LOUISVILLE, Ky. (WDRB) --  With the stroke of a pen on Friday, a nonprofit organization affiliated with the University of Louisville was able to add nearly $29 million to the school’s $655 million endowment.

The board of the University of Louisville Real Estate Foundation voted Friday to assume responsibility to repay $28.8 million in debt to the endowment.

The endowment – which is managed by the U of L Foundation – is a pool of donated funds that support the university. Every year, a portion of the fund is spent on faculty salaries, scholarships and other academic support.

Friday’s action will allow the U of L Foundation to add nearly $29 million to the endowment’s reported value – even though it will take the real estate foundation many years to actually repay the debt.

“That is the accounting effect it will have,” said Jason Tomlinson, the U of L Foundation’s chief financial officer.

As previously reported by WDRB, the debt represents money that the U of L Foundation withdrew from the endowment over an 8-year-period and loaned to University Holdings, a sub-organization of the foundation involved in real estate projects.

In an interview Friday, Tomlinson didn’t dispute that UHI owed at least $52 million, including interest, to endowment despite the foundation board having put a $35 million cap on the borrowings in 2011.

Tomlinson said his staff is still preparing records to show exactly how much was borrowed from the endowment since 2008 and whether the foundation allowed UHI to withdraw more than the board had authorized.

The real estate foundation – an organization the U of L Foundation created in 2014 – will now assume responsibility for $28.8 million of University Holdings’ debt to the endowment.

Before the real estate foundation assumed the debt, the U of L Foundation had evidently planned to write off the $28.8 million – essentially acknowledging that the endowment would never be repaid.

The $28.8 million write-off hit the endowment hard, according to a report obtained by WDRB.

The fund lost 5.8 percent on its investments – including an investment in UHI – in the fiscal year ended June 30, making it one of the country’s worst-performing endowments for the year.

But now the endowment’s performance won’t look so bad after the $28.8 million write-off is reversed and the money re-appears as part of the fund.

Tomlinson said the foundation’s outside investment adviser, Cambridge Associates, is “already re-doing” its report on the endowment’s performance for the year-ended June 30.

Meanwhile, Tomlinson was unable to say exactly how many years it will take the real estate foundation to pay off the debt.

He said the plan is to use about $1 million to $2 million a year in economic development subsidies that the foundation gets from Louisville Metro government and the state through the foundation’s tax-increment financing districts.

Tomlinson said the so-called “TIF” monies are expected to grow, generating more funds to repay the endowment.

The endowment debt was run up under the administration of former U of L and U of L Foundation President James Ramsey, who was forced out of both organizations earlier this year.

Neville Pinto, U of L’s acting president, was elected chairman of the real estate foundation on Friday.

Pinto said he doesn’t “pretend to understand” the situation with the endowment borrowings and they are accounted for.

But he suggested that U of L Foundation could benefit from changes to make its structure less complex.

“What we are doing here is taking here is a bigger view of, how do we clean this up and (make) sure it is in alignment with our best practices,” he said.

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