EKU arts center records reveal widespread improper business practices under ex-director

rcopley@herald-leader.comMarch 22, 2013 

Documents released this week reveal widespread financial irregularities at the Eastern Kentucky University Center for the Arts under the management of former director Debra Hoskins — less than four months after the $30 million arts center opened in Richmond.

In January 2012, a few months after the center opened, university employees were assigned to take over business operations of the center and address concerns including mishandling of cash, irregular student employment practices and improper handling of customer credit card numbers that could have compromised security and threatened the university's overall ability to accept charge cards.

Those were just a few of the concerns expressed about Hoskins' management. She resigned in June after EKU officials tried to fire her. She has since become executive director of the Grand Theatre in Lancaster.

Documents obtained by the Herald-Leader under the Kentucky open-records law also detailed concerns about Hoskins' use of information from her former longtime employer, Centre College's Norton Center for the Arts in Danville, and her use of university-issued procurement credit cards.

The documents were originally withheld because of a confidentiality agreement between Hoskins and EKU. But Hoskins, through her attorney, has since agreed to release the documents. They include the report from the team sent in to take over the center's business operations, an internal audit of the center's finances for the fiscal year that ended June 30, and her separation agreement with EKU.

The separation document includes a confidentiality agreement and specifies that Hoskins was to receive $76,591.04, including six months of her salary, vacation pay and other considerations.

Friday afternoon, Hoskins denied any accusations of wrongdoing and said some of the situations cited resulted from trying to get the center open in a relatively short period, and her lack of experience working with a state institution. Centre is a private college.

"Due to time constraints, I think you will understand that errors were made, but not so much as one penny was taken for personal gain," Hoskins said, reading from a prepared statement. "As I told the board ... I'm no financial manager — that's not my strong suit."

She said she was hired with the understanding that a financial manager would be hired, "but after two unsuccessful searches, the center continued to operate with that position vacant."

The documents were not all the records sought by the Herald-Leader. A hearing is scheduled for April 11 in Madison County regarding the remainder.

Problems began soon

Problems with Hoskins' work began showing up shortly after she was hired in late January 2011.

Centre College President John A. Roush, in a strongly worded letter dated March 10, 2011 and copied to EKU President Doug Whitlock, told Hoskins he was aware that she had "confidential business information of Centre College," including "Norton Center ticket holder information, advertiser lists, and other proprietary information." The letter said the information had been provided to Hoskins by two Centre employees.

"I demand that you cease and desist from using this information for any purposes," Roush wrote. He ended, "I have been wishing you luck and success as you work to get the new center started at EKU, but I cannot tolerate the use of Centre's proprietary information to accomplish it."

Hoskins' attorney, Ephraim W. Helton, responded in writing that a list of patrons "can not be considered a trade secret" and that a list of Norton Center advertisers appeared on its website.

But on March 23, 2011, Hoskins received a corrective-action notice from EKU designating a disciplinary level of "final (last chance) warning" regarding the use of information from the Norton Center. It also reminded her of university policies and its "core values."

Centre College spokesman Michael P. Strysick said Friday morning, "We were satisfied with the way we were able to resolve the situation with EKU."

Spotty record-keeping

Problems continued.

A letter from Beth Ballard, director of EKU's Office of Internal Audit, dated Dec. 13, 2011, raised concerns about the handling of money at two events, noting that records were not being kept regarding valet parking and temporary student seating tickets.

She also raised the issue of credit card information being improperly recorded and retained.

Two months later, a Feb. 15, 2012, report from EKU employees Shannon Means and Jill Price, who were assigned to take over business operations at the center, said they found that "all box office desks were inundated with slips of paper containing patron names, ticket request information, and credit card numbers. It was impossible to determine any system for collecting, processing or managing this information for ticket sales and payment collection."

Hoskins said this was not an unusual method of taking orders and that it was in part due to the late arrival of the center's ticketing system and a lack of computers for box-office workers.

Asked about the loose credit card information, EKU spokesman Marc Whitt said Friday that no customer information was compromised, and the EKU Center has since instituted secure, industry-standard practices to protect customers' information.

Whitt said EKU could not comment further.

The report also addressed student employment, including students being asked to attribute time worked to other pay periods so they could work more than 20 hours a week, inappropriate accounting for tips, and no advance scheduling.

"Students receive an email notice 2-3 days ahead of time asking students to come work, leaving little to no ability for students to plan ahead," the report said.

Hoskins said she initially was not aware there was a limit to the number of hours students could work, but once she was, she complied with the policy.

'Bad working conditions'

Among other issues covered in the report:

■ A man who fell in the parking lot at a performance, breaking his foot in three places, was asked to return the next day to file a report. Price — who is director of EKU conferencing and events and was named the center's interim director last summer — intervened and worked with the family that night.

■ Two student employees sent emails saying "they would no longer work at the center due to bad working conditions."

■ A "seemingly excessive and inexplicable amount of seats for all upcoming shows" were being reserved with "box office holds," meaning the tickets were unavailable to the public, including 600 seats for a January 2012 performance of The Wizard of Oz. According to the report, Hoskins said seats were held to accommodate special patron requests on show days.

■ About $300 in cash was found in envelopes with no indication of its purpose. An employee held an additional $300 from the petty cash fund for valet parking over the 2011-12 holidays, not returning it to the center's safe until Jan. 10.

Invoices falsified

In September, the university's Office of Internal Audit issued a 25-page report detailing its findings. The report, which covered a year mostly under Hoskins' management, repeatedly recommended that the center comply with university and state regulations and practices.

The audit raised several concerns:

■ The EKU Center overpaid and underpaid artists appearing at the center, resulting in "an aggregate overpayment of $46,622." The center did not accurately pay production companies for 12 out of 26 events. Whitt said that after the irregularities were discovered, artists who were underpaid were immediately issued payments for the balance due.

■ The report indicated "weakness in the center's system of internal controls over cash handling such that should errors or irregularities occur, it may not be possible to fix responsibility for the loss on one individual." Cashiers were not required to balance their activity at the ends of their shifts, and sales reports were not routinely compared with deposits.

Recorded ticket revenue for the season was nearly $1.8 million, but the ticketing sales system indicated nearly $1.9 million in sales, a discrepancy of $104,731.

■ Invoices were falsified "to calculate and to support settlement payments made to production companies" to decrease the amount the center owed them.

For a concert by Mannheim Steamroller in fall 2011, the report said, Hoskins asked a freelance technical director to create an invoice for $2,545, although the original invoice was only $1,783, which is what the center paid him. The false invoice was submitted to the production company. Hoskins said that and another similar claim were not true.

■ The report said 6,899 complimentary tickets, valued at $389,039, were distributed. Of those, there was no way to account for the recipients of 3,125 of those tickets.

■ A "Save Your Seat" fundraising program placed 74 engraved plaques on the center's seats, but records indicated only 29 patrons who made the designated $500 donation.

■ Hiring irregularities included a candidate being offered a job 41 days before the job was posted, and candidates being interviewed inconsistently.

■ Irregularities existed in the use of Hoskins' EKU pro-card, including 98 transactions totaling $14,564 by unauthorized individuals and unallowed purchases of meals. Hoskins said she was not aware others could not use her pro-card until she was told.

"The bureaucracy was overwhelming because I had never worked in state bureaucracy before," Hoskins said. "But, as I was told of these policies and procedures, they were implemented."

Rich Copley: (859) 231-3217. Twitter: @copiousnotes.

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