FRANKFORT, Ky. — Kentucky’s auditor says the University of Louisville and its nonprofit investment arm often “blurred the lines” of legal separation by empowering one man to make decisions for both groups, essentially bypassing the university’s board of trustees.
The audit of the University of Louisville Foundation from Republican Mike Harmon took 18 months to complete and comes one week after the school was placed on probation by its regional accrediting agency. Meanwhile, the school’s future has become tangled in a lawsuit between the state’s Republican governor and its Democratic attorney general.
Acting university President Neville Pinto acknowledged the foundation has not followed “best practices” and vowed to make changes. But former university President James Ramsey — who is also the former head of the foundation — said the audit was unnecessary and many of its findings were wrong.
The audit detailed a “damaged and divisive working relationship” among the university’s board of trustees, the administration and the foundation. It said Ramsey’s dual role as president of the university and the foundation “created inherent conflicts by concentrating a significant amount of authority in one individual.”
For example, the audit said Ramsey used his authority as president of both entities to sign off on $67 million in loans between the university and the foundation, but he did not tell the university’s board members or request their approval. In another instance, it said, Ramsey used money from the foundation to offer buyouts of university employees but did not tell the board he planned to pay the money back, a tactic Harmon said appeared to be “designed to circumvent advice from University legal counsel.”
Harmon also said the foundation’s board overstepped its authority by giving Ramsey a 4 percent raise in 2014 after the university’s board approved a 2 percent raise.
In a written response, Ramsey disputed most of those findings. He noted the same person has been president of both the university and its foundation for nearly four decades. He said the foundation was free to increase his salary as much as it wanted. And he said one of the two loans mentioned in the audit has been paid back in full with interest while the foundation has paid off “three-fourths” of the second loan.
“Had either (of the boards) wanted me to obtain prior approval or notify them of these transactions — which were well documented and readily discernable — they simply could have directed that the CFO or I do so,” Ramsey said.
Harmon was also critical of the university’s board of trustees, saying they created “an environment of distrust resulting in a dysfunctional governing climate.”
Dysfunction was the main reason Republican Gov. Matt Bevin cited earlier this year when he abolished the university’s board and replaced its members. Ramsey also agreed to resign.
Democratic Attorney General Andy Beshear sued, and a state judge ruled Bevin was wrong to replace the board members and blocked his order. Bevin has appealed. The Southern Association of Colleges and Schools Commission on Colleges have placed the university on probation, citing concerns about “undue political influence.”
Bevin has maintained the university’s accreditation is not at risk, noting similar actions at other schools did not result in losing accreditation. Harmon said he did not discuss the audit with Bevin as the governor was making his decision.
“I believe that the governor, just like this audit indicated, (believes) the board obviously was dysfunctional,” Harmon said. “I think the governor took a good faith effort to redo that. Whether it was appropriate or not, I’ll leave that to others to make that determination.”