Cost, secrecy undercut U of L audit

University of Louisville campus
University of Louisville campus KyCIR

The University of Louisville and its related foundation got into lots of trouble by spending tons of money in great secrecy.

Now, the board and administration charged with getting the university back on track is spending tons of money amid great secrecy to find out what went wrong.

The university’s leaders, who seem genuinely committed to righting the struggling institution, would serve it better by insisting on detailed bills from the auditing firm investigating the murky past, and making them available to the public.

Last fall, as the university reeled from regime change and ever-deepening concerns about excessive compensation for former President James Ramsey and his inner circle — fueled by the way-too-cozy relationship with the rich U of L Foundation, where Ramsey also served as president — U of L contracted with a national firm for a forensic audit.

Ramsey’s high compensation and secrecy have, so far, cost him and his inner circle their jobs, and the university and foundation tens of millions of dollars, gave rise to a criminal investigation by the attorney general’s office, and several lawsuits that have been a serious distraction for the actual work of the university. Gov. Matt Bevin and the legislature overhauled the university’s board.

The idea of the forensic audit was to search in all the dark corners and track down the foundation’s murky deals as a critical step toward creating a new culture of transparent and responsible fiscal management.

The trouble, though, as Kate Howard of the Kentucky Center for Investigative Reporting recounted, the board and school officials “have largely ignored a state law meant to guarantee transparency in contracting, sidestepped cost guidelines and shifted control to an outside firm in order to shield details of the examination.”

The cost of the audit, originally priced at $900,000, has reached $2.2 million, including $151,000 in unspecified expenses. Still, it is the school’s outside attorneys, not U of L staffers, who know how the money is being spent by Alvarez & Marsal, the Chicago firm hired to investigate the foundation’s activities.

There are good reasons to create an arms-length relationship when an auditor is investigating the organization itself. Typically, Howard reports, that would be handled by handing the job over to an outside law firm, which would hire the audit investigators, supervise their work and receive and pay the bills. As such, those records would be covered by attorney-client privilege and wouldn’t be open to public inspection.

But U of L did the hiring and Alvarez & Marsal sends its bills to the school. Those bills are public but they don’t include much of the information typically required in a state contract, such as the names of staffers working on the project and the time each spent or a detailed list of expenses.

There’s no question U of L, which may pursue Ramsey and others to recover up to $100 million that may have been misspent, needs a very thorough and professional forensic audit.

But what U of L needs even more is to recover public faith in its integrity as an institution. It won’t get there by bending the rules.