Hardin: UCA not alone in unapproved credit lines

Although former University of Central Arkansas president Lu Hardin said Saturday in retrospect he should have notified the state's higher education department of the school's $6 million line of credit, he said the school is not alone.

Jim Purcell, director of the Arkansas Department of Higher Education, told the Associated Press on Friday he recently made a troubling discovery that UCA had been borrowing money without state approval, contrary to an existing statute.

Hardin, who served as the department's director for six years, said he knew of several public universities that had credit lines during his tenure and did not approach the department for approval.

"No university petitioned us for approval during my six years as higher education director, and I did not pursue them or speak negatively as I had confidence in the trustees of those universities," Hardin said. "Although we were unaware at the time of the way the statute read and we were unsure of our authority in that situation, we still probably would not have aggressively pursued them."

One school Hardin pinpointed Saturday of having a $15 million line of credit while he served as director was the University of Arkansas for Medical Sciences.

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"I would have been happy to bring it before the coordinating board, but I did not pursue them with a letter or with a threat as I had bigger fish to fry in trying to get funding for universities rather than picking on them," Hardin said.

UCA's loan in question is a $6 million credit line with the National Bank of Arkansas that was publicly approved during a regular meeting of the Board of Trustees Feb. 9, 2007. The board approved an extension of this line from March 12, 2009, to June 30, 2009, during a special meeting Friday.

Although Purcell was concerned with his revelation of UCA's unapproved credit line, an upcoming agenda states he will still recommend the higher education board approve both the $6 million line of credit and a $3.6 million interest-free advance from the Department of Finance and Administration when it meets Tuesday.

UCA interim president Tom Courtway said after Friday's board meeting he sent notification of the board's decision to both Purcell and to Richard Weiss, director of the finance and administration department.

Hardin said the reasons behind the board's decision to approve the credit line in 2007 were parallel to the board's decision to extend it Friday.

"The two reasons we had a cash-flow problem were because we were receiving state appropriation for 10,000 students when we had over 12,000 students," Hardin said. "And we were also spending too much money on scholarships. I certainly don't criticize anyone as it is an excellent use of money; however, for cash flow purposes we had to cut back on scholarships and over the past two years, we did."

According to AP reports, Purcell said Hardin and executive vice president Barbara Anderson admitted earlier in the year to having a credit line but said the school had not borrowed any money on it.

"We had rumors to the fact that they had been borrowing money to make sure the place could operate, and we called to check on it," Purcell told the AP. "When they said they didn't do a line of credit, I took them for their word so there was perhaps some naive trust there."

Hardin said during the telephone call in which Purcell indicated the line of credit needed ADHE approval, there was a critical misunderstanding.

"What we told him was there was nothing owed on the credit line, which he misinterpreted to mean the line had never been used," Hardin said. "This would be absurd in that I talked about the use of the credit line in my president's report to the board of trustees. What we indicated was there was nothing owed and apparently we thought everything was fine."

Anderson echoed Hardin's words in saying Purcell's perception of the state of the credit line was not how she intended it. She said Saturday the point of a line of credit is to use the available funds and then pay the bank back in a timely manner.

"When you get a short-term loan, you use it and then you pay it back," Anderson said. "At a university, you have high months and low months and when you don't have the tuition coming in and state revenue is coming in unevenly, you'll need that money."

However, she said she would not deny the fact that an error had been made in the school's course of action.

"I don't mind saying we were in error and we should have taken that to the coordinating board, that's not the issue at all," Anderson said. "There is no deliberate attempt to violate any particular law and there is no attempt to hide it. We did approve the credit line in public, we just made an error in not taking it one step further and getting it approved."

(Staff writer Jessica Bauer can be reached by e-mail at jessica.bauer@thecabin.net or by phone at 505-1236. To comment on this and other stories in the Log Cabin, log on to www.thecabin.net. Send us your news at www.thecabin.net/submit)