The University of Louisville Foundation’s chief financial officer has been placed on paid leave, though the head of the foundation has declined to provide any further information on the matter.
This news comes just a day after a scathing forensic audit was released on the foundation’s finances and management from 2010 to 2016, under the administration of former president James Ramsey. The report documented how the university’s endowment managed by the foundation suffered losses related to failed lines of credit and investments in startup companies, in addition to exorbitant spending on compensation for top staff, real estate investments, and the UofL Athletic Association — all without proper disclosure to the foundation board and including efforts to shield such information from the public.
UofL Foundation CFO Jason Tomlinson is mentioned prominently throughout the audit report by Chicago-based firm Alvarez & Marsal, as he was the foundation’s assistant vice president of finance until late 2013, when he became its chief financial officer — third in command among foundation staff below Ramsey and his assistant secretary Kathleen Smith.
Keith Sherman, interim executive director of the foundation, confirmed to IL that Tomlinson was placed on paid leave, but he would not comment on why that action was taken and when it took place. Kathleen Smith — who was paid nearly $4 million over the past five fiscal years, mostly from the controversial deferred compensation plan of the foundation — also was placed on paid leave last fall, which remains in effect. Her contract with the foundation — signed by Ramsey just before he resigned — runs out at the end of July.
The report shows that Tomlinson agreed to be interviewed in person by the auditors and includes a number of his email exchanges with Smith and Justin Ruhl, the foundation’s director of accounting operations. Ruhl was also an employee of BKD, the foundation’s accounting firm until this April, when foundation leadership chose to cut ties with its longtime legal and accounting firms to get a “fresh look” and a “clean break.”
Many of Tomlinson’s emails were in the section of the report finding that the foundation liquidated much of its endowment assets to go toward spending far more than was budgeted. In a September 2013 email to Tomlinson, Ruhl quantified the endowment asset liquidated for “off the top spending” in the 2013 fiscal year, which amounted to $4.9 million. Tomlinson told the auditors that he may have shared that information at the time with Ramsey and top foundation officers verbally.
The auditors also found that the foundation continued to increase such “off the top spending” in the next fiscal year, but tried to borrow money from the university to avoid liquidating assets. While foundation officials such as Tomlinson and Ruhl would later refer to this as a “receivable agreement,” the auditing firm says this was in reality a loan and noted a November 2013 email in which Tomlinson pitched this idea to Smith as a loan. In their replies to that email, foundation attorney David Saffer approved, and Smith added “why not lend more university money to the ULF for appreciation. The ULF would use it as appropriate, but the University funds would be stewarded better to receive more interest than what they are getting now. Just make it as a matter of general policy.” Tomlinson said he would check on whether there is “any threshold before we should or have to take it to (board of trustees).”
Up to $38 million in loans or lines of credit from the university to the foundation would become a major issue within the UofL board of trustees in 2016, when then-chairman Larry Benz became aware of them and protested that he and his fellow trustees were kept in the dark by the Ramsey administration and foundation leadership.
The audit report also included an email in May of 2016 from Ruhl to Tomlinson stating that such off the top spending by the foundation is “unsustainable” for the endowment.
“…our spending policy (not including off the top liquidations) is not sustainable long term,” wrote Ruhl. “If off the top is included, it’s unsustainable in the short term – it would only take a couple more fiscal periods until the entire [market value] of the pool is at/below its stated [book value]…” He went on to say such “unsustainable spending” is not limited to endowments or the foundation, but that it’s a “global problem” within both the foundation and UofL Real Estate Foundation.
The audit report also found that foundation leadership failed to inform the foundation board directors about such overspending, as they didn’t know the budget presented to and approved by them was not a complete operating budget and did not include significant operating expenses. As Ruhl also noted in his May 2016 email to Tomlinson, “since most of our discussions on the topics are verbal, there is little documented history regarding our office’s proposed fiscal plan, other than the final topic which is typically massaged to a point which is not reflective of our initial recommendations based on our assessment of the plan’s viability. In other words, it’s the plan Leadership wants, not what we feel we can deliver upon given our resources.”
Smith was also mentioned prominently throughout the report, including several emails in which she provides suggestions on how various activities should be hidden from the public, media and open records requests. Smith’s attorney, Ann Oldfather, told WFPL that the audit was a “one-sided smear campaign” and ignored Smith’s 46 years of positive contributions to the foundation, adding that there was “not even a whiff” of wrongdoing.