend three percent to our board and why did we not acknowledge that every number we were getting reported was to the benefit of the other direction and i think that's the question that we need to have answered from you and or whoever was driving that that scenario in this hearing so i lay that out in
front of you those are the facts that we have in front of us and it doesn't paint a very
Speaker 104
1:37:54
good picture so help us get to that answer please okay so let me start with moody's um moody's did their regular review of the university's credit rating
Speaker 112
1:38:07
in i don't remember the month you have it there. So that review was based on information that the university provided to them to review. So their conclusion was the same as what I've been describing to you.
So there was no difference between what they were
Speaker 104
1:38:23
looking at and the conclusions they reached and the information that I was looking at and the conclusions that I was reaching and communicating so i'm not sure where
Senator Mathew Pitsch
Unverified
1:38:35
my question if i may mr chairman please continue my question is you're saying we're in trouble they're saying we're in trouble in june of 2018 11 months later we're saying hey we forecast a surplus hey let's give our faculty a three percent raise and those two things don't jive in good financial culture i mean you're admitting that we knew we
were at a negative rating which was what moody came out with moody came out with a negative rating so what transpired back to the question do we have malfeasance do we have direction from someone else to misreport numbers what are we dealing with here that's going on at henderson state that takes all these negative numbers and now all of a sudden which are factual we're recommending raises we're recommending that we think we've got a budget surplus and yet a month later we're five million in the hole and digging that's the problem
Speaker 128
1:39:29
the the raises that were recommended in the spring
Speaker 104
1:39:34
of 19 were recommended despite the situation and it was simply to ensure that
Speaker 112
1:39:42
there was not another year of unrest is the word that's coming to mind but that's not the right word right because because of all of the significant issues that had played out over the year prior to that and because the number one priority among the faculty was raises.
So we allocated money in that budget to provide raises despite the fact that all of these other challenges were going
Senator Mathew Pitsch
Unverified
1:40:20
on. Yes. follow-up I promise Mr. Chairman. I am hearing what you're saying but that borders on malfeasance there because you're dealing with facts and figures as a CPA and the chief financial officer who says this is a train wreck. I can't make payroll a comment made the following month
and yet to keep unrest from your faculty members you're promoting a three percent raise that you had to know wasn't going to be realized that's the problem with all of these decisions we're getting out of henderson state in the last 12 months we're doing things to mask whether it's the numbers being listed above if it benefits us or the numbers listed below if it benefits us we need to hit the nail on the head with what the facts and figures are that's the beauty of accounting that's the beauty in my mind in engineering facts take you down the road to
to the answer. And if the answer is negative, you don't start changing the facts. And to me, that's where we border on malfeasance, giving a 3% raise when we knew next month we couldn't pay the payroll. That's the problem, I think, in front of this committee. I didn't change
Speaker 120
1:41:34
a number. I didn't report any information that I did not think to
Speaker 112
1:41:44
be correct. If there was incorrect information reported, I don't know the source of it.
So the financial statements that were audited were provided to me. I reviewed the financial statements for whether they were accurate based on the information that I had. I did not go back to the source
Speaker 104
1:42:04
records of every number behind those financial statements to ensure that they are accurate that's that's why you have staff and at some point you
Speaker 112
1:42:13
have to trust the staff to provide you with the right information so i reviewed what was presented to me
for whether it was accurate or not i didn't change a number i didn't suggest that anyone
Speaker 104
1:42:29
change a number i would never provide information that's knowingly incorrect all right thank
you members just for your information uh we also have in attendance today dr jones former president uh johnny hudson the
uh he's the current board president elaine kneebone the interim university president and several of
the board members that were there at
the time of this decline uh just so so you're aware all those people some of these questions may may be well served to go to multiple members just want you to be aware that
everybody that i just listed and that's probably not all inclusive
is in attendance today senator hickey you're recognized for
Senator Jimmy Hickey, Jr
Unverified
1:43:18
a question uh thank you sir dr powell just uh first question mr chairs i'd like this we're here of course over these audit findings and those misrepresent misrepresentations
on the financial statement so i was wondering could the staff put those up there i'd like to look at those one at a time and if those other individuals you discuss need to come forward i'm more than happy to have them but i guess my first question is going to be to staff what i remember a minute ago is the misstatements on the financial statements that we've seen all provided what i would consider a positive outlook for the institution if we've got some antiquated system or if there's just some mismanagement it would seem like to
me that our auditors should have found information that where we were the whenever they went in and said well because of this system or because of some mismanagement they actually understated a revenue and it was more positive did we see information like that or was everything that we seen actually represented or misstated so that it would provide a positive outlook on the institution itself we
Speaker 85
1:44:33
were unaware of any information that was
misstated purposely for the university's benefit that was not my
Senator Jimmy Hickey, Jr
Unverified
1:44:40
question my my My question is this, and, again, if we
could get those on the screen, like just as an example, and I'm going to use one, Senator Dismang, and many others have already brought that up. There was a misstatement on the amount of interest that was going to be paid on their debt. It wasn't an overstatement. It was an understatement. That would have provided a positive outlook to the institution.
also the other stuff we've seen it as far as accounts for accounts payable their receivables what i remember is that every one of those would have made it so that it would have made their financial statements look more positive for them what i'm asking is is whenever we had done the audit did you all find things to the nature that well actually they had more revenue that was supposed to come in so they understated their revenue or something to that
nature or was everything that we found actually misstated to look them so that they would look better intentional or not yes sir i believe that's correct okay that gives me a lot of pause because the information that we're hearing here is this. We're hearing that we understood that we could not balance our budget.
And, Dr. Powell, what I remember you saying is that we prepared a budget. that budget had expense items had expense items in there that we we took out some of it even went to the employees employees come back and basically we put that back in okay if we put if we had a balanced budget or we had a budget that we knew that we were going to had to balance by cutting
those expenses and that we didn't cut them and we put them back in however you do that then it's no longer balanced did the board vote on a budget like that or how how was that done what did the board vote
on a budget that was balanced or did they vote on a budget that was unbalanced
Speaker 112
1:47:07
those expenses were put back in by removing other expenses by removing what type So that the budget was balanced. Okay.
Senator Jimmy Hickey, Jr
Unverified
1:47:15
Removing what type of other expenses?
Speaker 112
1:47:18
The most significant was we were attempting to replace the antiquated financial and student system with one that would provide the institution with the type of information that's necessary to operate. So the cost of implementing that system was taken out of the budget. Okay. Were we able to get those
Senator Jimmy Hickey, Jr
Unverified
1:47:38
back up on the screen? or is that too if it's too much work that's fine okay i'm i'm being told that we are having some
technical difficulties as far as that goes uh mr chair i've had a bunch of members and again i'm going to kind of uh go to you and senator rapert on this i've had a bunch of members that have asked me or wanting wanting this to be this report to be referred over to jpr uh for us to look into it further unless you and the senator rapert have some other ideals i would uh suggest i'd like to make that motion at the appropriate time because again i'm i have concerns that all of this
misstatements would put them in a positive light
Speaker 68
1:48:25
thank you sir thank you uh representative mayberry
Representative Julie Mayberry
Unverified
1:48:31
you're recognized thank you mr chair um when you first started out you pre
you were presenting some slides, and you specifically were saying that you had a cultural survey that was done in 2016 and that it was not public, but you were willing to share it today, and I'm just curious what that cultural survey would tell us.
Speaker 110
1:48:52
If I said I would share it, I misspoke. I never saw it because it was never published that I'm aware of.
Representative Julie Mayberry
Unverified
1:49:02
Do you have any idea what information was in that survey then? type of questions? What are we missing out on? What information is there that we don't have access to then?
Speaker 112
1:49:13
Dr. Michael A. Since I've never seen it, I don't know the details of it. So
Speaker 110
1:49:18
I can't really speculate on what was in it. The only thing I can tell you is what I was told was that the divide between the faculty and administration was so severe and
it showed up so strongly in that survey that it wasn't published. That's all I know
Representative Julie Mayberry
Unverified
1:49:35
about. So is this survey just faculty and administration, or does this also include students? I
Speaker 239
1:49:41
don't think students were included, no.
Representative Julie Mayberry
Unverified
1:49:45
OK. And then, I'm sorry, one other quick question, if you don't mind answering for me. You also said the director of student accounts that you had suggested a recommendation that that person be moved to another position. Who was that person, and is that person still
Speaker 104
1:50:02
in that position today? I don't know if he's still there because I've not been there in about
Representative Julie Mayberry
Unverified
1:50:17
a year, but his name is Scott Freeman. Say that for me again. Scott Freeman. OK. And you directly had conversation with this person then about the student accounts and the need to get payments in and to not let it continue to ride semester after semester. OK.
Chair
Unverified
1:50:34
Thank you. Oh, Representative Bride, you're recognized for a question.
Representative Johnny Rye
Unverified
1:50:46
Mr. Chairman. What Senator Stubblefield said and Senator Hickey, all those things come into play. But I have just one question. You said that all of the schools that are in this classification, U.S. wide, was about 27 to 1 for each instructor.
And we're looking at 20 to 1 where we're at at Henderson State. Now, this board had to have known this through the years and had to have seen that. And that's going to have a big impact on the amount of money that it's going to take to operate that university. Correct. And I just wonder, sir, if there's something that was ever said about that situation that would have impacted the amount of money that was coming in and going out and all of the different, you know, things that it would take to make that a positive run university, sir.
Speaker 128
1:51:52
I can share two things with you related to
Speaker 104
1:51:56
that. I mentioned earlier that we were to work on two plans. One was non-instructional. How do we reallocate resources so that we're putting funds where they should be to support students? The other was an academic plan to ensure that the university was offering
Speaker 112
1:52:14
the right programs at the right levels with the right faculty staffing in those programs. The academic plan was never created.
Speaker 104
1:52:24
As far as I know, it's not been created today, so that there was no real data to really assess what the academic program looks like. Now, I personally prepared an analysis by academic program of the revenue and expenses in each program that identified the programs that were losing money, that they didn't have enough students to support the program as it was staffed.
And I provided that information to the provost and the president and I never saw it again. Senator Stubblefield, you're recognized. Thank you, Mr. Chairman.
Senator Gary Stubblefield
Unverified
1:53:26
Mr. Powell, I've always been told that when you have a smaller student-to-teacher ratio, that your test scores are usually higher and your graduation rates are certainly much better than 33%. Would you agree with that? There are
Speaker 111
1:53:39
certainly studies that would show that smaller class sizes are better for students, yes. I can understand the fact that
Senator Gary Stubblefield
Unverified
1:53:45
it might hamper your financials, But is it true that you were holding invoices because you were unable to pay them? Not that I'm aware of.
So you're not aware of that? No. Would you agree that spending outpaced revenue by almost $5 million? I'm
not sure what you're referring to. I'm talking about the $5 million that you
were in debt and that you outspent. You wouldn't agree that spending
Speaker 178
1:54:21
outpaced revenue at Henderson State by $5 million? Yes. Spending exceeded revenue.
Senator Gary Stubblefield
Unverified
1:54:25
Well, that's not a financial statement issue.
That's a budget management issue. It is. And that falls on you. It does. So you accept responsibility for this
Speaker 110
1:54:42
boondoggle? I'm not sure what you mean by boondoggle, but
Senator Gary Stubblefield
Unverified
1:54:46
let me. What we've been discussing this entire morning for two hours, that's what I'm talking about. Okay.
Speaker 112
1:54:57
So let's go back to where I started.
This was not a situation that began when I arrived in August of 2016. It's a situation that began years before that, that I was working to correct. senator i can't begin to to add up the number of of challenges
Speaker 104
1:55:21
roadblocks that were in front of trying to correct this situation it was issue issue after issue after issue that stood in the
way of of taking care of of the boondoggle that you're describing i i only came to henderson because I felt like I could make a difference and help that institution become what it should be. Henderson State is vital to southwest Arkansas. Clark County, I'm forgetting the names of the county. I forget things pretty quickly, but that area of Arkansas is the most economically depressed in the state.
Speaker 112
1:56:02
There are counties in the Delta that rival it, but it's pretty similar. The only
Speaker 104
1:56:09
way to change that picture is through higher education, and Henderson State University should be the way that that picture gets changed. But it can't be that with all of these challenges. Now, if we could go back, I mentioned that there are two ways to do this. One's with an ax and one's with a surgical knife. Absolutely. If I could go back, I would say we're going to stop this today.
we're going to reduce budgets we're going to cut staff we're going to cut people we're going to fix it immediately in
Speaker 114
1:56:44
some cases absolutely that is what should happen and if I knew then what I know today I
Senator Gary Stubblefield
Unverified
1:56:54
got on campus I'm not second guessing your
intentions to make Henderson State better that's not what I'm asking the fact is you presented evidence that was false as far as budget numbers to the board?
When is that? In May of 2019, you presented to the board a financial document saying that Henderson State had a surplus when, in fact, they owed $5 million. Senator, what I presented to
Speaker 152
1:57:21
the board in May was a financial report through some period. I don't remember
Speaker 112
1:57:26
exactly what it was. It would have been sometime in April of revenue and expenses to that point. And the data on that report was accurate as far as I know. Did anybody on
Speaker 277
1:57:37
that board, when you presented that, question you?
