LITTLE ROCK—The University of Central Arkansas borrowed money for two years without state approval, the state higher education chief said Friday.

Jim Purcell, director of the Arkansas Department of Higher Education, said he learned recently that the school had been borrowing money from a bank, contrary to what he said top UCA officials told him earlier this year.

Purcell said that while the discovery was “disconcerting,” he would still recommend when the Higher Education board meets Tuesday that it approve a UCA request to borrow up to $9.6 million to cover operating costs.

The newspaper Arkansas Business first reported UCA’s error on its Web site Friday.

“It is disconcerting,” Purcell told The Associated Press. “At the same time, I do know it’s a great institution and those mistakes were not made by the students or the faculty. We’ve asked as a part of our recommendation that we would like to see what their plan is for remediation.”

UCA Interim President Tom Courtway, who succeeded Lu Hardin after his resignation in August, said he was not involved in any conversations regarding the previous line of credit.

“How it was done, what steps were taken, I’m not privy to all that,” Courtway said.

He said that, in general, UCA’s current cash-flow problem was the result of funding that has not kept pace with a boom in student enrollment and overspending in some areas, such as scholarships. The university’s total operating budget is about $145 million to $150 million.

Friday, the UCA Board of Trustees authorized the school to borrow up to $6 million from the National Bank of Arkansas and up to $3.6 million from the state. Courtway said that, after the board meeting, he sent letters to Purcell and to Richard Weiss, director of the state Finance & Administration Department, seeking approval from their agencies.

DF&A Deputy Director Tim Leathers said universities can borrow from the state within certain limits and come before the agency for certification of their plans before seeking approval from the Higher Education board. Leathers said UCA’s use of a prior loan would not affect its current request.

“I don’t think that’s relevant to what they’re doing now,” he said.

Rush Harding Jr., UCA board vice chairman, said it was not unusual for any operation, public or private, to borrow money to meet expenses until revenues come in. He said several factors contributed to UCA’s cash-flow problem. He cited the growth in student enrollment, as well as the purchase of properties near campus, a $1.5 million court settlement, and a freeze on assets held in a common fund by Wachovia Corp. related to the country’s financial crisis.

Statewide cutbacks earlier this year also affected the school.

Purcell said that, sometime in the spring or early summer, Hardin and Executive Vice President Barbara Anderson told him the school had a line of credit but had not borrowed any money.

“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 said. “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.”

He said that about two weeks ago he learned that the school had used the line of credit when Courtway told him about the school wanting to borrow more money.

Hardin said Friday that Purcell misunderstood him and Anderson. He said they, along with Vice President of Finance Paul McLendon, explained to Purcell that UCA had a line of credit but that nothing was owed on it.

“We did not tell him we had never used the credit line,” Hardin said. “What we had told Dr. Purcell was that there was nothing owed on the credit line, which there was not at the time.”

Hardin said that in retrospect, the school should have sought approval from the state.

“We probably should have taken this before ADHE but, at the time, it was my understanding that other universities had similar credit lines,” said Hardin, who headed the Higher Education Department for six years before becoming the university’s president.

Hardin said UCA had the line of credit, “maybe $8 million,” for three years. He said he did not know if UCA used the line of credit after Purcell said last spring or early summer that the school needed state approval.

Anderson was at a funeral in Texas and unavailable for comment, according to the UCA administration office.

Hardin resigned amid criticism over a $300,000 bonus awarded him secretly and a note he wrote board members under Anderson’s name and the names of other UCA officials.