Although Tom Courtway, interim president of the University of Central Arkansas, said the school's fiscal state is not the best, he said it is not yet at its worst, either.
A special meeting of the UCA Board of Trustees was held Friday morning, with all seven trustees meeting via telephone, to make recommendations to balance out the cash flow and work toward rebuilding the diminishing reserves.
The board unanimously approved a resolution to request an advance of $3.6 million from the Department of Finance and Administration's annual appropriations and to extend a $6 million line of credit from the National Bank of Arkansas, previously approved by the board, from March 12, 2009, to the end of the 2008-09 fiscal year.
Though, Arkansas Department of Higher Education chief Jim Purcell told the Associated Press that UCA has been borrowing money for two years without state approval.
Purcell told the AP that while the discovery was "disconcerting," he would still recommend on Tuesday when the Higher Education board meets that it approve a UCA request to borrow up to $9.6 million.
Paul McLendon, UCA's vice president of financial services, who recently announced his retirement, said the university currently owes nothing to the line of credit, which was approved in early 2007.
"This isn't something that just came up all of the sudden because we have used a line of credit to stabilize the cash flow in the last three years," Randy Sims, chairman of the board, said during the meeting.
Courtway said the $3.6 million UCA is asking from the state will come from the $54 million UCA is forecasted to receive based on the funding formula. He said the university will either pay the money back in May or June 2009, or the $3.6 million will be simply removed from the overall total.
"All it is is an advance on an appropriation we would get later in the year, but the benefit to it is the university pays no interest on those funds," Courtway said during the meeting.
According to Courtway, the decisions made Friday were based on the fact that a university's revenue, the two major sources being tuition and state funding, will always go up and down and other funds often come into play. The resolution states the months of December and June are typically when UCA experiences its lowest cash balances.
"The university also experiences cash shortages because it is required to incur expenses for such items as federal grants, state scholarships and payrolls that are reimbursed from federal and state sources at a later date," the resolution reads.
Another factor that comes into play is UCA officials do not know when they will receive the $3.6 million in university funds currently held by Wachovia Corp., which is being taken over by Wells Fargo & Co.
"We can't say today when we're going to get that $3.6 million," Courtway said. "And the dilemma is that I have to know today. We will get it, we just don't know when."
McLendon said including the withheld $3.6 million with Wachovia, there is about $5 million in UCA's cash reserves, though not all of it can be accessed as it is already appropriated for specific expenditures.
UCA already received $2.3 million from the money kept in Wachovia's common fund, 40 percent of the total, and those dollars will be used this month, he said.
Board member Scott Roussel pointed out the funds currently frozen from the acquisition of Wachovia not only affect UCA, but hundreds of the nation's institutions of higher education.
"Because of forces out of our hands, we, along with about a thousand other colleges and universities in this country, have the same issue, this is not unique to us," Roussel said.
Another issue Courtway said may be a cause of the low reserve fund is the fact that the state is lagging behind in meeting UCA's needs for enrollment growth. Although Courtway said he appreciates the work of the governor and legislature, he said he believes UCA is the least funded school on a percentage of need out of all four-year institutions in the state.
Despite those drawbacks, Courtway said based on budget projections, auxiliary expenditures and a recent $4.5 million cut in scholarship spending to rectify past deficits, he predicts to end the 2008-09 fiscal year with a positive balance. He also said because of the state of today's economy, the study and the tightening of budgets is taking place in all levels of government, not just at UCA.
"In light of all the current issues, this is a legitimate use of funds to level out the cash flow needs for the University of Central Arkansas," Courtway said.
Now that the board has decided to borrow a possible total of about $9 million, Courtway said the money will all go into one pot and be used as needed. He said the next step is to send a letter to the Department of Finance and Administration to make the request. Although this is the first time UCA has asked for an advance on state funding, Courtway said he is certain they will approve it.
"We're also going to make a recommendation to the department of higher education to notify them of the request and then we'll work on building our reserves and being prudent in our spending to increase those reserves," Courtway said.
According to Courtway, the university will continue to look at all aspects of spending to improve the cash flow, but added he will not approve any cuts or changes that would "jeopardize the mission of the university to educate its students."
(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)