Senator Gary Stubblefield
Unverified
1:57:41
I don't recall that meeting in particular, no. You don't recall anything in that
meeting, any questions that were asked by the board members? No. Thank
Representative Justin Gonzales
Unverified
1:57:55
you, Mr. Chairman. Representative Gonzalez, you're recognized. Thank you,
Mr. Chair. I kind of have a follow-up to what I was questioning before. so you said you saw this coming and reported that to the board and
reported that to other administration once they chose not to act on what you were telling them did did you try to take that
to anyone higher you worked for the department of higher ed for a while did you not i did okay so did did you try to take that anywhere else and say hey this is a problem that's coming
Speaker 225
1:58:23
that the state might ought to look at before this disaster happened
Speaker 104
1:58:28
i did not um so i didn't take it to the department of higher ed because it really is outside of their purview um higher ed is a coordinating body that um they approve academic
Speaker 112
1:58:40
programs they um provide information about higher
ed in arkansas but but they really don't have anything to do with the governance of the institution so you didn't try
Representative Justin Gonzales
Unverified
1:58:48
to make government stops with the board you want you didn't try to make anyone else aware that this was coming
Speaker 281
1:58:55
you just chose to i don't i don't know who else i would have made aware okay all right
Representative Justin Gonzales
Unverified
1:59:04
thank you uh i have another question if yeah go ahead continue so you mentioned several times about a poor i.t system that that caused this um and it's my understanding that you purchased a new financial aid system while you were there and it had many
problems is is that correct that's correct is it also correct that the henderson state university is the only university in the nation to use that particular program that's not correct okay so how many how many other universities are using that or were they having the same same issues did you know about that
Speaker 104
1:59:42
before you chose to purchase this program um we did explore whether to install that particular system
so it was chosen because the university went through an rfp process to select a system to replace the financial and student systems that had been in place for 30 something years The result of that was selected a particular company and a particular product that that company sells. We had begun the process of implementing that, and as I mentioned
Speaker 112
2:00:13
earlier, we had to stop that process and pull all that cost out of the budget because of all these other financial
Speaker 104
2:00:22
issues. The reason we continued with that financial aid system, well, there are a couple reasons. we continued with that one
Speaker 112
2:00:30
in particular was because it was the system connected to the ERP that we intended to implement and had hoped to come back to at some point when the finances would allow it. So it made no sense to move to a different financial aid system if it then was not gonna integrate with the system that we intended to adopt. So that's point number one.
The second issue with this is back to what I described earlier about this antiquated system that the university was operating on. So the financial aid system was part of that same older system that was being held together by a couple of staff who had all the knowledge about how that system operated. The system, the financial aid system was failing. We could not award aid to students. the only way to fix it was to replace it
so we had made the decision of of the direction to go on the erp that included the financial aid module so we decided to go ahead with that implementation because we had to do something to be able to award aid to students the existing failure did
Representative Justin Gonzales
Unverified
2:01:48
the failure of that system have anything to do with the decision to let students carry forward a $4,800 balance no who made that decision there was no
Speaker 281
2:01:59
decision to let students carry forward balances of $4,800 so we were
Representative Justin Gonzales
Unverified
2:02:05
told that was an unwritten policy so how did how did that happen where did the 4,800
Speaker 104
2:02:14
number come from as as I was describing earlier there was a policy when
Speaker 112
2:02:20
I I arrived that allowed students to enroll with balances that would accumulate
Speaker 104
2:02:25
so essentially a student could enroll in four semesters accumulate balances across four semesters and then be
Speaker 112
2:02:34
told they couldn't enroll again because the balance had gotten so high so we eliminated that policy and went to this practice of we expect balances to be zero at the end of every semester we're going to automatically enroll students in monthly payment plans if their balance is not paid at the beginning of the semester and start outreach to those students immediately so when we enroll them in those payment plans send them information to say hey
we put you on a payment plan because your balance wasn't paid in full your first payment is x dollars if they miss a payment start reaching out again so we started making phone calls and text messages and emails and everything else to get those balances paid now there was a 4 800 threshold in there about what level of communication that we needed to provide so once balances got to some point we need to step up the efforts to communicate with those students but that had nothing to do with a balance that would allow them to enroll or not enroll according to the report that we got
Representative Justin Gonzales
Unverified
2:03:36
that wasn't even followed through with all 50 of the ones tested you weren't even going after trying to collect as i said the director of
Speaker 104
2:03:44
student accounts would not do what he was asked to do okay i'm gonna move
Senator Gary Stubblefield
Unverified
2:03:51
on representative gonzalez you're welcome to jump back in uh if you need uh looks like representative peyton you're up next and i i'd like to remind the members
we still have a lot of people to visit with you that also have pertinent information and dr powell won't be leaving until we're you know sure that we're through with him for today
Representative John Payton
Unverified
2:04:10
Representative Payton, you're recognized. Thank you, Mr. Chair. Mr. Powell, I'd remind you you're under oath. Did anybody above or below you in the chain of command come to you with questions or recommendations on how to make the books look better for the university? No. And you've stated earlier that you were unaware that these discrepancies were contained within the books? I hadn't seen that information until today. So legislative audit has done this audit
and came up with the discrepancies, and you were unaware of it or had not made any attempt to review their findings? I don't know
Speaker 120
2:04:53
when they came up with those findings. How
Representative John Payton
Unverified
2:04:57
much time did you spend preparing your presentation and those slides? Most of
Speaker 104
2:05:03
these slides are from presentations that I'd given on campus multiple times. Okay. So you knew to be
Representative John Payton
Unverified
2:05:08
here today for some reason. You were not informed as to why you were coming?
Speaker 104
2:05:14
I have a subpoena that says we feel you may have information to add to these financial statements, and I got a copy of financial
Representative John Payton
Unverified
2:05:26
statements. And you did not review that copy? Yes, I reviewed the financial statements. Okay, so what you were given did not show the
Representative Jeff Wardlaw
Unverified
2:05:38
discrepancies that Audit had found? No. Okay. Thank you, Mr. Chair. Representative Wardlaw, you're recognized. Mr. Chair thank you for recognizing me but I think my question I want to go back to Representative Gonzalez's question about student balances and who approved that underline of
allowing those balances to get to the point they were at and if Dr. Powell can't answer those questions maybe Dr. Jones or someone else can and I just think we've been beating around that bush all morning and that's where I'm hearing from the other universities that some of this case came from because that's caused a lot of this debt problem so if you don't mind I'll let you make that decision on who we need to answer that but I think we need someone to address that okay Dr.
Powell would you like to hit on that I don't I
Speaker 152
2:06:22
don't know that I have anything else
to add to it okay well just just hold on that representative lord law
uh at the moment there's no more questions in the queue so we're going to ask you to just take a take
Chair
Unverified
2:06:42
a seat uh well hang on senator flippo
Senator Scott Flippo
Unverified
2:06:45
oh murdoch you're recognized thank you chairman i'm kind of displaced today from my seat so i got better view from over here but just to the staff annually our audits done of our
universities so I guess my question is would there have been some indicators prior to the Senator Senator Soberfield called it a boondoggle prior to the boondoggle would there have been some indicators possibly that we would
Speaker 301
2:07:33
we do yes of course this is the 2018 and 2019
audits and like I stated in the previous committee meeting in January most of the the negative effects occurred within those two years that we were auditing. They had negative trends since 2015, but within the 18 and 19 years were the majority of those trends came and that's when we questioned their going
Speaker 302
2:08:01
concern as a university. If you'd like an example, I think JJ touched on the cash balance.
So from June 30th, 2015 to
Speaker 301
2:08:21
June 30th, 2019, the university's cash balance decreased 14 million, over $14.1 million. But most of that decrease happened between 630-17 and 630-19, where it decreased a little over $9 million. dollars so most of the problems were indicated in those audits that we're looking at today
Senator Scott Flippo
Unverified
2:08:51
familiarity with what you do when you go into school districts if you will and maybe even systems you interview people and people sometime will give you information that will make you ask an additional question dr powell has testified that he had asked that something happened by a staff member that would have possibly dealt with some of these
these losses and that he has testified that that did not happen and sometimes that's reported in other audit findings or in testimony or discussions around findings so did during the drill down process that your people did on while they were on the site was any of this discovered were any interviews done was anything done to indicate or prevent that could have we could have had information prior to when all of this kind of came down uh
Speaker 301
2:09:47
yeah excuse me um as part of our
auditing standards of course yes we interview um select personnel at the beginning of each audit just for to see if they have any kind of fraud indicators that they want to tell us or anything else is by that matter prior to 2000 and i'll have to ask jj since he was the auditor in charge of the audit but prior to the 2018 audit there was nothing indicated to us that there was anything wrong at that point any fraudulent activity was dr powell ever interviewed
Speaker 307
2:10:24
um yes okay all right thank you chair all right
Senator Ricky Hill
Unverified
2:10:35
senator hill mr newt this is probably going to be more toward you we've heard numerous times during this hearing so far how antiquated the system is that they had down there would you say as far as an expert that their system is as antiquated as they're saying it is question to us i'm sorry could you repeat the question yes sir i said we've heard numerous
times how antiquated their system is at henderson would you say that their system is as antiquated as they say it is where you
Speaker 301
2:11:07
cannot get well we can't really um we really don't give an opinion on systems i mean we um have our i.t department go in and look at controls to see if that system is adequate with the controls that that's in place um and i don't
Speaker 303
2:11:23
think was there any computer there wasn't any computer and we
Speaker 301
2:11:28
didn't have any computer issues at that time
but like i said i mean there's several different type of systems that universities use this is one of them and again we don't make an opinion on how antiquated the system is Senator Ede you're recognized thank you mr. chair mr. Powell
Senator Lance Eads
Unverified
2:11:56
could you provide like the source of your data on the under if we go back to the unrestricted fund you talked about earlier on
it looked like you showed a slow fade happening in that and we've seen reporting that as recently as 2018 there were still over four and a half million dollars in that fund and it was between 18 and 19 that it went from a net positive to over five million dollars in the negative so what's the difference in what we're seeing in reporting versus what you're
Speaker 112
2:12:26
showing on your graph the numbers on that chart were from
Senator Lance Eads
Unverified
2:12:31
the audited financial statements from from from Henderson States okay all right thank you
Senator Gary Stubblefield
Unverified
2:12:37
Senator Stubblefield, you're up again. Thank you. Thank you, Mr. Chairman. Mr. Powell, are there any board members
here today, Mr. Chairman? There are several. There are several? Yes, sir. If we brought those board members up here and had them testify under oath, would they agree or would they
testify that they had been briefed by you or Mr. Jones concerning these financial issues? i believe they would sir yes you think they would all right that's all i have
senator elliott you're recognized for a question mr chair
Senator Joyce Elliott
Unverified
2:13:17
i just i wondered it is um i'm not trying to put people in a spot to have to testify but is this going to be
the only witness we hear from today uh no ma'am i think we i think you're out of the room we have uh dr jones former president we have several people here that's fine that's all I want to know and actually that's our last question in the queue so I think it's
a great time to have Dr. Jones if you don't mind
hey Mr. Powell would you mind just staying at the table there's liable to be a lot of questions that may require your expertise
honestly Dr. Jones would you mind coming up and you can
just pick a chair there if you don't mind remain standing please
you'll need to turn that microphone on thank you would you uh state your name employer and position for the record glenn jones i'm former president
Senator Mark Johnson
Unverified
2:14:22
of inderson state university all right would you please raise
your right hand Do you solemnly swear or affirm that the testimony you're about to give will be the truth, the whole truth, and nothing but the truth, so help you, God? Yes, sir, I do. All right, thank you. I would like
to give you an opportunity to make a brief statement,
if you have one prepared, before any member questions. First
Representative Jeff Wardlaw
Unverified
2:14:44
and foremost, I'd like to start by just saying thank you all for allowing me to be here today. I
Senator Mark Johnson
Unverified
2:14:50
do want to just let you know that I recognize that as the president of the university, this did occur on my
Representative Jeff Wardlaw
Unverified
2:14:58
watch. And therefore, it makes it my responsibility, and I accept that responsibility and the accountability that comes along with it. From my standpoint, my journey with Henderson goes back to my days as
a student. When I started Henderson in 2012, my goal, my hope was to really come back and contribute
to my alma mater in a meaningful way. But from my standpoint, as the leader of the institution, I'm held accountable for all the actions and activities that take place therein. and I just want you all to know that I recognize that. I want to thank you for the exchange prior to this. I
Speaker 330
2:15:32
did make it in safely last night, and I look forward to answering
Senator Gary Stubblefield
Unverified
2:15:39
any questions you all might have. Thank you, sir.
Any questions from the committee or comment? Senator Hickey, you're first up.
