Swift Reaction To Scathing U of L Audit
Fallout from the scathing audit of the University of Louisville Foundation started to take hold Friday, while attorneys for two top former school executives pushed back against the allegations.
The foundation’s chief financial officer is currently on paid leave. Meanwhile, a major donor expressed disappointment in the revelations but confidence in the school’s ability to rebound.
The nonprofit foundation manages a nearly $800 million endowment and oversees fundraising for the public university. (Read our earlier analysis of the full 132-page report.)
Attorneys For Ramsey And Smith Slam Audit
The attorney for former university president and foundation head James Ramsey on Friday questioned the value and objectivity of the $1.7 million audit by Chicago firm Alvarez and Marsal.
Attorney Steve Pence noted that his concerns begin on the report’s first page, where the firm acknowledged it “did not perform an audit, examination, or review in accordance with generally accepted auditing standards.”
Pence said Ramsey was not in Louisville and unavailable to comment. Pence said he has yet to fully digest all aspects of the 135-page report, but noted that it failed to highlight the foundation’s accomplishments under Ramsey.
“When this group came in and said, ‘We’re going to fundamentally change the way U of L does business,’ we’ve heard that from politicians before and the first thing they have to do is tear down what’s there,” Pence said.
Ann Oldfather, an attorney for Ramsey’s top deputy, Kathleen Smith, attacked the audit, calling it a “one-sided smear campaign” that included “not even a whiff” of wrongdoing.
“Alvarez and Marsal chooses its words carefully, but it does not conclude (even after the $1.7M price tag on its audit) that anyone was over-compensated. Its complaints are about the budget amount, or alleged lack of adequate understanding by the foundation board,” Oldfather said in a released statement.
Smith retired from the university last year, but she remains on paid administrative leave from the foundation.
CFO On Leave
The audit levied significant criticism on the stewardship of Ramsey, Smith and the foundation's chief financial officer, Jason Tomlinson.
Tomlinson was on paid leave Friday, according to foundation executive director Keith Sherman. He said the foundation has no further comment at this time.
His attorney, Don Cox, said Tomlinson has not been placed on leave.
"He's on vacation. Period. That's all I'm going to say," Cox said.
Cox declined to expand on Tomlinson's status or communications with his employer.
University of Louisville trustees gathered on June 8, 2017, to examine a forensic audit of the school's foundation.
Swift Community Reaction
The audit and changes spurred by it are welcome -- if profoundly disappointing -- developments for Mason Rummell, president of the James Graham Brown Foundation. The Brown foundation is a major donor to U of L, and it pulled its funding last year amid concerns about the foundation’s money management.
Rummell said her organization’s concerns were validated by the report, but they’ll have discussions soon about whether their confidence has been restored enough to return as a donor.
“What we see here now is this transparency that is very apparent that didn’t used to be there,” Rummell said. “I know they have taken some steps already to improve some of their governance and controls. But I can't tell you about the future yet.”
Tess McNair, executive director of the C.E. & S Foundation, which also raised concerns last year, declined to comment.
Politicians also began weighing in on the report Friday.
Senate President Robert Stivers said in a news release that the audit further justified the legislature’s move this year to remove and replace the board of trustees.
State Auditor Mike Harmon, who released his own audit of the foundation last year, said his office’s work prompted many of the changes already implemented by the Foundation.
“With the forensic audit now revealing further detail on issues we initially exposed, we continue to encourage the new leadership at both the University and foundation to take corrective action,” Harmon said.
U of L commissioned the $1.7 million audit in November, following the donors’ complaints and media scrutiny of the nonprofits management and finances. The audit released Thursday painted a picture of foundation finances in disarray — and former leaders who intentionally obscured the truth.
The forensic investigation of the public university’s foundation detailed questionable loans to foundation subsidiaries, a $21 million deferred compensation plan shrouded in secrecy and numerous unbudgeted transactions that were hidden from board members.
The auditing firm also noted that Ramsey’s hard drive was “erased and repurposed,” and that U of L failed to preserve the computers and mobile devices of employees under scrutiny.
Among the audit’s findings:
- The foundation liquidated $42 million of its endowment to cover unbudgeted spending.
- Foundation staffers failed to properly account for transactions and lowballed the numbers on investments that were underwater.
- The foundation overpaid for real estate to the tune of $10.3 million.
- The foundation bought properties for the University of Louisville Athletic Association in exchange for cash and waived required ticket donations.
This story has been updated to clarify the circumstances of Jason Tomlinson's leave from the U of L Foundation.
Kate Howard can be reached at email@example.com and (502) 814.6546.
Disclosures: In 2015, the University of Louisville, which for years has donated to Louisville Public Media, earmarked $3,000 to KyCIR as part of a larger LPM donation. The C.E. & S. Foundation is a major donor. University board member Sandra Frazier, former member Stephen Campbell and attorney Ann Oldfather have donated.