University of Louisville Foundation approves first detailed budget, sacks law and accounting firms
The University of Louisville Foundation on Tuesday adopted a detailed budget to guide its spending in the upcoming year -- a basic financial management procedure that the $900 million organization never undertook during the 14-year administration of former U of L President James Ramsey.
LOUISVILLE, Ky. (WDRB) -- The University of Louisville Foundation on Tuesday adopted a detailed budget to guide its spending in the upcoming year -- a basic financial management procedure that the $900 million organization never undertook during the 14-year administration of former U of L President James Ramsey.
Seeking a “fresh start,” the foundation also replaced its longtime general counsel, David Saffer of the Louisville law firm Stites and Harbison, and its longtime auditing firm, BKD LLP.
Diane Medley, a certified public accountant who chairs the foundation board, said it was “incredibly unusual” for an organization of the foundation's size not to have a “line item” budget detailing its planned expenses on an annual basis.
“I think the way the foundation has been run in the past – it was a lack of accountability, and there was a lack of planning,” Medley told reporters following a meeting of the board on Tuesday. “It was used as a funding mechanism for various projects that the president felt added to the value of the university, and the whole process is not what you would normally expect.
“What happens when you don’t have a normal process?” Medley said. “Sometimes you have things that are not well thought out, and that’s what we are also grappling with, is, how to unwind some of those contracts and some of those projects and move forward in a good way.”
Included in the budget approved Tuesday, for example, is $597,776 to satisfy “deferred compensation” obligations to a handful of university administrators.
Last month the foundation board voted to eliminate the deferred pay program – which has already cost the organization more than $20 million – but not all of the money owed to administrators has been paid out yet.
Before Tuesday, the foundation hadn’t budgeted a cent for deferred pay, and when Ramsey and few other top administrators cashed out last year, the organization dipped into U of L’s largest individual gift on record, from the late philanthropist Owsley Brown Frazier, to make the payments.
Financial documents reviewed by the foundation board Tuesday show a steep drop in donations during the first nine months of the fiscal year.
The foundation, which receives donations to the academic departments of the university, took in $20.3 million in gifts during the nine months ended March 31, down from $52.7 million during the same period a year earlier.
Foundation leaders chalked that up to bad publicity about the organization, whose finances are the subject of a $1.7 million “forensic audit” that will be released in June.
“I think donors from what they are telling us, they continue to love the university, they know what it means to the community, but they want to make sure that we’ve got the ship righted,” Medley said.
The gift comparisons were also skewed by a single, $20 million pledge that was recorded in the earlier period, according to Justin Ruhl, the foundation’s accounting director. Foundation staff declined to reveal the donor.
Medley said the decision to change the foundation’s legal and accounting firms was not based on those contractors’ performance, but simply to bring in new professionals to go along with the foundation’s almost entirely new board of directors.
Medley said the change had nothing to do with Saffer’s comment at a March meeting that the foundation, under Ramsey, had separate accounting for the deferred pay program “for obfuscation purposes.”
“We were having discussions with (Saffer) prior that, about transition,” Medley said.
The foundation hired Franklin Jelsma, managing partner at the Louisville firm Wyatt Tarrant & Combs, as its general counsel. No replacement has been named for BKD, the foundation’s longtime auditor.