State Auditor Adam Edelen says he’s looking into the financial management of the University of Louisville Foundation, which manages the university’s $1.1 billion endowment, and the university’s board of trustees as part of an ongoing investigation.
Edelen originally said his office would focus on “governance and oversight” of the organizations, which have been under fire for hefty salary and deferred compensation packages awarded to U of L President James Ramsey and other top school officials. Ramsey is also the president of the U of L Foundation.
On Monday, Edelen said the investigation would include an examination of the financial operations of the boards.
“If there are examples of financial management or activities that operated outside of the purview of the board, certainly that’s something that we will review and consider as we examine the process,” he said.
The board of trustees has authorized large bonuses for Ramsey, and the foundation has independently awarded hefty deferred compensation packages — delayed bonuses used to retain employees — to Ramsey, former provost Shirley Willihnganz, and Ramsey’s chief of staff, Kathleen Smith, among other top officials.
According to tax documents filed last year, in 2013 the nonprofit foundation alone awarded $1.86 million to Ramsey, more than $663,000 to Willihnganz and more than $272,000 to Smith.
According to a report requested by the board of trustees and conducted by the firm Verisight this year, Ramsey’s estimated deferred compensation for 2014 was $1,905,239, bringing his total compensation last year to $2,529,239. The initial estimate for his 2015 compensation is $1,672,114 — which includes $1,023,153 in deferred compensation and tax gross-ups.
Verisight advised against using gross-ups — awarded to reimburse Ramsey for taxes paid on his income — saying they are “not common practice and should be eliminated, going forward.” The consultants also criticized the university’s overall use of deferred compensation, which isn’t deferred at all.
“The current vesting schedule used by the university’s plan is too short and should be at least three years,” the report said. “The is no retention element if the deferred compensation award vests immediately.”
Next year, Ramsey’s base salary — to which both the foundation and university contribute — will be about $670,000.
Earlier this summer, the board of trustees awarded Ramsey a 3 percent merit raise on his base compensation next year, even as some board members have raised concerns over Ramsey’s high salary and benefits.
Gov. Steve Beshear appointed two new members and removed two members from the board of trustees in June, a move which precipitated the election of a new board president.
On Monday, Edelen said changes to the board’s makeup haven’t altered his investigation.
“What has happened in the past has happened, and we’re going to review that to make sure it was in the best interest of the university and its foundation, and its aims and its mission,” Edelen said.
Newly elected board chairman Larry Benz was one of the members calling for a review of the U of L Foundation earlier this year.
In an email, Benz said the board of trustees is not officially aware of the scope of the investigation, but he expected to be notified once the auditor’s office had collected all the information it needed. He added that from the perspective of the board of trustees, “there is no ongoing issue” with Ramsey’s compensation.
U of L spokesman John Karman declined to comment directly, saying the university “has been cooperating fully with Auditor Edelen’s review and will continue to do so.”
Robert Hughes, chair of the U of L Foundation board and former head of the trustees, did not respond to a request for comment.