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Audit unearths dysfunction and questionable financial deals between U of L, foundation
By Kyeland Jackson —
After 18 months of investigation, Kentucky Auditor Mike Harmon’s audit found questionable practices between the University of Louisville and the U of L Foundation, U of L’s endowment manager.
Citing “serious weakness” in ULF’s governance, the audit found:
• Delays and inconsistencies in information provided, which, along with numerous open records violations, validated concerns of poor transparency;
• Poor segregation between the administrative operations between U of L and ULF, resulting in ineffective governance practices and management having too much influence without appropriate checks and balances;
• A dysfunctional governing climate due to excessive board conflicts;
• Endowment funds used for loans to ULF and an affiliate without appropriate notification to and approval of the U of L Board of Trustees;
• The appointment of an acting ULF Chief Administrative Officer without appropriate authorization from the ULF Board of Directors; and
• Compensation provided to the former U of L and ULF President greater than amounts approved by the U of L Board of Trustees.
Harmon discussed the audit Wednesday morning, citing a lack of checks and balances in governance between the university and foundation under former president James Ramsey.
“Our examination found numerous governance concerns between the foundation and the University of Louisville,” Harmon said. “We have to have the proper checks and balances…without the proper checks and balances, problems can occur.”
Ramsey refuted the findings, pointing to university progress under his tenure.
“Your examination found that UL and/or ULF boards acted in conflict with one another, or without sufficient training or information, or in violation of governing principles, and that they allowed institutional officer (including me) to act without proper checks and balances. I strongly disagree,” Ramsey’s statement said. “Neither I, nor – to my knowledge – other institutional officers, acted without board authority.”
But a lack of checks and balances enabled Ramsey to green-light a $67 million loan from the university to the foundation without board approval. Harmon says it’s unclear if that loan benefitted the university.
Ramsey was also paid double his recommended compensation by the foundation, breaking university by-laws and improperly hired a chief administrative officer under him for the foundation.
Though the audit found questionable practice related to Ramsey’s simultaneous governance of the university and ULF, Harmon did not recommend future presidents refrain from leading both positions. Instead, Harmon recommended further checks and balances be implemented to restrict the position.
“Our job is to make recommendations, not to tell the university and board how to move forward,” Harmon said.
Throughout the investigation, Harmon said there was difficulty in obtaining records. Questioned if the foundation’s chief financial officer and Kathleen Smith tried to hide information from Harmon, he said the delays in obtaining everything raised “red flags.”
Acting President Neville Pinto released a statement reminding actions were taken in alignment with audit recommendations.
“We recognize and appreciate that many in the community—including U of L faculty and staff, students, alumni, supporters, donors and other stakeholders—have concerns about whether the foundation has adhered to best practices. Foundation Chair Moore and I are committed to fully addressing these concerns. Considerable time and energy have been and will continue to be spent addressing the issues that have been identified by the state auditor,” Pinto’s statement said.
“This audit does provide a roadmap for further improvements in the oversight and daily operations of the foundation, and we look forward to continuing the work necessary to ensure that public confidence, trust, and transparency in this important resource is fully restored. We will provide a more detailed corrective action plan to the state auditor within the next 60 days.”
Foundation Chair Brucie Moore also issued a statement, citing corrective actions taken by ULF since she became chair.
“When I became board chair, I pledged to operate in a spirit of transparency and openness while maintaining our commitment to advance the intellectual, social and economic development of our community. We are accomplishing that objective while working to upgrade the governance structure of the foundation,” Moore’s statement said.
Those actions include hiring more legal counsel to address backlogged open record requests, hiring an interim executive director, including the CFO in financial committee meetings and creating a foundation oversight committee.
Harmon says the $186,000 audit costs will be paid by the foundation.
File photo / The Louisville Cardinal