Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 11, 1992 TAG: 9201110108
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: DANIEL HOWES BUSINESS WRITER
DATELINE: LENGTH: Medium
TECH TO TAP OTHER FUND FOR HOTEL
Virginia Tech admitted its mistake Friday. So now the university intends to move $750,000 from one account to another in hopes no one else will say it is using the wrong cash to manage the vacant Hotel Roanoke."It's not going to be university - public - funds, if you will," Tech spokesman Larry Hincker said. "It will be foundation money."
The state's auditor of public accounts reported this week that the private Virginia Tech Foundation had improperly loaned $750,000 in public funds to its private real estate foundation subsidiary, which would use the money to maintain the hotel.
The money, it turns out, had come from $1.1 million in public funds - cash management proceeds from short-term investments - controlled by the university's Board of Visitors. The money was given to the parent foundation, which, loaned $750,000 to its real estate unit.
The state auditor, Walter Kucharski, said such a transaction is improper, and he accused the school of failure to consult a lawyer.
Initially, Tech officials disagreed, though they did confess that the school's attorney had not been consulted on the original transaction. The university denied any impropriety implied by the audit, saying the funds in question were not taxpayer dollars.
By Thursday afternoon, repentance began to creep in. "I guess you could say we've been enlightened," said one official. Said another: "There were rules we were not quite aware of."
Virginia law says a university or its foundation may place public money - cash appropriated by the legislature or other funds accrued through common investment practices - only in specifically approved investments, such as government-backed debt.
Commercial real estate is not approved. "How you invest public funds is set forth in the Code of Virginia," Kucharski said. "If what you invest in is not on this list, you cannot invest in it."
But a university may invest a portion of its unrestricted endowment in real estate. The auditor said the University of Virginia has loaned $32 million from its nearly $500 million endowment to its real estate foundation.
"They sat down with their lawyers," Kucharski said. "UVa's endowment funds are not in a foundation. They are out there for the public to see. With endowment money, you may want to take a risk to get a higher rate of return."
A statement issued by Minnis Ridenour, Tech's executive vice president and chief business, said the university "will take immediate steps to modify the transaction and use other foundation funds as the source of the loan."
"This just clearly was not an investment that should be [done] with public funds," Kucharski said. "We don't want to imply that they went out and broke the law. They tried to act in good faith; they lost sight and didn't know where the money came from."