The University of Louisville Foundation’s board declined to move forward on an agenda item to forgive $28 million of debt owed to the university’s endowment by one of the foundation’s affiliates, with board chair Brucie Moore saying at Thursday’s meeting that they need more information on the complex matter before taking action.
The millions of dollars loaned to the foundation’s University Holdings company has become a major point of criticism in recent months for the university’s nonprofit, which manages UofL’s $655 million endowment that dropped in value by 16 percent from last year — one of the worst performances among university endowments in the country. According to recent reporting by WDRB, since 2008 the foundation has withdrawn as much as $60 million from UofL’s endowment and loaned it to UHI.
While foundation CFO Jason Tomlinson said at a board meeting last month that the endowment had a guaranteed return on such loans, that “line of credit” withstood a 50 percent loss in the last fiscal year, playing a significant role in the endowment’s declining value. That is despite former President James Ramsey loaning the foundation $22 million from the university’s budget last year, a move board of trustees members said was unauthorized and undisclosed.
The agenda for Thursday’s foundation board meeting included a request from its external auditor BKD to forgive $28 million of UHI debt owed to the university’s endowment, but Moore postponed such action until she and the board members can make sure the exact nature of this line of credit is “thoroughly vetted” and “accurate.” BKD is close to finalizing its annual audit of the foundation, and Moore indicated this information must be cleared up by the end of the month so foundation staff and BKD can report their final recommendations on what action the board should take.
“There has to be a deliberate and accurate decision made about the handling and the reporting of those items to make sure that it’s accurate,” Moore told reporters after the meeting. “At this time it’s a complex issue… I don’t want it to appear that I’m punting it to the audit, but it does need additional eyes to look at it and come back with a deliberate decision.”
The process for the other audit Moore referred to is moving forward, as the newly created joint committee of the foundation and university boards has issued an RFP for a forensic audit of the foundation’s finances. Committee chair Diane Medley said in Thursday’s meeting that several large national firms have inquired about the contract, with proposals due next week and the committee’s selection of a firm expected soon thereafter.
Asked after the meeting if she fully understands the complexities of the UHI debt issue, Moore replied “I understand part of it. If I told you that I understood all of it, that would not be a fair statement. I’m getting there and I’m working hard to understand it completely… I’m working feverishly to do that with the assistance of accountants and other people.”
Larry Benz — a member of the foundation’s board and chairman of the UofL Board of Trustees — told IL that he agreed with the move to push back a vote on debt forgiveness, as they need to be given complete information on the total line of credit for UHI and what entities that debt is assigned to.
“Until our board can get a true view and understanding of the UHI credit line and what it represents, it will be very hard to ask for a resolution of debt forgiveness,” said Benz.
During the meeting, board member Jonathan Blue asked about conducting an assessment of the fund managers hired to handle the endowment’s investments, which Moore said she would address, as “my mission is to see that we have top flight personnel, that we have transparency, that all of the stakeholders are represented well in this mission.”
While former James Ramsey aide Kathleen Smith recently was placed on paid administrative leave from the foundation, Moore addressed questions from reporters regarding a letter Ramsey signed just before his departure in July stating that Smith would now have an annual salary of $242,000 from the foundation. Asked if this letter — which was not approved by the foundation board — is a binding and enforceable contract, Moore answered, “I don’t think there has been a position taken at this time.”
Smith’s large compensation from the foundation in recent years — reaching a high of $1.458 million in 2013 — as well as her recently uncovered additional salary from UHI, had drawn criticism as being excessive for a nonprofit employee.
Moore also disclosed in the meeting that the foundation’s recent hire of local attorney David Tachau has improved their ability to promptly respond to open records requests, saying that increased transparency is one of her top priorities for the foundation. Board member Bob Hughes — who recently stepped down as board chairman — then brought up the possibility of charging 10 cents per page for open records requests, saying that many of them are duplicative and the foundation could create significant revenue. Moore replied: “That’s not of great interest to me.”