Senator Jimmy Hickey, Jr
Unverified
2:15:46
Yes, sir. Same, and if you were sitting out there, you may have heard kind of my questions. Misstatements to the financial statements. you're president of the university what's your take on that because again as I have already said what gives me pause is that those misstatements appear like that they give a better impression of the
university of course than what the actual was it wasn't the other way around can you comment to that yes
Speaker 333
2:16:17
sir first and foremost I do not prepare financial statements
Representative Jeff Wardlaw
Unverified
2:16:21
I don't direct people to put items on or take items off, to increase items or decrease items. I believe that you have people who you employ for those roles, and that's their responsibility to give you true and correct information. And so when I saw the audit report as well for the first time when it was delivered to me, I was surprised to see that. But as Dr. Powell testified, and I think anybody else within finance will testify as well, that neither I and I'm not aware of any board member directing anyone to misinterpret or
Speaker 241
2:16:52
misrepresent the financial statements in any way okay
Senator Jimmy Hickey, Jr
Unverified
2:16:58
one more if you don't mind mr. chair yeah go ahead you're recognized based on what you just said then which I fairly much anticipated that but as president of that university who did you have in charge of doing that not only with the preparing of that but entering it who who would those individuals be by name that would be that would be totally responsible for what for what you're telling me who who would
Representative Jeff Wardlaw
Unverified
2:17:24
those have been i'm not certain who the people within finance who would actually enter the data you're requesting uh i just know brett reported to me directly and i know he worked very closely with our controller but in terms of the people below them who actually did the data
Senator Jimmy Hickey, Jr
Unverified
2:17:40
entry i do not know. Any idea how many people are within what you label your finance department sir?
Chair
Unverified
2:17:53
Approximate. Fifteen maybe. Thank you sir. Representative Mayberry
Representative Julie Mayberry
Unverified
2:17:57
you're recognized. Thank you Mr. Chair. One of the main
things that we've heard so much about is the students not paying the university for the classes and I asked earlier who was the director of student accounts I'm told that Scott Freeman we were told that mr. Powell asked for this person to be moved to a different position can you tell us why that person was not moved to a different position Brett visit with me at some point about his
Speaker 333
2:18:26
concern about the ability of mr. Freeman and my response to Brett was in the case of
Representative Jeff Wardlaw
Unverified
2:18:34
any employees have been there for any length of time, let's try to work with those people, lay out the expectations for them, see if they can meet those expectations, and if they don't, then at that point in time, they can make the decisions they feel they need to make. But at no point did I think anybody expected that people wouldn't be out asking for the money that students owed us. And as I saw the audit report and the notes where it indicated that we weren't even making efforts to collect the amounts that were owed to us,
Representative Julie Mayberry
Unverified
2:19:02
it was very disappointing to see. How could you have not known that, that the students weren't paying?
I'm just perplexed by that, and why didn't this stop sooner? Ma'am, I don't issue
Representative Jeff Wardlaw
Unverified
2:19:15
bills to students. I didn't collect money from students. I didn't send a statement out. That was handled in our area of finance and
Representative Julie Mayberry
Unverified
2:19:25
administration. But it's the school policy that we're to just kind of ignore that the students have this debt and to let it ride semester after semester? That was not
Representative Jeff Wardlaw
Unverified
2:19:35
the school's policy, nor should it have been our practice.
For students who owe a bill, they're expected to pay the bills that they owe.
Representative Julie Mayberry
Unverified
2:19:44
So you told everybody they need to pay at the beginning of the semester? I never had conversations with
Representative Jeff Wardlaw
Unverified
2:19:50
students about needing to pay their individual bill. And I would talk with parents at orientation about you're gonna get a bill and we're willing to work with you to make payments in order to accommodate those bills, but never sat down with individual students and said, pay your bill, pay your bill. No, ma'am, I did
Representative Julie Mayberry
Unverified
2:20:07
not. Or direct staff members to look the other way?
No, ma'am. Okay, let me also follow up with the other question that I was asking about this cultural survey that was done in 2016. Can you tell me what that cultural survey revealed? Who was involved in it? What type of questions were there and why was it not released
for others to see? Yes, we brought
Representative Jeff Wardlaw
Unverified
2:20:27
in, There's a survey called Best Colleges and Universities to Work For, and we had the group came in, they did a
survey, it was part of our strategic plan to really gain an assessment of kind of where we were in terms of the culture of the university.
That they interviewed primarily faculty and staff, and that was released to the campus and that we had a series of open forums where that information was shared, and that was really the basis of understanding what we needed to focus on in our strategic plan moving forward. And one of the big issues that came out in that particular survey dealt with the fact that people were very concerned over salaries. In fact, they felt that there had been years where salaries were promised to them and those promises were not delivered upon, and that had gone on over a period of time. And so I was working with my faculty senate presidents at the time to really understand
where we were and to really put a plan in place to begin to address some of those concerns. What were those concerns? primarily dealing with salaries and the fact that they felt that they had very little input into the decision-making process of the university. So out of that, we grew the salary compensation plan that Dr. Powell talked about. We also created a shared governance system whereby we had key committees being formed, populated by faculty and staff and students.
Budget committee is a good example of that, where people would be apprised of what was going on. opportunity to provide input into decisions that were being made, whilst at a facilities committee and others along the way. But the main concern that I took away from that was that people felt that they were not a
Representative Julie Mayberry
Unverified
2:22:04
part of governing the institution. So what did you do to accommodate that? Did you make
Representative Jeff Wardlaw
Unverified
2:22:09
any changes in policy? Yes. As I just said, we created the compensation plan. We created a shared governance system whereby decisions were being vetted throughout this process.
Faculty, staff, and students were part of these committees. It wasn't just administrators. We had committees that were being chaired by faculty members as well. So they're very instrumental in being a part of that. But also we created a strategic plan. And that strategic plan itself, it set out some priorities, one of which was to enhance student success all the way to graduation, one of which was to improve the quality of life for people who worked on the campus itself. that dealt with health care and things of that nature. We also talked about wanting to make certain that we could address issues such as facilities improvements
Representative Julie Mayberry
Unverified
2:22:53
and things of that nature. And didn't the faculty take a vote of no confidence on your performance? Yes, ma'am, there
Representative Jeff Wardlaw
Unverified
2:23:03
was a group of faculty working outside of the system I just described who did take a vote of no
Speaker 24
2:23:12
confidence. Okay, thank you. I'll let someone else chime in. Dr. Powell, this might seem like
a simple question, but it's directed to you. In regards to that
conversation with Dr. Jones about the Director of Student Accounts, is
that scenario he testified to, does that sound exactly the way that you remember it? There
Speaker 110
2:23:39
was an additional factor that was mentioned in that conversation, and that was the fact
Speaker 199
2:23:44
that the director of student accounts, his father was important to the university.
Okay, so I guess we'll go to Dr. Jones. Who ultimately had the authority to make a change there?
Representative Jeff Wardlaw
Unverified
2:23:58
Ultimately, it would have been his authority if he said, you know, this isn't going to work. I feel this person can't do the job on any level. But in the case of any employee, especially employees that have been there for a length of time, I think it's always wise to give that person an opportunity to meet your standards and give
Speaker 330
2:24:14
that person an opportunity to show that they can or cannot
do the job. What do you think is appropriate for a length of time to
Representative Jeff Wardlaw
Unverified
2:24:23
meet those standards? We have employee improvement plans. I don't know what a standard length of time is, but maybe a semester.
If you lay out, here's what I'm expecting, and you still don't do it, then at that moment in time, I think you've done what I've asked you to do,
Speaker 330
2:24:36
which is give an opportunity to the person to show
that they can or cannot do the job. So, Dr. Powell, did this person, were they able to meet that standard in a reasonable amount of time,
Speaker 110
2:24:50
or what you felt like was a reasonable amount of time? No, I don't think he was meeting expectations for job performance. Why was there no action taken? Because when I recommended moving him, I was informed that we shouldn't.
Senator Gary Stubblefield
Unverified
2:25:04
By? By Dr. Jones. Okay. Uh, so where does that leave us Dr. Jones? I
don't, I don't understand. You just said that Dr. Powell had the freedom and it was his responsibility. We never had a follow-up
Representative Jeff Wardlaw
Unverified
2:25:19
conversation whereby after that period of time he came back and said, this isn't working for me at all. Not to my knowledge.
So would there have been an issue had, had that person been moved? No.
Dr. Powell, did you feel that, that there would have been an issue or
not, if you had done that responsibility? I thought
Speaker 112
2:25:45
the direction that I was given was clear, and that was the direction I was following. Okay, thank you. So I was trying to work
with the individual as best as I could. Okay,
Senator Joyce Elliott
Unverified
2:25:57
thank you. Senator Elliott, you're up. Thank you, Mr. Chair. I think I have just two questions. And one, Dr. Jones, I think, because I want to just think the best of intentions in this case, not every case.
But earlier, Mr. Powell testified that there is some connection here. Part of the problem is we're not serving the best and brightest at Henderson. And I know, Dr. Powell, maybe you probably didn't mean it the way it fell on people's ears. but if you're a student or if you're a graduate or if you're whatever from Henderson State I want to just be sure that's not something you want to feel about yourself because I don't think we even know the definition
of best and brightest. It's something we throw around. So Dr. Jones is there any connection as far as you're concerned to students being the best and brightest and not being the best and brightest that should account for anything that has shown up in this audit report is it on the students students you
Representative Jeff Wardlaw
Unverified
2:27:07
articulate this I would never describe our students as being not among the best and
brightest I think we have outstanding students at Henderson State University they may not have the highest ACT scores they may not come from second and third and fourth generation college families we have a lot of young people that work very hard and we've seen a lot of lives being changed by the work that we're blessed to be a part of. In terms of best and brightest, I think the biggest factor is just the economic rallies of our families. We had, at any given point in time, we'd have up to 90% of our families, 90% of our students, who are Pell eligible, which means that they're eligible to receive a Pell grant. Sorry,
they're on some form of university assistance or some form of assistance. 60 to 65% would be Pell eligible in any given year, which means that we're not serving wealthy students but it doesn't mean that we're
Senator Joyce Elliott
Unverified
2:27:57
not serving bright students not synonymous with best and brightest no ma'am students who've had more advantage is not synonymous with best and brightest not in my opinion okay and I just have a second question because we mr. Powell thought of course
that we would we would agree with one another when we start testifying and to get to shorten it is there anything that was testified to that you have any material disagreement with that you should respond to so that I won't just go down a road trying to pick things is there anything you need to respond to so that we have a full picture of how you see it I think from my standpoint in
Representative Jeff Wardlaw
Unverified
2:28:46
terms of how I've experienced the university it's probably a little differently than the lens
through which Brett saw it. I think from my standpoint, as I saw the university, and when I hired Brett, it was because I really wanted to put us on a better trajectory to really understand the relationship between the investments we were making and the outcomes we were seeing on our students, but also do a better job of planning for things that seem to repeat itself over and over and over and over and over again. And to really, to be a little more comprehensive and a little more thoughtful about how we approach things.
I'm trying to recall everything that he said, so at this point, nothing comes to mind. Well,
Senator Joyce Elliott
Unverified
2:29:23
I'm asking if anything just strikes you. If nothing comes to mind, that's fine, but to just give you an opportunity so that we understand from both perspectives, that's all I'm asking. You're not required to come up with a list of things. Okay. Yeah. Okay. At this
Representative Jeff Wardlaw
Unverified
2:29:36
moment, no, but something probably will come up. All
Senator Joyce Elliott
Unverified
2:29:38
right. Thank you, Mr. Chair. That's all I need. Senator Raper.
Thank you, Mr. Chairman. Mr. Jones, thank you for being here as well. I'm going to ask you just a couple of questions that were the same questions I asked Mr. Powell.
And that is, did you sign any required federal or state reporting forms knowing the figures you were reporting were not accurate? Absolutely not. Did you sign any bank, loan, or financial documents knowing the figures you were reporting were inaccurate? No, sir. I want to make a point on the bonds because that was brought up by Mr. Powell. I if I'm not mistaken you can correct me if I'm wrong, but there's about 80 million dollars in outstanding debt now
On the Henderson books outstanding bonds. Is that correct? It sounds close. Okay. Well, my point is there's a lot of things I could say here But and I appreciate you for stating right out the gate that you know you're accountable for everything that's happened here this didn't this is not something that happened overnight even within a 12-month window that suddenly things went badly you knew the numbers you knew the enrollment was declining you had to
know that you were in financial trouble but like some of my colleagues have pointed out oddly enough the numbers seem to look rosy for whatever reason and now we know they're inaccurate but as it relates to the bonds I just want make sure if you haven't thought about it what your actions have not just hurt Henderson and the staff and the students your actions have actually hurt every single person that had faith in Henderson and that bond rating that they
put their own personal money into those bonds and maybe even institutions and maybe even banks in the state of Arkansas that bought your bonds so that you could achieve the the goals that you had stated and you do realize that when that bond rating was reduced that you personally cost them millions of dollars in market value do you acknowledge and understand that I'm not knowing I don't quite know
Representative Jeff Wardlaw
Unverified
2:31:54
the degree to what it cost them but I do understand
the fact that when the bond rating was reduced that was not a very that was not positive in any way on behalf or a positive reflection of the
Speaker 110
2:32:10
university anyway do you understand that mr. Powell yes I understand how bond ratings can affect
the value of the instrument well I could tell you the grandmother mr. Jones that maybe bought a hundred thousand dollars of your bonds that as soon as that bond rating went down she lost money in her account and if she needed
her money today and wanted to sell that bond she would get less for that bond that she did obviously when she bought it and so yes mr. Jones you've hurt the grandmothers the grandpas and even the banking institutions that not only in this state that could have been states outside of Arkansas people that bought those bonds and so it's it's hurt and are you still on the payroll at Henderson now yes sir I am and
Speaker 379
2:32:55
to what date through the end of July I'm currently
on sabbatical okay well I'm gonna cease my questions I think the chairman and others are gonna bring us to conclusion here but I just want to tell you for me I believe that there's things that are legal and there are things that are honorable and given the impact of what you've done it's a bit of an insult to know that you're still being paid if I were you I would consider whether it might be more honorable to resign fully and stop the impact and really have an
acknowledgement of which the pain that you've caused here that would be my suggestion to you
that's all mr. chairman senator Johnson you're recognized for
Senator Mark Johnson
Unverified
2:33:50
question thank you mr. chair and dr. Jones dr. pal I'm gonna ask this question and if happy to either one of
you can answer it, but I want to, if one of you hears the other and disagrees, I'd like to hear why.
