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Between June 2019 and December 2020, KSU withdrew $2.7 million from its internal endowed funds. These funds were then deposited into KSU's general bank account, bolstering the University's cash balance figure, and were used to partially cover operational spending. While an approved 2018 endowment spending policy permitted KSU to begin spending at a rate of 4.8% for FY 2019, the policy contained specific monitoring and reporting controls that were not implemented, including:

Though funds were drawn, KSU also lacked appropriate controls to prevent donations made with a restricted purpose from being spent for unrestricted purposes such as general operating expenses. By not implementing and maintaining proper controls over endowed funds entrusted to it, KSU failed to provide adequate oversight and may not be meeting the standard of conduct in management and investment of institutional funds required by KRS 273.605.

The 2018 policy, as presented to the Board of Regents on June 7, 2018, states in part:

The President will also appoint an Investment and Endowment Committee which will develop an investment policy and a spending policy to be presented to the Board of Regents. The committee will also monitor investment performance, the use of endowment income, and evaluate and select investment managers used by the University.

A full endowment report will be developed as required by the Council on Postsecondary Education. Donors will also receive annual reports as to the disposition of endowment income.

Interview with KSU personnel and the former KSU President identified that no such committee was appointed. The former President stated that at no time did the Board ask about an investment committee, and he did not know who at KSU would have the competency to be on an investment committee.

Additionally, KSU has not developed a new investment policy or spending policy. University email correspondence identifies that KSU personnel discovered a 2012 Investment Policy in July 2018, a month after presenting the 2018 Endowment Spending Policy to the Board. In the email correspondence, KSU’s former General Counsel advised that she was not aware that the 2012 Investment Policy existed and that the only way to know if the policy was still in place, would be to go through board meeting minutes from January 2012 forward to see if there were any subsequent amendments. This action would be required because KSU has not historically maintained a database of its policies. In response to the former General Counsel’s statement, another former KSU employee, states that this policy will need to be revised or updated by the