Arkansas Desegregation Fund Spent More on Salaries Than Scholarships

Arkansas Legislative Audit⧉ -- the state's legislative-branch audit agency, reviewing the program at the Legislative Joint Auditing Committee's direction -- found that the Charles W. Donaldson Scholars Academy at the University of Arkansas, Little Rock (UALR) spent $2,865,116 (33.91% of its total budget) on staff salaries, wages, and fringe benefits over its ten-year life, more than the $1,965,845 (23.27%) it spent on the scholarships it was created to fund.▸ Testing scholarship awards for eligibility, auditors found 31.8% of tested dollars -- $111,180 of $349,930 -- had gone to students who didn't meet the program's own eligibility rules. By the time auditors arrived, every employee who had run the program, including its director, was gone from UALR and unavailable for interview.

The Donaldson Scholars Academy traces back to a 1982 school-desegregation lawsuit, Little Rock School District v. Pulaski County Special School District⧉.▸ In 2014, with the consent of the state and approval of the U.S. District Court for the Eastern District of Arkansas, the Pulaski County Special School District (PCSSD) agreed to commit $10 million in desegregation funding -- money freed up by eliminating positions and services no longer required under the district's earlier 1989 desegregation settlement -- to a new academic-support and scholarship program for African American students and other at-risk students in PCSSD and the Jacksonville North Pulaski School District (JNPSD).

UALR ran the program jointly with Philander Smith College and the University of Arkansas-Pulaski Technical College, offering renewable $2,500-a-year scholarships (up to $10,000 over four years) alongside test-prep, mentoring, and a residential Summer Bridge Academy.▸ Arkansas Legislative Audit says this review was issued in response to a legislative request approved by the Legislative Joint Auditing Committee⧉, and it examined the full decade of records, June 11, 2014 through July 12, 2024.

Of the $8,449,764 the program spent in total, the single largest category by far was its own staff: $2,865,116 in salaries, wages, and fringe benefits, more than a third of everything spent.▸ Scholarships -- the program's stated purpose -- came in lower, at $1,965,845 by the general ledger (auditors flagged that this figure didn't match the $1,872,241 documented in student files, due in part to misclassified expenditures). UALR also billed the program $600,000 in indirect cost recovery, and paid $265,000 to Donaldson & Donaldson Associates LLC, a consulting firm whose Chief Executive Officer is Charles Donaldson, the retired UALR vice-chancellor the program itself is named for; UALR's written response describes the payments as non-legal consulting services. Add it up, and the program spent about $1.46 for every $1.00 it put into scholarships just on running itself.

Auditors sampled 39 of the 379 students who received a scholarship and found 32 of them -- more than four in five -- had at least one eligibility problem: 22 scholarships exceeded the $10,000 lifetime maximum, 12 went to students who hadn't completed the required enrollment hours, 11 went to students below the required 2.5 GPA, 10 continued past the program's four-year limit, and one went to a student who wasn't enrolled full-time.▸ In dollar terms, that meant $111,180 of the $349,930 tested across all three schools -- 31.8% -- was awarded to students who didn't meet the program's own rules; UALR's management response says a committee of staff and stakeholders made deliberate exceptions for students close to graduating, but did not dispute the dollar total or the exception count itself.

Auditors also tested 147 non-payroll disbursements totaling $1,911,917 and found 124 of them -- 84.4% -- had at least one exception: 77 lacked proper authorization for payment, 41 lacked proper documentation, four contained clerical or mathematical errors, and auditors couldn't determine what happened to two capital assets after the program shut down.▸ In its written response, UALR said supporting documentation was simply unavailable for 25 line items dating to fiscal year 2014 and that it couldn't tell how those correlate to the auditors' 77 and 41 counts -- an answer that itself illustrates the recordkeeping gap the audit describes. UALR says it has since replaced its administrative system and adopted new sponsored-program review procedures.

Grant compliance drew a smaller finding: a $50,000 Central Arkansas Planning and Development District grant funded a May 2015 study-abroad trip to Spain and Morocco for 16 students and six staff and faculty, but the trip's full cost ran to $89,730 -- $30,030 of it airfare -- meaning $39,730 beyond the grant came from the program's other funds.▸ Auditors found that expenditure properly authorized under the grant's own terms; it's cited here only because it, along with karaoke nights, trampoline-park excursions, and out-of-state trips to New York and Washington, D.C., is part of the $868,408 in cultural and social spending itemized in the report's appendices.

The COVID-19 pandemic curtailed program activity starting in fiscal year 2020, and on July 12, 2024, with the court's approval, the program shut down entirely -- returning $1,633,373 (about 16.3% of the original $10 million commitment) to the two school districts, 80% to PCSSD and 20% to JNPSD.▸ Auditors say the court appears to have monitored spending of the remaining $10 million through periodic progress reports the program itself filed. What auditors couldn't do is talk to anyone who ran it: the director and every other employee materially involved were gone from UALR and unavailable for interview by the time the review began, leaving auditors to reconstruct a decade of spending from documents alone.