A few years ago, I had the opportunity to try to help a friend of my daughter's, a young man who had a disability and was trying to go to a two-year college and start to rebuild his life. He couldn't work in the job he had, and he couldn't get his transcript. He had gone to UCA for a couple of years, and he couldn't get his transcript because they said he owed a couple hundred dollars. And he told me that he had registered for one semester, but for a number of reasons, his estimated financial aid didn't materialize.
And so he just withdrew. He quit because he couldn't pay out of pocket. so i contacted officials at uca and they told me that they had a hard and fast rule that if you owe us money and you don't get a transcript and the official there told me and he was in a position to to speak for the universe he said if we didn't do this we'd have people that would never ever pay and i remember that when all this thing came up when i see the level of we're talking
I think the figure was 4,800 or 4,300, something like that that was thrown out that students would be allowed to carry a balance like that and still enroll for the next semester. I believe in compassion, but there's compassion, you know, there's a reaction to different. When you make the decision, there's a
thing you directly, and then there's the unintended consequence like Senator Raper was speaking of
of someone that is dependent on the ownership of that bond to be able to pay for their retirement. Are you aware of any other state-supported institutions of higher learning that had that, I started to say liberal, I guess I should say that loose requirement on what students could carry as debt owed to the university and still continue to sign up for the next semester?
And I would take answers from either
Speaker 112
2:36:24
or both of you. I'm not aware of the
Speaker 110
2:36:30
student account policies at any other university. All I'm aware of is that when I arrived, the
Speaker 112
2:36:37
university had a very loose policy, as you said, and we were attempting to tighten that
Senator Mark Johnson
Unverified
2:36:46
up to get those balances under control. Then, Dr. Jones, this situation regarding this student, unpaid student balances, that
Again, I'm just following the timeline. If I'm wrong, correct me on this. This happened totally on your watch. Was this a policy that was formally or informally implemented by your administration to allow this to happen? When I started Henderson, whatever policy was
Representative Jeff Wardlaw
Unverified
2:37:14
in place is what we followed up until the time of what Brett described that we started doing. well
Senator Mark Johnson
Unverified
2:37:24
there's net has there ever actually been a something that was in writing that said okay if
a student gets a little behind they can carry up to this much I did read the part in the auditor's report about there was supposed to be I'm gonna call it counseling it might not be the right word but to help get them on track for a repayment schedule and there were several that were put on such a program and failed to make a
single payment that semester, but were still allowed to re-enroll in subsequent semesters. Is that correct? Yes, there was a practice
Representative Jeff Wardlaw
Unverified
2:38:00
in place where students should not have been allowed to go
over the $4,800, but as you saw in the audit report, a lot of exceptions were made that should not have
Speaker 389
2:38:11
been made. Who made that decision to allow
Senator Mark Johnson
Unverified
2:38:15
them to re-enroll even though they had... I mean, at least from my way of thinking, you created a very liberal policy. Look, we'll let you carry a pretty good balance here, but there is a limit to it. And then it reminds me of the saying that a football coach a few years ago on the NFL team, the owner fired him, and he said, why'd you fire him?
He said, well, I gave him an unlimited budget, and he exceeded it. And it seems like this is what's going on here, that these students, they kind of have an unlimited budget, but then they turn around and exceed it at the acquiescence of administration. Can you respond to
Representative Jeff Wardlaw
Unverified
2:38:51
that, Dr. Jones? I do not know who made those
Senator Mark Johnson
Unverified
2:38:55
exceptions. Okay. Well, that's why we're going to continue to have hearings. And it looks like, and I will support Senator Hickey's motion that we refer this to JPR for further study. But thank you both for coming today.
I know you didn't know. Well, let
Representative Jeff Wardlaw
Unverified
2:39:09
me make it clear. I did not make those
Senator Mark Johnson
Unverified
2:39:13
exceptions to answer your question. Okay. Mr. Powell, do you have any knowledge of
Speaker 110
2:39:18
that policy and the genesis of it? Any exception to a student accounts policy would have been made in the
Senator Mark Johnson
Unverified
2:39:25
student accounts office, as far as I'm aware. Is this the gentleman
that we were referring to that Dr. Jones had recommended that he not be transferred? Is that the same office? Correct. Okay. Thank you very much, gentlemen.
Thank you, Mr. Chair. Yes, Senator Pitts, you're
Senator Mathew Pitsch
Unverified
2:39:45
recognized, sir. Thank you, Mr. Chair. I guess I've got, I guess, two and a half questions for the two of you. Predominantly, I'll start with Mr. Jones. Having been a president and CEO at a pretty early age, an old-timer told me there's two people you never make mad, and one is the secretarial staff, and the second is your CFO. You need to trust both of them. you were the CEO and his reason for telling me that is the buck stops there
something goes bad it's on you and you have to trust those people eminently so my three questions go back to getting the last set of facts to determine what happened here and what I don't have is when the transition took place that a you were and maybe you can answer this one at a time when did you first become aware of the henderson state financial as i alluded to it earlier train wreck that was coming at you
do you remember when you first heard we got financial lows of this magnitude from
Representative Jeff Wardlaw
Unverified
2:40:49
my standpoint and some of the budget presentations brett would show that our margins were very very thin
Senator Mathew Pitsch
Unverified
2:40:55
so since he was there from 2016 to 2018
i believe was your testimony 2016 was really the first time you'd heard financial issues yes in terms of our
Representative Jeff Wardlaw
Unverified
2:41:05
margins being thin okay in terms of the current woes and where we were it wasn't really
until i want to say june of 2019 that i became aware well he would have been gone in
Senator Mathew Pitsch
Unverified
2:41:19
june 2019 right so he did not
tell you in may of 2019 before he left that you weren't going to be able to make payroll no okay so you found out from his successor that we weren't going to be able to make payroll in
Representative Jeff Wardlaw
Unverified
2:41:34
June she informed me that we had certain vendors that hadn't been paid for a few months and that those bills had really piled up and that they hadn't been
Senator Mathew Pitsch
Unverified
2:41:42
paid so it's your statement then as I'm trying to drive to this fact that being joined at the hip with your financial person there was not
communique that said we're in serious issues financially there was communique from the standpoint
Representative Jeff Wardlaw
Unverified
2:41:58
that when he gave his reports to the board when he did his Daniel budget workshop that showed the charts that
you saw up here in terms of where we're going in terms of margins revenue expenses and things that we needed to do but in terms of us not being able to pay our bills I didn't become aware of that until after he left
Speaker 400
2:42:22
were you aware of the moody report about your institution
Senator Mathew Pitsch
Unverified
2:42:25
of higher learning in june of 2018 and yes i was and that didn't raise severe alarms that they labeled you as a complete negative as an institution because you couldn't pay
Speaker 353
2:42:37
your bills yes they gave us a negative outlook if i recall
Senator Mathew Pitsch
Unverified
2:42:41
correctly with that particular report so something isn't quite jiving in our time frame here then because if you as you just stated were aware in June of 2018 of this financial disaster from a national source, Moody's, I think the
real key is somebody, either Mr. Powell or a national institution, had to have made you aware we were in dire straits. I also have concerns as one other data point, these two, I'm chairman of education audit. I wasn't in 2017 when your institution received a whoa wow report or 2018 and the idea that the buck didn't stop at this president of the institution or chancellor I don't want
to mistitle you but the fact you didn't know that the state had audited you in back-to-back years from somebody whether it was staff or whatever I find kind of incredulous I was a dean of a UA system for six years and if the remotest thing of a bad audit showed up on our institution we'd have been all over that immediately and so I believe it was your testimony you didn't know that third piece this audit that happened back-to-back years ever came to you are you speaking about the current
audit for 18 19 17 we started with 2017 an audit that said you had numbers that were misstated and overstated both of in my opinion to the benefit of your institution plus some other findings and then the exact same repeated findings were found in 2018's on it and every audit report
Representative Jeff Wardlaw
Unverified
2:44:17
that we received we'd sit down with the auditors with the exit interview and I would ask are they anything any
items here of concern to you and in a couple years we had what they called minor misstatements that were corrected on the spot by our team I
asked if our folks were involved and engaged and helpful the answer was always yes and so in that earlier audit when i asked if
Speaker 402
2:44:41
there were concerns or items that created heartburn for them that was a response i
Senator Mathew Pitsch
Unverified
2:44:47
got so let me ask the third question and it really is trying to find out where the issue is here and when i wrote this i was trying to get to the nut that caused the problem do you believe you were misled by dr powell regarding the financial
health of henderson during his time frame there because somebody has to own this this buck has to stop here statement and it's either you and the president's chair or him and the financial chair but there was a disaster coming and you've got board members over here that were making decisions you have legislators that were loaning you money based on decisions so were you misled by him or was that something you knew about and chose to make other directions as it relates to what i knew
Speaker 397
2:45:39
here's what i knew i knew based upon his reports reporting and
Representative Jeff Wardlaw
Unverified
2:45:43
sharing that we were very thin from a margin standpoint i was not aware that we were so thin to the standpoint that we were not able to pay our bill collectors and our folks that we owed so when he left that was when it was brought to my attention that there were invoices two three years two three months old that had not been paid and at that time I called those vendors and I
asked what's going on this was when we hadn't been paid in two or three months here and so why haven't you guys said anything to me about it I've seen you we've had meetings we've had conversations I know but I wasn't aware of that likewise I wasn't aware even though the fact that some of our employees who had incurred expenses and in the course of their work with the university hadn't been reimbursed either and so when i found out that those things that occurred is when lisa shared it with me that this is what was taking place was i misled to get to your question all i can tell you is here's the information i had and the information i had
is what was shared with the board and that's what we had until tally trying to
Senator Mathew Pitsch
Unverified
2:46:49
make decisions on behalf of the university so two actions then come to mind for you in that answer one is in june the month he left of 2019 you found out we weren't paying bills did you continue with the three percent raise to the faculty or did you not do that at that point
Representative Jeff Wardlaw
Unverified
2:47:06
we took a huge step back to really understand the magnitude of the problem that we had and visiting with our controller and I started asking her
what's going on she could not give me a lot of answers and so we did a lot of digging to understand what was taking place subsequently I know that the raise was withdrawn from the this year's budget in order to make certain things
Senator Mathew Pitsch
Unverified
2:47:31
balanced so what you're implying then is the communicate
between you and needing to be a trusted advisor back to my opening comment of the financial person you weren't getting the information you said you knew they were thin but you still chose to do raises based on that when
Representative Jeff Wardlaw
Unverified
2:47:48
that recommendation came forward I asked if we could afford this budget and I was told yes we can and that we should have these in here it's a commitment we've made in terms of getting faculty salaries up it's one of our priorities and as a result that was the recommendation that I received that I passed on to the
Senator Mathew Pitsch
Unverified
2:48:05
board so your testimony was you asked and we're told we we needed we could do this in my opinion do you still believe that was good counsel because that goes to the misled comment well I'm looking at the
Representative Jeff Wardlaw
Unverified
2:48:17
benefit of hindsight now and that was not
a wise thing to do but that moment in time in
terms of he and even our provost saying this is something we should
Speaker 397
2:48:28
do I accepted that council because the budget itself showed
Senator Mathew Pitsch
Unverified
2:48:33
that there was still a surplus even with that being in it mr. Powell do
Speaker 120
2:48:43
you believe that you should have communicated more to your president and Chancellor Communication about
Speaker 110
2:48:49
the cash issues began in November of 2018. That's when cash really became tight.
Senator Mathew Pitsch
Unverified
2:48:58
I guess my question still stands. Do you believe you should have communicated more prior to then of the current fiscal
Speaker 281
2:49:07
situation? There are always opportunities to communicate more. And maybe the real question
Senator Mathew Pitsch
Unverified
2:49:12
is, were you strictly saying we're thin, to use Dr. Jones' statement? Was that your communique, is we're pretty thin with money? Or were you actually stating a CPA's type report, here's the financials, here's where we're at, et
Speaker 110
2:49:27
cetera? I didn't provide the type of financial statements that you see in the audited statements,
Speaker 104
2:49:34
because that's not a management statement. So they're different. there's an operating budget and then there's a set of financial statements so within the operating budget the we were certainly thin and and beyond thin the entire time i was there as as i stated earlier we we started my my tenure at henderson started with a budget that was not in balance and we spent three years trying to right size a budget and trying to make all the right decisions to continue operating a university,
continue to do the right things for the faculty and staff, while also trying to correct all of these challenges. So if we went back and looked at every individual decision, would some be made differently? Absolutely. Did we think we were making the right decisions at the time? Yes. Did I think I was providing the right level of information? Yes. As I said earlier, none of this information was held closely, right?
