Foundation spending deemed unsustainable

By on December 21, 2016

By Kyeland Jackson —

Spending by the University of Louisville Foundation could soon outstrip its resources, according to Cambridge Associates, ULF’s financial advisors.

Cambridge Associates made the statement Wednesday as part of an annual endowment update. Their report found ULF’s endowment fund has shrunk by 2.7 percent, partially due to the foundation’s 7.5 percent spending rate estimated to outpace investment returns. Cambridge also found the foundation’s total assets, driven by additions, gifts, spending and investment returns, has been relatively stagnant in the last several years.

“7.5 (percent spend rate) in and of itself is very high in terms of sustainability,” Cambridge Associates Managing Director Letitia Johnson said. “It will be hard to make up for that, frankly.”

Board member Mark Lynn believes the foundation discussed the spending rate before, but asked ULF Chief Financial Officer Jason Tomlinson what was being done about it.

“We’ve talked about that spend rate at least the last three meetings that I’m aware of,” Lynn said. “But I don’t think we’ve ever come to any decision that we’re going to do anything about it.”

“Cambridge, to their point, has made recommendations before,” Tomlinson said. “The foundation staff took recommendations to the leadership of the university last year to reduce the spending policy. It was not approved to report on to this finance committee.”

If achieved, a lower spending rate would prompt the foundation to rely more on private equity.

Cambridge’s report comes a week after State Auditor Mike Harmon unearthed a culture of dysfunction within the foundation and U of L. Harmon said James Ramsey’s tenure, who was president of both the foundation and university, lacked checks and balances.

As per Harmon’s recommendations, Interim Executive Director and Chief Operating Officer Keith Sherman briefed members on ULF policies and guidelines. He issued a statement about the briefings Wednesday.

“Today we began the orientation process for directors of the University of Louisville Foundation, acting on a recommendation from the state audit,” Sherman’s statement said. “We covered the following topics: an overview of foundation by-laws, conflicts of interest, public meetings laws, standing committees and open records requests. All of these are critical to maintaining stakeholder confidence in the foundation.”

Faulty operations hampered ULF’s response to open records requests, prompting lawsuits against the endowment manager. The foundation settled one of those suits Wednesday, paying the Kentucky Center for Investigative Reporting $15,000 in attorney fees.

File photo / The Louisville Cardinal

About Kyeland Jackson

Editor-in-Chief at The Louisville Cardinal.

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