Kentucky State Auditor Adam Edelen

Kentucky State Auditor Adam Edelen

State Auditor Adam Edelen said on Thursday his office would investigate the University of Louisville Foundation, the separate $1.1 billion nonprofit that partially funds university operations.

The Foundation has been under scrutiny after Insider Louisville and other media outlets reported on its multimillion-dollar payments to U of L President James Ramsey, former Provost Shirley Willihnganz, and Kathleen Smith, Ramsey’s chief of staff. The lump-sum payments, which totaled a combined $4.2 million, came from deferred compensation agreements that vested in 2013, according to IRS documents filed by the Foundation.

The announcement of an investigation comes nearly two months after Steve Wilson, a member of the board of trustees, the university’s official oversight body, formally requested that the state auditor investigate the finances of both the Foundation and the university. Wilson’s request came after months of agitating by some trustees for a stronger governance structure within the board, and for greater oversight of Foundation and university functions.

That has led to sometimes-public disputes among factions of trustees thought to be loyal to Ramsey and those seeking to enhance the board’s oversight role, as well as the creation of a special trustee committee to examine best practices. Edelen said Thursday his office also would review the governance structure of the board of trustees.

In a meeting last month, trustee Stephen Campbell said he had trouble obtaining financial information from the Foundation, saying he has waited nearly a year for a list of Foundation payments to university employees. And Wilson said it was “embarrassing” to have so little information in conducting trustees’ fiduciary role.

Edelen said his office would examine governance of the Foundation and not the management of its finances. It will also review the trustees’ governance structure.

“The importance of the University of Louisville in regards to education and workforce development cannot be overstated,” Edelen said. “Dr. Ramsey has presided over a period of significant growth and achievement. I have heard from dozens of business and community leaders who believe that a review by my office will be a constructive exercise, resulting in easing tensions and a fact-based path for moving forward.”

As president of the university, Ramsey is also president of the Foundation, which is governed by a 15-member board. More than half of his annual pay typically comes from the Foundation, including deferred compensation and bonuses. Ramsey is paid $270,260 per year in base salary by the Foundation — on top of his university salary, which was $342,930 last year — as well as an annual bonus of more than $153,000 per year (Ramsey rejected that in 2008-10), health insurance coverage and “gross-up” payments to cover taxes on any payouts he receives. In fiscal year 2013, he received $2.4 million in deferred compensation.

The deferred compensation payouts also included $1.9 million for Willihnganz and $1.3 million for Smith.

The scrutiny led Ramsey to publicly accuse some trustees of lacking trust in him and the university.

Edelen said the Foundation “independently awarded” the compensation packages. Under state law, the board of trustees must oversee Ramsey’s compensation, as well as that of faculty and staff.

“The Foundation is critically important to the university, but it must be fully transparent,” Edelen said. “In addition, the board of trustees must have primacy in its governance and oversight roles in relation to university activities funded by the Foundation.”

The question of Foundation governance has been at the fore since earlier this year, when trustee chairman Robert Hughes, a western Kentucky physician, was named chair of the Foundation as well, effectively merging oversight of university operations and the nonprofit’s finances. Hughes did not respond to a request for comment.

U of L is expected to comment on the investigation soon. This story will be updated.

*****UPDATE 11:50 a.m.*****

Trustee Craig Greenberg of 21C Hotels said this to IL:

“I strongly support and respect Auditor Edelen’s decision to review the management processes involving the University and the Foundation. I expect everyone at the University will fully cooperate with his work. I look forward to receiving his findings and recommendations and am hopeful that his work will help bring the board together to govern more effectively.”

Trustee Larry Benz, who is on both the board of trustees and the Foundation’s board, declined to comment, saying there would be a time to discuss it in the future.

IL has not heard back from a number of other trustees asked for comment.

*****UPDATE 12:58 p.m.*****

Robert Hughes, chair of both the board of trustees and the Foundation’s board, issued this statement through the university early Thursday afternoon:

“On behalf of the University of Louisville Board of Trustees, we look forward to working with the State Auditor’s Office to review the relationship between the UofL Board of Trustees and the University of Louisville Foundation. Since recent questions arose in the media, we began action to clarify misinformation about the UofL Foundation and its importance in supporting the University of Louisville.

“We pledge to those who care deeply about the future of the University that we shall work every day to achieve our statutory mandate from the citizens of Kentucky. We will, through our teaching, research, community engagement, and clinical service, do what it takes to increase economic opportunity and the quality of life for the citizens of Louisville, the Commonwealth of Kentucky, and our region.”

*****UPDATE 3:56 p.m.*****

Trustee Steve Wilson, who originally requested the state audit, released this statement Thursday afternoon:

“Some months ago, I called on state Auditor Adam Edelen to review the relationship between the University of Louisville and the University of Louisville Foundation. I have a great amount of respect for Adam Edelen and how he has been able to serve the taxpayers as Auditor. For example, his audit of Jefferson County Public Schools a year ago has clearly provided important reforms that were needed and have been very helpful. I am pleased that the Auditor decided to review the Foundation and its management practices. I look forward to our boards cooperating with Mr. Edelen and to his recommendations. I’m sure the results will help us govern with more efficiency and transparency.

“I’m very proud of the University of Louisville and how it is serving our state. I’m sure this process will make it an even stronger institution.”