University of Louisville Foundation backs away from plan to eras - WDRB 41 Louisville News

University of Louisville Foundation backs away from plan to erase debt to school's endowment

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U of L Foundation Chairwoman Brucie Moore, center U of L Foundation Chairwoman Brucie Moore, center

LOUISVILLE, Ky. (WDRB) – The University of Louisville Foundation is backpedaling from a plan to erase $28 million in debt that the foundation’s own holding company owes to U of L’s endowment.

The $655 million endowment is a pool of donated funds held by the foundation, a charitable nonprofit, for the benefit of the university.

But since 2008, the foundation has allowed its own sub-organization called University Holdings, or UHI, to borrow millions of dollars from the endowment to buy real estate and pay supplemental salaries to administrators, as WDRB first reported last month.

Now the foundation’s recently installed leaders are squashing a plan – one that was apparently already in motion -- to “forgive” $28 million of UHI’s debt to the endowment.

“I have been told that there are ways that that will be paid back … I want it paid back, obviously,” Brucie Moore, who became the foundation’s chairwoman on Sept. 16, said in an interview Thursday.

The $28 million liability will instead become the responsibility of the University of Louisville Real Estate Foundation, another organization the U of L Foundation created last year.

At a meeting Friday, the real estate foundation’s board will be asked to assume a “payable” to the U of L Foundation resulting from UHI, according to an agenda publicized Thursday.

The $28 million in debt corresponds to certain properties being transferred to the real estate foundation, Moore said.

The apparent erasure of the $28 million in UHI debt had a major, negative impact on U of L’s endowment, which posted one of the worst investment losses in the country in the fiscal year that ended June 30, as WDRB reported last week.

The foundation considers the money that it allowed UHI to borrow – including the interest UHI owes on the borrowings – as an “asset” of the endowment.

It’s unclear if the shuffling of the UHI debt to the real estate foundation will, in turn, restore $28 million to the endowment's value -- at least on paper.

Jason Tomlinson, the foundation’s chief financial officer, did not respond to a set of questions emailed on Thursday.

Asked whether the parent foundation – or any of its entities – actually have the $28 million to repay the endowment, Moore mentioned a “payment plan” for the debt and said additional details would be discussed at Friday’s meeting.

She added that the foundation’s external auditor, BKD LLP, will address the situation as part of the annual audit it is preparing for the fiscal year ended June 30.

Separately, the foundation and university boards plan to hire a firm in the next few weeks to perform a "forensic audit" of the foundation's books starting next month. The special audit is meant to restore donors' confidence in the organization's stewardship of funds.

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