Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, January 8, 1992 TAG: 9201080106
SECTION: BUSINESS PAGE: A5 EDITION: METRO
SOURCE: DANIEL HOWES BUSINESS WRITER
DATELINE: LENGTH: Medium
AUDIT QUESTIONS TECH HOTEL FUND
A state audit has criticized Virginia Tech over a $750,000 loan to a private foundation created to manage Hotel Roanoke.The money is part of $1.1 million in public funds the university gave to the private Virginia Tech Foundation, which manages Tech's investments. That foundation sometime after July 1 made the loan to its subsidiary, the Virginia Tech Real Estate Foundation.
"These are public funds," Walter Kucharski, the state auditor of public accounts, said Tuesday. "Lending money from one foundation to another is prohibited by statute."
Tech officials denied any impropriety implied in the audit, saying the funds in question are not taxpayer dollars appropriated by Richmond.
Tech "contends the . . . foundation will recover both principal and interest on this loan arrangement, and the university will receive all its investment and interest," the audit said. "However, the university does not have a formal agreement to support this arrangement or loan and did not get legal counsel's opinion about this action."
The audit recommends Tech seek a legal opinion "on the legality of the investment and loan arrangement." It calls for the university to establish formal policies governing financial arrangements between the Tech foundation and other related foundations, including legal review of all transactions except routine investing.
"One purpose [of the recommendation] is to say the Board of Visitors needs to have better control and oversight" over transactions within the university and related foundations, Kucharski said.
The money is "not tax money; it's not tuition; it's not fees the General Assembly said we could collect," said Jerry Cain, Tech's general counsel. "It's cash management [proceeds] from overnight transfers" and other short-term investments.
"It's true that legal counsel has not been approached until today," he said. "They're apparently concerned that there's no deed-of-trust or mortgage on the property."
Cain described the auditor's concerns as one of "form and procedure" and "not a big deal." He predicted that senior university officials would quickly complete the paperwork for the parent foundation to take a mortgage on the property - valued at $3.8 million on Roanoke's tax rolls.
The Virginia Tech Real Estate Foundation Inc. was established two weeks before Tech assumed ownership of the landmark hotel from Norfolk Southern Corp. on Dec. 28, 1989. A recommendation to a special meeting of the Board of Visitors dated Dec. 15, 1989, said the Tech foundation "will make available the necessary funds to operate the real estate foundation."
Tech officials say the auditor's questions will not sidetrack redevelopment of the hotel. The New Orleans developer overseeing the project expects final cost estimates and design schematics to be chosen before the end of the month.