There were regular forums at which anybody could come listen to all the information about what's going on at the university, ask whatever question they wanted to ask. None of it was private. But it was reported
Senator Mathew Pitsch
Unverified
2:50:55
incorrectly. In what way? in that we've got audit findings that show it's always to the benefit of the university being reported too low. The benefits are too high
Speaker 104
2:51:06
when it benefits. Unfortunately, sir, I don't know
what was incorrect in those financial statements. As I said earlier, today's the first time that I knew that there was any difference between what was handed to the auditors and what ended up in that process. I don't know what those differences were I would need to sit down with the controller with the audit team and and better understand what happened to be able to answer your question I don't have the benefit of knowing what went on in that audit but that tends
Senator Mathew Pitsch
Unverified
2:51:38
to go back to where does the buck stop because
your institution had been put on notice by the people who provided funding to you the state of Arkansas that you were out of compliance in an audit two years in a row during your tenure and yet you well we had audit findings that needed dealt with both 2017 and 2018 and in both cases we're led to believe there's actions being taken to fix and to change and as dr jones said in hindsight clearly we have the benefit of hindsight that we weren't doing it both of your testimony as you did not know the audit was there because the audit is
very telling information that we are off the train tracks right now sir let me correct that to the extent
Representative Jeff Wardlaw
Unverified
2:52:23
an audit was made available and shared with us i was aware of it during my time there at henderson so we would always have the exit interview with the auditors and the audit report would always come out and that audit report would go to the board members as well so i i'm not saying i wasn't aware that there was an audit to the extent the audit was conducted now the audit let's say the audit was sometimes behind in terms of
a given year I understand and so I just
Senator Mathew Pitsch
Unverified
2:52:54
want to make a one but I guess in both cases it's the buck stops where because you're being reported by outside agencies Moody's state's audit team I presume there's communique between you and your financial person stating we've got a train wreck coming and yet I see three percent pay raises i see other actions that not collecting from students etc that don't mirror and follow the parallel path of that kind of data
Representative Jeff Wardlaw
Unverified
2:53:27
representative wardlaw you're recognized thank you mr chair i think my mic's working now Now, Dr. Jones, what's your relationship with James Barnes? Where's – I'm over
here. James Barnes is a graduate – fellow graduate of mine from Henderson. He's one of our board
members. Did you know how much Henderson spent on the new dorms
and the golf center? On the new dorms, oh, gosh, it's about $27 million, I believe.
okay does that include the golf center or is that a different
figure no the golf center was all private funds all private funds okay can you tell us why uh or what made mr barnes resign from the board of directors you'd have
to ask mr barnes that he said he had a lot of business interests going on and a lot of activities going on that he had to give his attention to and he felt
it's time for him to step aside so Henderson early in 2019 moved all their banking to
Southern Bank Corp do you serve as the chairman of the board of that bank at that time
Speaker 327
2:54:45
yes sir I do thank you thank you mr. chair let's go let's see
Representative Justin Gonzales
Unverified
2:54:53
represent gonzalez you're up thank you mr chair i want to go back to the uncollected fund balance uh letting these students carry forward this 4 800 both of you seem pretty quick to throw mr scott freeman
uh under the bus put blame on on him for some of that not being collected but it's my understanding that he was that Mr. Powell you were his direct supervisor correct and my question is did he have authority to allow those students with those fund balances to re-enroll in class and what tools did you give him to be able to collect those those funds
Speaker 128
2:55:36
he had the the authority within the system to override a balance and allow a student to enroll
Chair
Unverified
2:55:43
was that his decision yes thank you
Representative Julie Mayberry
Unverified
2:56:04
representative mayberry you're recognized for question thank you mr chair i'm i'm struggling to understand how this budget crisis uh from what i'm hearing from you today you weren't really
aware of until recently because I have in front of me some information minutes from a faculty senate meeting from October 18th of 2017 a special meeting was called and the senate faculty meeting they met because they were given information at a meeting just before that from the budget and planning committee and that information shared and so so the dates let me put the dates out here October 18th of 2017 is when the special meeting is taking place of the Senate faculty.
On October 20th of 2017, a letter was addressed to you, Dr. Jones, from the head of that, and that is Megan Hickerson, President of the Henderson State University Faculty Senate. And in it, she states, after having this meeting, they all agreed, yes, we need to write this letter and we need to address these concerns to dr. Jones it says that they are concerned about the 2017 18 budget deficit of 1.6 million dollars following
a transfer from the reserve of 1.8 million so this is dated in October of 2017 very publicly known that you've got a budget deficit then it goes on and has a whole bunch of other, you know, questions in here about spending and money and specifically asked about all the consultants that were hired and the firms, private agencies, they want to know who has been hired in the last three years. We wish to know how these firms were vetted and chosen, who vetted them, who's accountable for the decisions to utilize them,
why was their work on this campus, or their work on this campus obviously has not produced the results that are wanted, and ask about a fall faculty conference that the university will be seeking to recover monies paid to Jim Black and his firm SEM Works. We'd like to know when all this will take place, how much money we will be seeking to recover and exactly what action we'll be taking if we're unsuccessful with our negotiations for compensation from SEM Works, and I really don't even know what that is.
It has a whole bunch of other questions about $2 million for a buyout from Aramark to a different food company. Lots of good questions, and the note I have on here is that there was no response from Dr. Jones. Did you ever respond to the faculty on this particular letter that was addressed to you? Yes, I did. We had a series of meetings
Representative Jeff Wardlaw
Unverified
2:58:56
to talk about the letter and everything that was within it. That particular year, I think, was Brett's first year. He came on board. said there are some things, some concerns I have about the budget, and there are things
that are not in the budget that should be in the budget, there are things that need to come out of the budget. In that particular year, there was a transfer from reserves to board approval to go ahead and make that adjustment. SimWorks was an enrollment management firm who had gone through a process with a new enrollment management director. So actually we had an enrollment management director who had been there for a while, and they were really struggling in terms of just gaining footing with the new way of recruiting students primarily with analytics we had jim come in to work with that group he made some suggestions some were good some were not very good and so in that particular year was a year
where we had a down a decrease in enrollment and so that elicited that concern but also subsequently there were some things that he was supposed to have delivered that he didn't deliver and we paid for those things even though he didn't deliver those things and that was the basis of requesting parts of our money back since he didn't deliver some of those items so you're saying
Representative Julie Mayberry
Unverified
3:00:03
you did so that information is not correct you did respond to this letter because what i have says that there was no response there
Representative Jeff Wardlaw
Unverified
3:00:09
was a discussion series of discussions i meet every month with the faculty senate president i would meet at least once a semester with the
entire executive team of the faculty senate and when invited to the meetings
Representative Julie Mayberry
Unverified
3:00:23
questions they would have as well okay the other thing I also have a an email that was sent by Brett Powell on March 29th of 2017 and it was to the faculty and to the staff so I assume when it says faculty that you are included in this email so you had knowledge at that time about the
carry over of the balance part of this letter it says I believe we have not adequately assisted students with management of their tuition fees and other charges as a result each semester we lose and we will likely never re enroll students to unpaid account balances most recently approximately 200 students who were enrolled in the fall of 2016 were not able to continue this semester due to unpaid balances an additional impact is that the accounts receivable balance for student accounts has more than doubled, more than doubled over the past five
years. Currently enrolled students have outstanding account balances ranging from $500 to $17,000. Again, I'm going to repeat, this was March 29th of 2017. Our past practice was to put student account holds on students who have outstanding balances, which prevented them from registering for future classes. Essentially, this ensured that many students who were struggling to pay would no longer be able to enroll and would leave with balances that would likely never be paid. This practice has benefited neither the students nor the university.
This January, we began working closely with students who were not able to pay their charges in full registration, making them aware of payment plan options and ensuring that they have access to information on all available forms of financial aid. As a continuation of this proactive approach to helping students manage their student accounts, We also plan to change the enrollment process for summer and fall courses. Below is a copy of the information, blah, blah, blah. And it goes on. But you clearly knew that this was the policy. So as president of the university, why then do you say, okay, you had to have known this was the policy.
Hearing that there's an outstanding account balance of $17,000, dollars? I'm really struggling. Help me out. How do you ignore that? You don't. And when I found out that
Representative Jeff Wardlaw
Unverified
3:02:45
we were allowing students to carry balances that high, that's when we had the conversation. This should never happen.
A student who owes that amount of money should never be allowed to get to that point, ever. And that was a concern I had when we started talking about how do we assist our students and help our students. But at no point did I ever authorize anyone to
Speaker 369
3:03:08
that allows students to run up balances that high. That's a disservice to the students. It's
Representative Julie Mayberry
Unverified
3:03:14
also a disservice to the university. Well, what did you do to stop it? This starts and ends with you. You have that responsibility. And so, what did you do to
Speaker 397
3:03:25
stop it? And at that point, no one who has a balance over $4,800 should
Speaker 426
3:03:32
have been allowed to continue. That's still really
Representative Jeff Wardlaw
Unverified
3:03:34
high, $4,800. I agree, it's high. But from my standpoint, again, looking at something that was $17,000 in the amounts
you articulated, that should not have been done, should not have been impossible. Can you tell
Representative Julie Mayberry
Unverified
3:03:47
me anything about those students? Who are these students who weren't paying those accounts? Some of the
Senator Mark Johnson
Unverified
3:03:53
students I'm aware of are students who were typically juniors and seniors. Some of them had life challenges or life experiences or
Representative Jeff Wardlaw
Unverified
3:03:59
sudden changes in their lives, lost a parent, along those lines of major illness there were good students who wanted to continue were willing to get on the payment plan and honor the payment plan and they did but also apparently there were
Speaker 353
3:04:15
others who were not like that who were just taking advantage of the system and were
allowed to do so all right members uh at this point i think it'd be appropriate to go ahead and get the board members that would like to mr hudson's been subpoenaed
so we'll have you come for sure and in any other board members that are here that feel that they have something to add to this discussion or maybe some new information or can shed some light on something that they might
disagree with has been testified with testified on today please come on up and when you get there They remain
standing, please. You'll have to work your way into
a microphone. Please, please remain standing. We'll
start on my right. Would you please turn that microphone on?
Thank you. Please state your name, employer, and position. Johnny Hudson, Chairman of the
Speaker 430
3:05:23
Board of Hunter State University. Thank you, sir. Would you please
raise your right hand? Do you solemnly swear or affirm to tell the testimony you're about to give will be the truth, the whole truth, and nothing but the truth? So help you God? Thank you, sir. Next. Brown Hardman. Is that microphone on? Yes, sir. Can you hear me? That's better. Thank you for the record. We need that. What is your employer and your position? I'm a real estate broker.
for united country all right thank you sir uh please raise your right hand do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you
Speaker 434
3:06:02
god i do thank you sir next please i'm eddie
Speaker 435
3:06:08
arnold your employer in position i'm in the health care business and i'm also in the school
recognition business all right thank you sir uh please raise your right hand do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth
so help you god i do all right thank you mr hudson uh i'd like to go to you first do you have a prepared statement or something you'd like to say before we get into any questions
a few words here i'd like to say all right please share with us you will need to pull
Speaker 436
3:06:39
the microphone up closer slide in somehow like i say you know i'm johnny hudson chairman board of henderson university of 1967 graduate Henderson, have a lot to give back to that school, what it's done for me and our family.
I wish I was not here today under these circumstances, but if we had known some facts and proper facts given to us at appropriate time, we'd have made some decisions a long time ago, but we were not given the proper information to make those decisions by. And contrary to what's been said today, I've got a timeline here of everything that happened And on May the 3rd, we have, every year, we have a board retreat that's strictly for budget purposes.
That's the main purpose of it. May the 3rd, we had that meeting, okay? And presented to us was a budget showing us surplus, both years, both year ends. every board member was there to ask questions about the budget and we asked a lot of questions that's what we're supposed to do but end of the day we were satisfied that these positive numbers were going to be right okay so we go to the board meeting
and we approve that budget based on the facts that were given to us at that time which we thought was facts we've got a CFO that's a CPA a PhD that has been in higher education for years, so he knows what's going on, okay? We've got a president who has accounting degree, two law degrees, and been in education for 20 years. Two strong people that the
Speaker 437
3:08:24
board relied on for this information, okay?
Now then, I did not know, and no board member knew that we had this kind of a
Speaker 436
3:08:36
financial problem. Yeah, we talk about thin budgets and things like that, sure, but not to the extent what we had here. Now then, when we pass the budget, now Dr. Powell left May the 31, okay? I get a call. I've got a timeline here.
