Major University of Louisville Foundation donor questions spending, calls for audit
Citing questionable spending and a lack of transparency, one of the biggest donors to the University of Louisville Foundation says it will not approve additional grants until the organization hires an forensic accountant to examine its books.
LOUISVILLE, Ky. (WDRB) -- Citing questionable spending and a lack of transparency, one of the biggest donors to the University of Louisville Foundation says it will withhold additional grants until the organization hires a forensic accountant to examine its books.
In a letter dated Friday, the James Graham Brown Foundation said it’s concerned the U of L foundation’s expenditures have not been solely for the “charitable and educational purposes” of the university, and that the U of L foundation has failed to turn over accounting records sought by Larry Benz, chairman of the U of L Board of Trustees.
The James Graham Brown Foundation has donated $72 million to the U of L Foundation, the university and the James Graham Brown Cancer Center at U of L since 1955, according to the letter from Brown Foundation CEO R. Alex Rankin and President Mason B. Rummel. (READ THE LETTER BELOW).
Among other actions, Rankin and Rummel called on the U of L foundation to hire “a nationally recognized forensic accounting firm identified by the University to conduct an independent review of (the U of L foundation) and its related entities.”
In a statement, U of L foundation chairman Dr. Robert Hughes said foundation officials are already planning a “full and open audit” by an “independent” firm. The foundation's board will likely be asked to approve the audit at its next meeting, he said.
“It will go in the direction of answering all these questions that have arisen,” Hughes said in an interview Saturday. “We’ll over turn every leaf to ensure our donors, our supporters (and) our alumni are satisfied with the end result.”
Hughes also mentioned the upcoming review by State Auditor Mike Harmon’s office, which may also address some of the Brown foundation’s concerns.
But the records sought by Benz comprise more than “800,000 pages of information,” Hughes said, adding that he has approved the hiring of up to four foundation employees to handle open-records requests.
An independent nonprofit, the U of L foundation is the school’s custodian of donations and manager of its $680 million endowment.
The foundation’s president is former University of Louisville President James Ramsey, who had run both the university and foundation since 2002 before accepting a buyout from the university position in July.
Ramsey has said he wants to remain president of the foundation, though it’s unclear if the foundation’s board will accept that.
In addition to paying millions of dollars to Ramsey and other top U of L administrators, the foundation for years has supplemented the salaries of a handful of administrators in the U of L president’s office for no stated purpose, as WDRB reported last month.
The Brown Foundation letter mentions Benz’s attempts to learn more about a $38 million loan the foundation received from the university last year.
The loan -- which Ramsey approved without bringing it to the university or foundation boards -- was not publicly known until WDRB reported it earlier this year.
The biggest chunk of the loan -- $22 million – went to repay the foundation for a “line of credit” it had extended, using its own funds, to a subsidiary organization called University Holdings Inc.
University Holdings is the organization through which officials in the president’s office have and continue to receive supplemental pay.
As WDRB previously reported, Ramsey and foundation officials called the loan nothing more than a “cash management strategy” aimed at giving the university a higher return on its bank deposits. Most of it has been repaid, foundation officials said in June.
“Unfortunately, unauthorized transfers of money coupled with the myriad of organizational complexity underneath the Foundation masks its charitable mission of academic support of the University of Louisville,” Benz said in a prepared statement Saturday.
Benz added that the letter from the Brown Foundation should “serve as a wake-up call and accelerate a pathway toward restored confidence” in the foundation.
The Brown foundation leaders also called on the U of L foundation to consider changing its governance.
The U of L foundation’s board of directors included Ramsey as a voting member until he resigned the U of L presidency in July.
The board also includes four university trustees and a number of independent directors whom Ramsey played a role in selecting as the permanent chairman of the foundation’s nominating committee.
“We also believe that the governance of (the U of L foundation) and its relationship with the University do not represent current best practices for the governance of colleges and universities,” the Brown foundation said.
A special meeting of the Executive Committee will be held Monday, Sept. 5th at 5 p.m.
On the agenda: Approval of RFP for Complete Financial Examination and Audit of the U of L Foundation, and an executive session to discuss personnel matters.
READ THE LETTER:
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