University of Louisville leaders agree to foundation audit; CFO takes pointed questions
Leaders at the University of Louisville and its affiliated foundation agreed Friday on the process for hiring a special auditor to examine questionable spending by the foundation – a move that averts a potential lawsuit by the university against the foundation.
LOUISVILLE, Ky. (WDRB) -- Leaders at the University of Louisville and its affiliated foundation agreed Friday on the process for hiring a special auditor to examine questionable spending by the foundation – a move that averts a potential lawsuit by the university against the foundation.
The foundation board also voted to hire an interim executive director to replace former foundation and university president James Ramsey as the nonprofit’s chief officer and appointed a committee to examine changes in how the organization is overseen.
“We now have a game plan, we have some resolution and we have an end we are all marching to try to achieve together,” said Dr. Mark Lynn, a major university donor and foundation board member.
Lynn is one of six people who will serve on a joint foundation-university committee to select a “nationally recognized accounting firm” to examine the foundation’s books.
Meanwhile, foundation Chief Financial Officer Jason Tomlinson faced pointed questions at Friday’s meeting.
Tomlinson addressed the growth rate and spending of the university’s $681 million endowment; a $38 million loan from the university to the foundation last year and WDRB’s story Thursday detailing how the foundation borrows from the endowment to invest in real estate and pay expenses like administrator salaries.
The $38 million transaction – $22 million of which went to repay the foundation’s own borrowings from the endowment – has been a point of contention.
In his Sept. 16 resignation letter, Ramsey said Board of Trustees Chairman Larry Benz has caused “incalculable damage” to the university by continually saying the loan was not authorized.
But foundation director Diane Medley, a certified public accountant, disagreed with Tomlinson’s assertion that the $38 million transaction was “approved” as part of the university and foundation annual auditing process.
She said auditors only attest that the money is properly accounted for, as opposed to whether “approvals were followed.”
Benz, who is also a foundation director, noted that the loan was not approved by either governing board and said that it violated the short-term money management policy the trustees had adopted in early 2015 -- to which Tomlinson replied, “I don’t disagree with any of that.”
As WDRB reported Thursday, a foundation sub-organization called University Holdings Inc. has been allowed to borrow up to $60 million from the endowment with few restrictions for nearly nine years, and the organization has also made extra payments to university administrators.
Tomlinson said the payments by UHI were approved by either him, Ramsey, or former Ramsey Chief of Staff Kathleen Smith – who still works for the foundation. Tomlinson and Smith are on the UHI payroll.
Tomlinson told the board – as he has previously told WDRB – that there is no record of how much money UHI has borrowed from the endowment since its credit line began in 2008. But he said the foundation could reconstruct the borrowings.
“The foundation only has a three year document retention record. That doesn’t mean we can’t pull more,” he said.
Tomlinson said UHI currently owes $24.4 million to the endowment.
Benz noted that the organization’s latest tax return shows $58.5 million in debt to the foundation as of June 30, 2015 – as WDRB reported Thursday – and asked if UHI will be able to pay the money back as its real estate projects mature.
“That’s the intent,” Tomlinson said.
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