Bear with me just a minute. I get a call from Elaine Kneebone, who was a general counsel, okay? And the reason she called me was that we had some accounts of payable that needed to be paid and possibly could make payroll, but I about fell out of my chair. I was shocked. I had no idea this was happening. Subject to that, Dr. Jones was on vacation at that time, okay? She got a hold of him, got my authority to talk to him, okay?
So I said, you go talk to Larry Walter, who's the head of the Department of Finance Administration, and see about getting a loan. Dr. Jones comes back on vacation. Then he understands the situation, and he calls Dr. Welch at Arkansas State and says, we need some help. So with that, we get approval for $6 million. So Dr. Jones, myself, go meet with the governor,
Larry Walther, Department of Finance Administration. $6 million. And I had no idea we had $4.5 million worth of payables sitting over there when this came about. So I get back to our next meeting, and I was told how many our council payable was. I said, well, this $6 million just barely covers our payables. What do you do about payroll? So that's when we found out the facts. And that's, if you want to know the truth, that's what happened. And you can look at those budgets presented to us, and yeah it doesn't have depreciation
but that's we knew it was thin but they show us a positive balance there and we all board members agreed and we voted 7-0 for the budget there was no dissension on that budget after the facts presented to us thank you sir members if you don't mind
hold your questions just a minute I want to get these other members that had something to add
to discussion. Mr. Brown, do you have something to add? Can I stand up and talk? Sure. Just do your
best and stay in the microphone for the record,
Speaker 367
3:11:08
please. Okay. Brown Hardman. Dr. Jones, maybe if y'all could scrunch together there a little bit and make it more feasible. I'm fine. I
Representative Dwight Tosh
Unverified
3:11:16
take total responsibility as a trustee for where we are right now. I didn't vote to end up where we are right now i fought it the whole time but i blamed the board all along i think the board and if you read the good good as it and democrat i've said that many times i think the board was lax in what we did i don't think we did enough just want to
Speaker 433
3:11:37
say that i hadn't heard anybody say anything about that
taking responsibility but i do okay well that sure raises some questions but we're gonna we're gonna stay
in line and just making a statement real quick oh mr arnold do you have something to say okay members we're gonna open may I respond to that a little bit no let's wait let's wait on some questions I think you'll have opportunity to say what you need to Center Hill Europe thank you
Senator Ricky Hill
Unverified
3:12:06
sir for hold my question to we got the board directors here my question basically is pretty simple
y'all have a directors and offers officers liability insurance we did at one time we just canceled it you just canceled do you have an errors and emissions policy yes you do okay
Speaker 227
3:12:30
thank you center stubblefield thank you mr. chairman well I think
it's it's on you might turn it off let me run back to center hill for a follow-up
Senator Ricky Hill
Unverified
3:12:46
okay have y'all filed a filed on that policy
Speaker 436
3:13:00
no can you answer why well at this point in time it's middle arrows and missions on our fault we did what we were supposed to do and we followed the rules and we had proper people giving us information to make proper decisions by you know they didn't give us the proper information so we made some bad decisions
Senator Ricky Hill
Unverified
3:13:18
okay so you're you're acknowledging that there's some bad this bad information that was given y'all correct indeed so that should i'm not not saying that y'all didn't do what you were supposed to but the information that is directors and officers
there is an omission from the information coming to y'all thank
Senator Gary Stubblefield
Unverified
3:13:38
you for that thank you senator stubblefield you're recognized thank you mr
chairman this is to the board are you saying you were given improper information or
Speaker 451
3:13:50
false information well I'd say improper information because the
budgets they were showed us were positive budgets please
Speaker 366
3:13:56
please do your best to speak in that microphone
Speaker 451
3:14:01
for the record I would say it's it's bad information given to us because we've got budgets
Speaker 436
3:14:07
that was approved by the board that were false budgets because shortly we found out we're five million dollars down and no one knew that at the board level you can talk about yeah we talked about thin margins and those things along the way yes but on May the third when you have a financial officer and the president sit there and give you
budgets to agree with them we asked a lot of questions and would prove those budgets that day that's false information it goes a month later we found out we're five million
Senator Gary Stubblefield
Unverified
3:14:40
dollars down when when were when were you first made aware that there were invoices that were
Speaker 436
3:14:46
being held two and three years that's what i got a call from the lane knee bone and i've got it time frame here on
Senator Gary Stubblefield
Unverified
3:14:53
june 20th 2019 this is a less than a month after dr powell left that's correct
Mr. Dr. Jones when when did you become aware there were invoices being held? It was
Representative Jeff Wardlaw
Unverified
3:15:04
about that same time I'm visiting with Elaine and Jennifer I think Jennifer Elaine or Jennifer called me and said the same thing and I was out of
town I asked that they would make Johnny aware of it serve mr. Hudson aware of it what was going on And then when I got back would have more conversations about it But that was the first I'd heard of it that we were holding invoices for two to three or longer months well that
Senator Gary Stubblefield
Unverified
3:15:28
earlier I asked Dr. Powell if he was aware that there were invoices being
held do you remember what his answer was I believe his answer was no he said that's right how is it possible that Dr. Powell did not know there were invoices being held how's that possible
Speaker 344
3:15:46
so you'd have to ask Dr. Powell that question
Speaker 154
3:15:53
I did he said no I wasn't responsible for paying the invoices and there's no way
Speaker 112
3:15:57
for me to know they weren't being paid unless someone told me for two or three how
Senator Gary Stubblefield
Unverified
3:16:00
long were you there how long were you there dr. Powell three years so
for three years some of these invoices were not being paid for three years and you are not aware of it which invoices weren't
Speaker 112
3:16:13
being paid for three years dr. dr. Jones just said there were invoices
Senator Gary Stubblefield
Unverified
3:16:17
that were being held three and four years no sir i said months well you said if i said years i
Speaker 394
3:16:25
apologize if i said years i was incorrect okay all right so there were invoices
Senator Gary Stubblefield
Unverified
3:16:29
being held three and four months and you were not aware of that dr powell as i said i i wasn't responsible for paying invoices
Speaker 112
3:16:39
and unless someone told me they weren't being paid there's no way i could be aware of that either a vendor would have to call me and tell me they weren't being paid or someone on the the staff
Senator Gary Stubblefield
Unverified
3:16:51
would have to say we're not paying invoices. Okay Mr. Chairman I have one last question
I'm done. Go ahead. This is to the board. Do you agree with Dr. Powell's testimony 100% that
Speaker 458
3:17:00
was given this morning? I'd like to ask each board member to answer that. No.
Speaker 203
3:17:11
I don't know. Mr. Arnold could you just move to that middle seat? I think that'll allow you easier. It's already got the space there to allow you easier access.
Senator Gary Stubblefield
Unverified
3:17:32
What was the question again? Do you agree with 100% certainty of every statement that Dr. Powell made this morning during his testimony? No. That's all I have, Mr. Chairman.
Speaker 117
3:17:43
Can I respond? Yes, sir. Yes, sir. yeah so there there's
Speaker 104
3:17:48
a there's a gap in information here that that i think might be helpful so if if there are three or four months worth of invoices that
Speaker 112
3:17:59
had not been paid that obviously accumulates to to some substantial balance i have no idea what that balance is the information that i provided to the board at the may meeting that mr hudson is referring to
was based on the revenue and expenses that had been collected and paid up until that date if someone had been holding three to four months worth of invoices those costs were not in those figures and i wasn't aware of it so
Speaker 154
3:18:30
if i did present apparently i did present incorrect information but it's because i didn't know there was information missing if i had known that there were three or four months worth of invoices not in that statement we would have revised that statement
i'm curious who who i mean we need a name who's responsible for for making
that known to you i mean who was the person that was sitting there holding those invoices i would assume it was the whoever was
Speaker 104
3:19:00
responsible and accounts payable for paying bills dr jones do you know who that person this no sir i do not is
there anybody in this room associated with henderson that could answer that question really
Speaker 57
3:19:17
that's that's interesting uh and sir i tell
Representative Jeff Wardlaw
Unverified
3:19:21
you i do not because i don't want to
give you an incorrect name i don't know if it was the controller who paid the bills i don't know if it was the assistant controller who paid the bills or if there was someone else and so i'd hate to give you an incorrect
name this this is beginning to be very frustrating so when you did find all the information who did you go to to ask what in the world is going on i went to our controller lisa franklin
Representative Jeff Wardlaw
Unverified
3:19:54
and she said what she said we've been holding invoices or invoices are being
had been held for the past two or three months, these invoices are now due, I don't think we have enough money to pay these invoices, it's okay, what is the total amount that we owe? And she said, I don't know what the exact amount is, because things were showing up every day, she said it seemed like. At that moment in time, because she was so frustrated and frazzled, I asked two of our accounting professors if they'd come over and would help her, just to, if she's doing year-end stuff and help us get an understanding about what are the accounts payable and and they
came and they helped they worked with her but we still weren't able to get an answer for several weeks after that in terms of how much is owed so my frustration was how can
we not know who we owe and how much we owe them and then why we haven't been paying
people and then you said how could this have happened and then you were advised what at that point
Representative Jeff Wardlaw
Unverified
3:20:53
in time that's when she said she being lisa franklin our controller she's saying i don't know what brett was doing those were her
words and i said well you're the controller you have to know you're looking at all the money you're the one who's seeing everything come in and go out and so at that point that's what i got from her and at that point we tried to get as many people in as we could to understand what was taking place as mr hudson indicated i reached out to dr welch just to ask if he would let us use some of his people to come in and just look at things for us and help me understand what was what okay mr chairman i don't know if you're ready to take it back
okay we'll uh move senator johnson you're recognized thank you mr chairman uh i have
Senator Mark Johnson
Unverified
3:21:37
a question for the board members and a question for uh dr jones and i'll start with dr jones um dr jones you
testified that you are a member i believe he's the chairman of the board of southern bank corp is that correct yes sir do you serve on any other corporate boards i serve on
the boards of baptist health as well okay
so are those the only two do you do you
receive a remuneration for either of those positions for southern bank corp i do okay Okay. Do you file a statement of financial interest with the Secretary of State, as most state employees in certain positions are required to file?
Yes, sir. Every year as president, I did. Okay. All right. Thank you. Thank you for that. My other question is to the board members, and I'll just kind of take you left to right. Mr. Hardman, are you familiar with, I know when you became a board member, you were sworn in,
you took an oath to uphold the Constitution
of the state of Arkansas. Is that correct? Yes, sir. Are you
familiar with Amendment 33 of the Arkansas Constitution? No, sir. Okay. Amendment, I won't belabor this yet. I'll move down to Mr. Arnold. Mr. Arnold, you also
were sworn in under oath when you became a member of the board. Is that correct? Yes, sir. Are you familiar with Amendment 33 to the Arkansas Constitution? I
Speaker 473
3:23:04
probably am, but you would have to refresh me what it is.
Senator Mark Johnson
Unverified
3:23:07
There's a lot of amendments, so I don't know if it's 32 or 33.
I'll come back, sir. And Mr. Hudson, you will acknowledge you were sworn
in. Are you aware of what's in Amendment 33? No, sir. Okay. Amendment 33 spells out the fact that universities are independent and that the governor can't fire you. There was an incident in the 30s when a governor got mad because the newspaper in Fayetteville editorialized against him. It happened to be owned by the mother of the president of the University of Arkansas.
And so he fired the president of the University of Arkansas, and the response was to adopt Amendment 33, which basically puts the powers of running this institution on you. and I only commend you to that because y'all need to know and Mr. Hudson it really upset me when the answer to Senator Hill's question was that y'all had had dropped that Arizona emissions coverage that's that's frankly quite bothersome to me I I'm trying to protect the taxpayers
interest and maybe there's some insurance out there that might cover some of this shortfall may I answer
Speaker 436
3:24:20
that of course you can sir please we had legal advice on doing that we didn't just pull it a trigger we had legal advice that said you don't need this because if you have any claims it goes to state claims and you don't
Speaker 451
3:24:33
need that coverage it was twenty five thousand dollars a year premium so the budget crisis we said hey let's do what's right
Senator Mark Johnson
Unverified
3:24:41
that that sounds penny wise and pound foolish to me but i could be incorrect and the i'm sure your
attorney gave you advice based on the information he had at
the time senator johnson i'm going to interject here just
as a an item of point that it wouldn't matter now that there's no current coverage because those policies claim cover the period under which their coverage was available to them so if it were possible which I don't know you actually would have situation in which they might still be required to make make a coverage claim on that so it's also thank you for
Senator Mark Johnson
Unverified
3:25:17
pointing on out but of course that's presuming that's what we've recovered but we don't know we're not through with this process yet but I appreciate your candor I appreciate you coming today thank you but I afraid we're this is a tip of the iceberg we're we're still gonna be digging and
I intend to support Senator Hickey's proposal that this be referred to joint performance review committee thank
you mr. chair representative Gonzales you're recognize for question
Representative Justin Gonzales
Unverified
3:25:47
thank you mr chair i have a couple of questions one specifically to the board
board members and it's the same question that i started off with mr powell when he first sat down there were y'all made aware of the financial situation of henderson from the time he was brought on board did you have quarterly reports that said this is the direction that henderson that's headed with their financial situation I'm not sure I well I'm not sure what
Speaker 441
3:26:17
time I went on the board because I was off the board maybe
Speaker 436
3:26:21
I was on the board 17 16 I'm not sure mr. Arnold can you were on the board then I
Speaker 473
3:26:26
for sure I know Mr. Hardman was I think
Speaker 435
3:26:32
you were on in 17 16 16 I think you But anyway, funds balance that he showed right off at the beginning of his presentation that it had decreased from $8 million down to almost $0. That's the first time that I recall ever seeing that. I never saw that at a board meeting. In fact, I'd even ask questions about reserve funds, and I was assured that we had reserve funds.
