When higher-education donors demand accountability

Philanthropic donors may sometimes find themselves demanding accountability from a university for more than their own grants. This was the case in September 2016 when the James Graham Brown Foundation warned the University of Louisville that it would halt its giving to the school—which amounted to more than $74 million in grants since 1954—until administrators conducted a forensic audit of the University of Louisville Foundation.

James Graham Brown was a lumberman, horseman, and entrepreneur who built his fortune through real-estate development in Louisville and through W. P. Brown and Sons Lumber Company in the early- to mid-twentieth century. Later in life, his thoughts turned to philanthropy, with the goal of improving the public image of Kentucky as a state and Louisville as a city. He helped to establish the Louisville Zoo and expand the footprint of the University of Louisville. In the 1970s and 1980s, the eponymous foundation he created in 1954 began to fund chairs, endowments, and professorships at the university. It provided the first of many grants to establish a first-class regional cancer center under the university’s direction.

Concerns about the center’s progress in the late 2000s led the foundation to begin asking questions about the grants it had made for that purpose. The answers were not forthcoming. “It was absolutely confusing every time someone tried to explain how our money was being used,” says Mason Rummel, president and CEO of the James Graham Brown Foundation.

In response, the Brown Foundation and another University of Louisville supporter—the C. E. and S. Foundation—demanded a forensic audit of the University of Louisville Foundation, which they paid for with a combined gift of $2 million. The audit revealed a series of questionable loans, bad investments, unauthorized compensation schemes, and numerous unbudgeted transactions that had never been disclosed to the university foundation’s board members. “It was toxic and convoluted,” remarks Rummel. “The audit met our worst expectations, but there was some sense of relief to know that our suspicions weren’t crazy.”

Initially concerned that a recipient was ignoring the stated purpose of one of its own grants, the James Graham Brown Foundation found itself assuming the role of watchdog and whistleblower on a much broader pattern of financial malfeasance—another reminder that ongoing donor oversight is crucial in higher-education giving.

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