State to examine U of L Foundation's management

This from the Courier-Journal:

Kentucky State Auditor Adam Edelen announced Thursday that his office will examine the University of Louisville Foundation, which has been criticized for giving millions of dollars of deferred compensation and other pay to university President James Ramsey and his top administrators.

Ramsey last month denounced calls by several trustees for a such a review, saying they represented a challenge to his integrity.

But Dr. Robert Hughes, the chairman of the board of trustees and the foundation, said in a statement that the university "looks forward to working with the auditor's office" to review the relationship between the board and the foundation.

Edelen said in a news release that the office would conduct an examination into the governance and oversight of the foundation, which manages the school's $1.1 billion endowment.

"The foundation is critically important to the university, but it must be fully transparent," Edelen said. He also said the university's board of trustees "must have primacy" in governing university activities funded by the foundation. He said the review will take months to complete.

The Courier-Journal reported in March that Ramsey, who is also president of the foundation, had received $2.4 million in deferred compensation in 2012-13, while that year Provost Shirley Willihnganz got $1.8 million and Chief of Staff Kathleen Smith got $1.3 million.

WDRB.com later reported that some of the deferred compensation had been backdated and credited with fictional investment returns, that Willihnganz and Smith also had been paid by a separate nonprofit created by the foundation, and that Ramsey had received $2.5 million from the foundation in 2008.

In a special meeting last month, Ramsey angrily denounced calls for a review of the foundation. But several trustees said it was necessary. They included Steve Campbell, who said he hadn't gotten information about compensation he'd requested a year earlier, and board Treasurer Larry Benz, who suggested the foundation has grown so complex — it has more than $1 billion in assets and controls 10 corporations — that its processes and procedures should be audited.

Trustee Craig Greenberg on Thursday applauded Edelen's decision to review the foundation's management processes and said he expects "everyone at the university will fully cooperate with his work."

Edelen said in the release that Ramsey had presided over a period of "significant growth and achievement," but "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."

He also said that given the university's dramatic growth and enhanced academic reputation, the review is important to ensure the board of trustees is in a position "to meet its statutory and fiduciary obligations as the governing body of the institution."

Dissident members of the board have stepped up their criticisms in recent months. In April, citing news reports on the deferred compensation, Greenberg and fellow trustee Steve Wilson called for the foundation, which operates independently, to be placed under the supervision of the board.

Ramsey denounced that proposal, saying it would "kill" donations to the university because the trustees are appointed by the governor and donors would consider the process politicized. The foundation, which is also headed by Ramsey, raises money through private donations.

According to the foundation's tax report filed last month, in 2013 it paid $1.86 million to Ramsey, $663,038 to Willihnganz and $319,146 to Smith.

The board of trustees has hired a Chicago consulting firm, Verisight Inc., to produce a "competitive market review" of Ramsey's pay and that of five other administrators. The report is to be presented to the board at its meeting next month.

The company is being paid $23,000 to review the compensation of the university's three executive vice presidents, including its provost and head of health affairs, as well as its senior vice president for finance and general counsel, along with Ramsey.