And when they were getting ready to do a line of credit, I questioned that. And this was shortly before he left. He said, we need a line of credit. And I questioned that due to the fact I said, well, I'm sure we've never – I've been on the board here four years, and we've never had to get a line of credit. I said, I'm sure you can just go hit your reserve funds. And I was told, well, you know, that's another fund.
Those are spoken for. Then I found out there wasn't any reserve funds. I'd gotten a call one day from, this was I guess in the June, about the time you got the call. I got a call from the provost saying that I needed to call the governor. I said, why do I need to call the governor? And he said, well, we do not have money to meet payroll. this week and said the president is in the caribbean on a tour on a on a cruise and we don't he said we don't have the money to meet the payroll and i was shocked so i said well
i am not the chairman of the board but uh i i think you need to call
Speaker 436
3:28:13
the chairman and that's what i did yes and that's when elaine nebong called me and gave me the information that i I had her to go to the Department of Finance Administration and talk to Larry Walter, who's the DFA head of that, as you well know, and got the ball rolling on getting some money in to cover those
Representative Justin Gonzales
Unverified
3:28:33
expenses and payroll. So bottom line is, on your regular board meetings, you were not made aware of declining cash fund balances.
Speaker 477
3:28:41
I do not recall someone, you know, seeing that we were in that dire
Speaker 478
3:28:52
i'll agree next statement you allow me another
Representative Justin Gonzales
Unverified
3:28:56
question uh sure here dr jones there were two votes of no confidence from the faculty at the school and it's my understanding that your plan is after you uh are off sabbatical that that you're done drawing your salary from
Henderson that your plan is to go back and join that faculty do you think it is appropriate for you to join faculty that has voted no confidence in you first and foremost I'm not certain
Representative Jeff Wardlaw
Unverified
3:29:27
if I will return to the faculty or not so my wife and I are praying through that and seeking the Lord's direction and what he'll have us to do and that's what we're praying through is is it appropriate is this good is this right thing to do is it just the right thing to do so we're still processing through all of that right now even as i speak okay can i respond
to something you mentioned about 20 minutes ago sure and that was you mentioned i was quick to throw scott freeman under the bus i did not in any way say anything i hope that was designed or intended to or sounded like i was throwing him under the bus i was just responding to someone's question about how i handled that situation what
Representative Justin Gonzales
Unverified
3:30:09
it's brought to my attention well since you brought that up let's go back to that i mean i think you you both did point at him for for blame for not collecting those fund balances and it's my understanding that ultimately the president
or the vice president had to sign off on all of those fund balances being carried over for those students to re-enroll so you're telling me that is not correct i have not signed off
Speaker 365
3:30:34
on anything for students to allow anything to carry over okay
Representative Justin Gonzales
Unverified
3:30:37
so you brought up yourself that they were allowed to carry over forty eight hundred dollars um i forgot who you mentioned that to earlier that they they should not have been able i think believe it was representative mayberry that was questioning you when you brought that up that they should not have been allowed to go over that forty eight
hundred dollar balance so whose policy was that to allow them to carry that forty eight hundred dollar balance i know that's been asked several times but that it has still not been answered In terms of it being allowed to be carried,
Speaker 365
3:31:07
it was our policy as a university. So it was
Speaker 481
3:31:13
a university policy, because we've heard that it was not. Policy
Representative Jeff Wardlaw
Unverified
3:31:16
practice, but when it came up, we had, in the email she read, there were about 200 students who had been impacted each year. Typically, those were juniors and seniors.
The ones I'm aware of were juniors and seniors who were close to graduating, close to completing, and this was an opportunity to help those students get further along. but it never should have been allowed to mushroom to where it got in terms of the amount of students who were just not being asked to pay at all and the amount of students that were not paying anything at all and the amount of students that were allowing to re-enroll
Representative Justin Gonzales
Unverified
3:31:49
even though they hadn't paid anything so what tools were given to the department to be able to collect those
Representative Jeff Wardlaw
Unverified
3:31:54
balances I do not know that was Brett's area in terms of what he authorizes
folks to do I know we had a collection agency that we worked with but that's extent of my knowledge in terms of what they did or didn't do and
how often they contacted students okay thank you dr jones i have a question you uh you brought up uh trying to figure out what was the right thing to do and uh that kind of stuck with me when there's about 21 give or take every year there's There's about $21.5 million of taxpayer money that goes into that budget.
And you sat at the table when you first got here and you owned this debacle as it's been described today. How, in light of so many of my constituents and people that have worked day in, day out to keep Henderson strong and do a great job, who are now suffering a pay cut and cuts to their retirement, how in the world can you think it's the right thing to do to continue taking that kind of salary? I would love to hear an answer to that on behalf of the taxpayers that I represent and my community first
Representative Jeff Wardlaw
Unverified
3:33:03
and foremost I'm taking the pay cut as well both to salary and to benefits as well
in terms of moving forward while this is a horrible situation and I as I said in the beginning I own all of it from my standpoint when decisions made for me to step down I felt it was time to step away. I felt we needed a new vision, a new voice. And
Speaker 397
3:33:27
so from my standpoint, I felt that what we agreed to was a fair and equitable thing to
do. Okay, that's interesting, but I appreciate the
answer. Senator Pitts, you're up next. One quick question
Senator Mathew Pitsch
Unverified
3:33:43
and maybe a follow-up. To the board members, I serve, I like Dr. Jones on several boards, serve on my alma mater's board of
advisors so i've been where you are on a lot of normal jobs i haven't been in front of a congressional or state hearing if you will but when you take your pledge to do that job is this the type of board that you have fiduciary responsibility stated implied or ignored
when you took the job were you part of a fiduciary responsibility that fell on your shoulders to be on this board yes yes yes sir yes sir so i think you alluded to the fact that you were seeing slim numbers and that your testimony was also that you all were shocked when the actual numbers came out so this insurance policy of errors and omission
has driven you to be in a crosshair with that judiciary responsibility. Is that correct? I'd
Senator Mathew Pitsch
Unverified
3:34:53
me advice on that, sir. Well, my point being is that with fiduciary responsibility and you didn't get the right information, fiduciary situation of this college is best described as woeful, worst described as a disaster, and yet that falls on your watch, so to speak.
Falls on our watch, I agree with that. And so you were given incorrect data, was your testimony. Correct. I think all of you kind of agree to that. Do you agree you were given, maybe you could elaborate if you're shaking your head, know that you were given the
Representative Dwight Tosh
Unverified
3:35:32
right information? I was given the same information everyone else was. Okay. When I got a call from the secretary of the governor telling me I had been appointed to the board, I asked her to hold off for two more days, please, because I didn't want to do anything to hurt Henderson State University.
My mom and daddy graduated there. I graduated there. I love it. I finally decided I would do it, and I would do it because I would make every vote, not far or against Glenn Jones, not far or against Eddie Arnold, not far or against anybody. that I would vote for what I thought was the best interest of Henderson State University,
Senator Mathew Pitsch
Unverified
3:36:10
and I've done it that way ever since. Well, I appreciate that. That's a passion and a heartfelt response. My question really gets to the information. I'm still back on let's get the facts.
I think you were put in a fiduciary responsibility position but were not given facts to make the right decision. And I really would be interested in all three of you answering that as either truth or no, you've got something else. I have voted no more than anybody on
Speaker 486
3:36:36
this board and been looked down on because of it. That is true what I'm saying.
Senator Mathew Pitsch
Unverified
3:36:42
You didn't get the facts. Do you care to weigh in? No, I'm fine with that. Yes.
So in reality, then the problem we have can go back to the management of this institution and the not handing data to the people who had fiduciary responsibilities. is that a
Speaker 411
3:37:02
true statement okay thank you dr jones a recurring question that's come from folks that
work at hsu that i'm curious about and i don't know the answer and i don't like to ask those questions not knowing
the answer but uh you are under oath so i'm i'm believing i'm going to get the truth
were there any raises given during this time of distress at henderson Beyond
Speaker 333
3:37:31
what we've talked about for the current budget cycle,
Representative Jeff Wardlaw
Unverified
3:37:36
there were raises given periodically over the past five or six years, mainly under the faculty compensation plan in the faculty. I think there may have been one year where we did across-the-board raises for every one, maybe one, but for the most part, raises were not given.
So any raises that were given were kind of a blanket deal that all the faculty would
Representative Jeff Wardlaw
Unverified
3:37:58
have gotten no based upon the compensation plan the plan itself
was designed to address inequities that existed for faculty members who've been there for a long time so if you've been there 20 years you have no salary compression so someone who just started brand new you're paying them market rate more or less if you've been there for a while without getting a raise that compresses your salary so the plan was designed to address those faculty members with the greatest compression so not everyone got a raise and under the compensation plan as related to faculty but for many for years where we did
raises typically only the faculty got raises
so administration didn't receive any raises during this
Representative Jeff Wardlaw
Unverified
3:38:36
time there were one or two years where we did across the board raises where administrators did get raises but I think that was probably only one maybe two years because one year we limited to people making under $100,000 if we gave and across
Representative Julie Mayberry
Unverified
3:38:49
the board raise but to my knowledge that's we didn't do
anything beyond that okay thank you representative Mayberry you're recognized thank
Representative Julie Mayberry
Unverified
3:38:59
you mr. chair first of all Eddie Arnold Brown Hardiman thank
you you two were the only two not subpoenaed to be sitting up here and I'm sure no one really wants to be sitting in those seats right now so thank you for for willing willingly come I have a question as board members though to my understanding there was a vote by the board that would not allow a board member to visit the campus without permission can you verify that for me that that vote actually took place what was behind that and who did you have to
get permission from to go visit the campus I would think that we would want our board members to be as involved as possible and what's going on there and shouldn't need to get permission can you each one of you address that for me mr. Arnold can't because I think you brought it up I
Speaker 476
3:39:51
didn't bring it up oh you didn't well it was she brought it up I
Speaker 436
3:39:57
didn't bring it up it was discussed how a board member should react coming on campus because a lot of times a board
member just comes on campus it gets people nervous so we thought well let's make it a proper way of doing this notify the president of the college if you're gonna be on campus there and why you're on campus because I'm I'm a CPA I'm a retired CPA and I graduated Henderson with a Kennedy degree and we got a great Dean and I like to visit the dean every night but I want to make sure that I won't disrupt
Speaker 445
3:40:30
something going to see the Dean so that was always well
Representative Julie Mayberry
Unverified
3:40:33
so you were in favor of this policy was everybody else in favor was it unanimous
Speaker 445
3:40:38
by the whole board no no no but you know I want to make sure it was just it was just being polite
Representative Julie Mayberry
Unverified
3:40:48
okay you're professional okay well let me move on from that I find that to just be odd
I I would want to feel comfortable going on campus and talking to whoever if I want to go in and have lunch and discuss with students what's going on I would that that's
just me I want to be involved but But go ahead. Go ahead. I think
Speaker 435
3:41:07
I could add something to that. You asked why that occurred.
I think I know the developments that brought that on. We had had, I think this has been in the papers, and, I mean, this is no secret that Mr. Hardman and I voted against a lot of the spending bills, and we did question several things because we live in that town, and we hear things that people that live in Little Rock or other places do not hear. so we did have concerns but um the um at that particular moment there was uh i think mr powell
and dr jones brought something to us like a week before our meeting saying we're going to repair we're going to spend 34 million dollars repairing smith and newberry halls which we thought they were these are large two ten eight-story dorms and we actually thought they were going to be torn down years ago, but we're given about a week to make a decision on whether or not we're going to spend $34 million to repair two old dorms, which we thought there should be a lot more discussion about that.
