May 30, 2018; Courier-Journal and Louisville Business First
The University of Louisville Foundation now stands as an example of the far-reaching fingers of harm caused by the bad behavior of key employees and the lack of strong policies. The repercussions continue with dollars that will now be spent to bring another lawsuit, damage to the fundraising aspect of the foundation’s work, and effects to the granting facility of the foundation.
The board of directors of the foundation have voted to accept the findings of a study of the compensation of the university president, who was also the president of the foundation, along with other former officials. The study found that James Ramsey, the ex-U of L president, and the others named received excessive compensation of over $3.9 million from 2010 to 2016.
A lawsuit was filed earlier against the foundation’s former administration team for misuse of funds and the endowment, citing the staff for having “depleted the endowment, breach of fiduciary duty, and diverting funds for personal gain.” That lawsuit also raises the issue of deferred compensation paid to Ramsey and Smith.
The study, conducted by the Korn Ferry Hay Group, looked at the compensation of Ramsey; Kathleen Smith, the ex-chief of staff; Shirley Willihnganz, ex-provost; and both former assistant treasurers, Michael Curtin and Jason Tomlinson. The study compared market percentiles with peer organizations, marking that it considers amounts over the 50th percentile excessive.
In a serious omission, especially for nonprofits with such large staffs, neither the foundation nor the university itself had board-approved compensation policies during the years covered by the study. The Korn Ferry study also considered up to another $16 million of the former administration’s compensation possibly excessive but did not endorse it.
The findings of the study were quickly refuted by some of the legal representation of the respondents.
“Whether something’s excessive or not is always in the eye of the beholder, so that’s a pretty subjective standard they’re using,” attorney Steve Pence, who represents Ramsey, said Tuesday. “Dr. Ramsey earned every cent he was paid.”
Willihnganz could not be reached for comment Tuesday, but an audit of the foundation that was released last year showed that she expressed concern about possibly being overcompensated in a February 2012 memo.
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The U of L Foundation has approved its budget for fiscal 2019, which covers July 1, 2018 to June 30, 2019, but with a net operating loss of $1.5 million. Fiscal 2018’s budget had a projected net operating income of $43.9 million, but that was prior to the fallout from the scandal.
Even with the net loss, the foundation voted to approve increasing its contributions by 20 percent to the education programs of the university, with $65.1 million coming from the endowment and projected contributions that includes $8.1 million carried over from the last fiscal year. There is a projection of over $33 million less in revenue from the previous year. This seems to be more of a guess, as the individuals charged with fundraising have changed or are nonexistent, and the all-important relationship threads are shattered.
There is no mention if there is a line in the budget to pay for the lawyers working on the lawsuits.
The former fiscal year budget had a line item of $867,000 for the university president’s office. The 2019 budget has zero for the university president. The interim president, Greg Postel, cut expenses and laid off most of the university office staff, saving $2 million. Since then, the new president, Neeli Bendapudi, has to operate with a tiny staff, although she did get approval to hire a chief of staff.
Even though they have been able to create a budget, there are some members off the current foundation board who are not happy with the financial reports. They state the reports are too complicated, although some board members say they are more understandable than they were a year ago.
At-large director and former Churchill Downs Inc. CEO Tom Meeker and at-large director Paul Carrico have stated that the foundation still depends too much on the university’s advancement office for revenue; the advancement office raises the dollars, donations go to the foundation, and the foundation helps fund the advancement office. The new budget provides $6 million to run the university advancement office.
A university foundation paying expenses for the university president brings up many questions. But the foundation paying some advancement expenses may not be as bad. This arrangement is not unusual, although many universities fully support the advancement office themselves, which controls the branding. Donations do flow to the foundations in that example, but the foundations have no staff. The foundation board is critical in that arrangement.
The changes in staffing and the scandal itself have led to confusion and communication gaps between university and foundation, especially when it comes to fundraising. The interim vice president for advancement left at the end of March, and now the advancement office will be led by the university president’s office with its tiny staff until the position is filled.
This will likely lead to more confusion and sparse, or at best uneven, fundraising. There will be a gap in relationships with alumni and supporters. To answer this problem, the university will have an outside contractor do fundraising for the time being, which still leaves out the relationship building.
The misuse of funds at the foundation continues to spread throughout the school, damaging credibility, rending ties to alumni and community, and spending dollars on legal bills instead of education. The list of consequences will continue to expand.—Marian Conway