I need more than just a week to come up with a decision on that. So I was just curious, and Mr. Hardman and I both were curious about the occupancy levels of those dorms. so we actually went into the director of housing about 30 minutes before the board meeting and it was right on our way in we didn't have to really go out of our way much and we got the the figures for all of the dorms and the occupancy levels so i was thinking we could probably get by without
those two dorms just there was a lot of discussion about that so that did not go over very well with the board members that we had other some of the other board members I'm not saying all but they they didn't did not appreciate the fact that we had done that so I kind of asked you know in Arkadelphia we only have one Chick-fil-a there in town and I thought well I like to go by and get a piece of chicken every now and then so who do I call for a piece of chicken to go on the campus
but anyway that never came to a vote I think that just ended I think Mr. Hardman might have something to say I can add a little
Speaker 497
3:43:32
bit to that because I was accomplished to the
Representative Dwight Tosh
Unverified
3:43:35
deed I think part of our problem comes from we've had a lot of practices but we didn't have any policies and procedures to follow and in my opinion a practice means that you can do whatever you got if you're faster draw you can pull that gun faster
and you win and i wanted policy procedures this is the first policy in procedure we now have policies and procedures treat span made sure of that but before that we didn't have any policies procedures board policies procedures at all okay um
Representative Julie Mayberry
Unverified
3:44:12
let me ask another question if that's okay miss uh
yeah last one if you don't mind um so when did you all become aware of the carryover balance um that this was a practice that was being accepted at the school that you could carry
it over because ultimately it really does stop with you um when were when when were you made aware of that and and was there ever any discussion during a board meeting that this is good policy let's keep allowing this carryover we were made aware of it about the same time
Speaker 436
3:44:45
all this blew up okay because we didn't we didn't have any idea i didn't know what the carol was i don't get in the weeds of operation i've got a cfo controller president has all these has all this knowledge so i don't get in the weeds they brought it up we've got a council stable here
several million dollars well why well we've got forty eight hundred dollar carryover on these That's the first time I ever heard of it. And that made me true with other board members, too, but
Speaker 435
3:45:18
that's what I heard. I agree. I agree with Chairman Hudson there. I was not aware of
Chair
Unverified
3:45:24
it until then. Thank you. Senator Rapert,
you're recognized. Thank you. I think we're getting close to the end here. And, you know, we've been here now nearly four hours. Wow.
and i came into this this meeting with really open to two different conclusions one is that there were going to be discovered or maybe stated or maybe owned up to some tremendous malfeasance of some sort that didn't happen the other option is gross incompetence and there's really only two two alternatives there and so i guess we're leaving here today just about now unless we
find out more in the future which i think we're going to get an opportunity to do that finding out that really this is terribly gross incompetence here but yet nobody takes responsibility you've been offered a couple of times mr jones we're in a situation here where really the public uh people of henderson the board the staff the students the bondholders beg for some justice
but the only thing they really have is that you apparently are you a tenured professor sir yes sir so you have tenure so as you you have tenure yes sir so when you tell me you're going to pray about what you do you absolutely could just say i'm going to stay and they would be forced to keep you is that correct that is correct I could choose to say yeah well I'm just gonna go ahead and say since you haven't said it yourself the most honorable thing for you to do is to say that you will stop continuing to
take check from Henderson or their foundation and stop what is a gross and justice you say you're accountable but you've really not paid much of a price and I really think it's the honorable thing for you to do to really consider and maybe you go pray that you just say I'm not going to take another check and I'm going to move on and stop my affiliation with what has been the ultimate disastrous end of an important institution here in the in the state of
arkansas and i hate to be so firm but the circumstances require firmness sir because i didn't even hear i'm sorry i hear you say you're accountable but it was never anybody's fault it was never my decision i only know what they told me and i never even heard the phrase that we expect out of a kindergartner to say i am sorry
Speaker 381
3:48:17
so what do you think sir senator rapert i came to henderson in
the fall of 1988. i'm not looking for a monologue are you or do you understand i'm just asking you do you understand what we're trying to tell you yes I
Representative Jeff Wardlaw
Unverified
3:48:33
understand completely and my response and why I was telling you when I came to Henderson in the fall of 1988 I was incredibly grateful for the opportunity that this university extended
Speaker 503
3:48:43
to me and my family the first person history of my family to go to college and so I come here before you
today I'm deeply sorry that we're in this position I can't begin to express the depths of my sorrow there's not a moment that goes by and each and every day why I don't think about Henderson and the position that it's in and the impact that it's having on the students its faculty its staff its alumni people in the community and so if you heard anything today other than the fact that I don't have remorse and I don't feel sorry I apologize you for that but I am sorry and that's why I started with this occurred on my watch and I own it and my
family when we own things it simply means that we recognize that we could have done better we recognize regardless of who did what or when it falls back on you and your responsibility so I am deeply sorry to this board that hired me for where they are now and the things that they're dealing with and so I'm sorry if that didn't come across if I omitted that early on but from my perspective I still live in Arkadelphia I look at these people each and every day
in Arkadelphia my son goes to school and he hears all these great things and all these bad things about his daddy and what his daddy didn't do and and all these bad things about well your daddy should have done this and your daddy should have done that and so it breaks my heart on his behalf on my wife's behalf and on my behalf and so please know that I'm sorry to our state I'm
Representative Jeff Wardlaw
Unverified
3:50:29
sorry to our governor and everyone that's been touched by the outcome of this and so sir I don't want you to leave here today and feel that there's anything but regret and sorrow on my part for my role as president's former president of henderson state university i yield to you
mr chairman all right members um we still have quite a few questions in the queue and uh
i absolutely want everybody to get their questions
answered if if we think it's necessary or is going to add something but i'm gonna i'm gonna tell you that i intend to make a motion to not review this and send it to jpr who also has subpoena power because I honestly don't know that we know any more right now than we did when we started this meeting four hours ago. So if you're in the queue and you're okay with not asking a question, if you wouldn't mind, pull out, and I'll give you a minute to do that. And if you stay, we're going to see it through.
I mean, if you stay in the queue. But I'll give you a minute to decide if something rises to that level that we're going to continue to sit here today or to move in a new direction.
Senator Jimmy Hickey, Jr
Unverified
3:51:45
Senator Hickey, you're recognized. yes sir just what you said and I had a
motion that was made to do exactly what you said which is fine with me the only thing that I want to say and make sure that whenever we refer this to JPR there's no doubt in my mind that we've said here and there's mismanagement that has occurred and we need to learn from
that I don't know what the appropriate committee of that is if it's a higher ed subcommittee or where else to make sure that our other institutions do not have this same type of mismanagement as far as your motion for JPR what I would hope is that or what my intent would be as the chair of that if based upon you recommended it to go there is that we would be more focused on the invoices
uh who who who said that those needed to be held and then in addition the findings of this body as it relates to those misstatements of the financial information because somebody entered that information i want to find out if we have to get the whole finance department down here and everybody that knows them is somebody entered that information why did you enter it did you know it was incorrect and were you directed to do so so i want jpr everybody to
understand that it would be my intent that jpr will be a whole lot more focused even though this information has been great so with that i would yield to that hoping that'd be part
of the motion uh representative gonzalez you're in the queue do
Representative Justin Gonzales
Unverified
3:53:24
you have something i do i'm not on jpr so i would like to just get one more question and if that's okay okay go ahead you're recognized be directed Mr. Hudson I guess as chairman of the board why did the board decide to ignore two votes of no confidence in the faculty or in
Speaker 506
3:53:41
administration at the time information was available to us there
Speaker 436
3:53:45
was a limited amount of tenure faculty that was concerned about compensation issues and that was what was boiling behind all of this at that time and it was opinion of board at that time uh since it was not you know you tell them we get a large faculty there it was only a small group of tenured faculty that were griping about that so at that time we decided you know leave it alone let's see what we can do about raises in the future and that's where the budget
Speaker 506
3:54:13
was coming back there we'll try to raise some compensation to alleviate some of those issues okay
Representative Justin Gonzales
Unverified
3:54:18
but there were no board members who wanted to discuss that issue at a board meeting you just chose to ignore ignore your faculty no
Speaker 436
3:54:27
we we did discuss it at the board meeting and we even talked about the potential raises the provost even talked about trying to get the compensation comparable to other professors across the state so that was brought up at board me anybody else have anything to
Representative Justin Gonzales
Unverified
3:54:43
add to that any board members yes I'd like to comment
Speaker 435
3:54:47
on that it wasn't a majority of the board to not address the votes of no confidence like two years in a row and I had made the statement that the serious that fact that in the United States of all the colleges and universities on the research that I obtained there's only an average of five votes of no confidence a year in the whole country and I thought it was very important that we discuss
it but you asked the question was did we discuss it and it was not a majority vote that we're not going to investigate it further I just
Representative Justin Gonzales
Unverified
3:55:28
think that's a big mistake to me when you have faculty who is willing to put their necks out there and take a vote on something that important I believe the board should definitely pay attention to that we
Speaker 506
3:55:43
did pay attention to it but I understand the situation
Speaker 436
3:55:46
and we don't have all the facts all the time but I tell you something that's done recently that you've got to tell the faculty how important they are we had major budget cuts down there because of what
Speaker 507
3:56:02
happened, okay they agreed to take salary cuts and they were positive because we got Arkansas State System working with us through this process and the faculty went along with that
Representative Justin Gonzales
Unverified
3:56:13
yeah, I understand that because of y'all's failures that ASU had to come in and take over, and I really appreciate them doing that.
Speaker 507
3:56:20
Well, when you say y'all's failures, let's clarify when you say y'all, and we all take responsibility, but there are certain key people that are really responsible for it. Do you understand what I'm saying? Well, all of you are ultimately responsible for it. I understand that, but I was not in the operations. I
Representative Justin Gonzales
Unverified
3:56:37
never have been. I understand you were not in the operations, but you were on the board. That's correct. You had fiduciary responsibility. That's correct. And it's my understanding that you're also a CPA that should have been able to recognize some of these failures had they been presented to the board and known some questions to ask.
Speaker 507
3:56:54
Yes. If proper information had been presented to me, yes, sir. I would have made a heyday out
Speaker 436
3:57:00
of it, but it was wrong information. And when you got a 7-0 board voted that way and we provided this information to you, yes, I'm a retired CPA, but I can read numbers. but I look at those budgets, and we discuss those budgets in detail at the retreat we had each year, and we had no
Speaker 476
3:57:18
reason not to believe those. So it's your position that you were given false information?
Representative Justin Gonzales
Unverified
3:57:25
Thank you. Mr. Hardeman, I saw you shaking your head down there. Did you, I mean, if Chair allows. I've
Representative Dwight Tosh
Unverified
3:57:33
even forgotten what I was going to respond to, but you triggered something that I needed to try to answer. If I think of it, I'll raise my hand
again. Thank you. Thank you, Mr. Chair. I'm done. uh senator hickey looks like we're back to you um i would i would definitely love to entertain a motion that you'd make i just hope it doesn't the motion doesn't end up too narrow in
Speaker 96
3:57:53
scope to to get everywhere we could want to go
Senator Jimmy Hickey, Jr
Unverified
3:57:56
yes sir mr chair and i will uh uh extend that to say to add
well so go ahead including but not limited to including not limited to what i said earlier that uh that this committee refer this to jpr to do the investigation the intent will be a more narrow for focus but uh as i said my intent will be to to look into the findings of the uh of this committee as it relates to
the misstatements in the financial statement also the invoices but if there are other items that we deem that we need to look at we will do that also okay
so we have before us that motion uh do i have a second we have a second all those in favor say aye all opposed no all right uh hang on just a second
okay also i would like to make a subsequent motion that we not review this report
today so that if this committee needs to take further action we will be able to do so after jpr does its work uh
so we have a motion and a second all those in favor say aye all opposed no all right thank you members uh i think center rayford you had some new business
to discuss well we should end on some kind of positive note and bless his heart he's already gone but happy birthday to senator stubblefield thank
you uh item e on the agenda the next meeting of law legislative joint auditing committee will be held on june 11th and 12 2020 or at the call of the chairs i'd like to thank everybody that came today and participate in this discussion I appreciate your efforts I know it was a lot of a lot of trouble and it was uncomfortable for a lot of you but I appreciate you
helping us in our endeavor and we will consider this meeting adjourned You
Agenda
A. Call to Order by Chairman
B. Adoption of Minutes
C. Reports of Executive and Standing Committees:
D. Review of Reports:
E. Other Business: The next meetings of the Legislative Joint Auditing Committee will be held on June 11 and 12, 2020, or at the call of the Chairs.
F. New Business
G. Adjournment
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING, Feb 28, 2020 | Agenda | 1 | Official source ↗ |
Speakers
Speaker 5
Representative Richard Womack Chair
Unverified
Senator Mathew Pitsch
Unverified
Representative Danny Watson
Unverified
Representative Fredrick J. Love
Unverified
Speaker 32
Representative Johnny Rye
Unverified
Speaker 41
Speaker 44
Speaker 50
Speaker 51
Representative Joe Cloud
Unverified
Speaker 56
Senator Mark Johnson
Unverified
Representative Stan Berry
Unverified
Representative Jay Richardson
Unverified
Speaker 77
Senator Jason Rapert Chair
Unverified
Speaker 85
Senator Jonathan Dismang
Unverified
Speaker 104
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Speaker 112
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Speaker 152
Speaker 110
Speaker 174
Speaker 175
Speaker 128
Senator Linda Chesterfield
Unverified
Senator Joyce Elliott
Unverified
Senator Gary Stubblefield
Unverified
Speaker 154
Speaker 220
Representative Justin Gonzales
Unverified
Speaker 122
Speaker 17
Senator Jimmy Hickey, Jr
Unverified
Speaker 68
Representative Julie Mayberry
Unverified
Speaker 239
Chair
Unverified
Speaker 263
Speaker 111
Speaker 178
Speaker 277
Speaker 225
Speaker 281
Representative John Payton
Unverified
Representative Jeff Wardlaw
Unverified
Senator Scott Flippo
Unverified
Speaker 298
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Senator Ricky Hill
Unverified
Speaker 303
Senator Lance Eads
Unverified
Speaker 330
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Speaker 367
Representative Dwight Tosh
Unverified
Speaker 433
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Speaker 96