Sloppy management practices in UW System invite abuse

My column for the Washington County Daily News is online. I tried my best to make a very boring topic more interesting. You be the judge as to whether or not I succeeded. Here you go:

Last year the University of WisconsinOshkosh Foundation filed for Chapter 11 bankruptcy after several suspicious and inappropriate transactions were discovered between the foundation, the university and its chancellor. The fallout from that mess is still being litigated in court. In response, the state’s Legislative Audit Bureau (LAB) conducted a study of the relationships between UW institutions and 90 affiliated organizations. The results are disturbing.

First, let us recall what happened at UWO because it serves as an example of how bad things can get. The UW-O Foundation was purportedly dedicated to helping the university. Like many university foundations, it served as a booster club to raise money to help the university pay for things that were not covered in the budget.

Over several years, it was discovered UW-Oshkosh was funneling university money through the foundation for projects like a biodigester and a hotel. Meanwhile, the foundation bought the university’s chancellor’s house for about $120,000 more than the appraised value right before he retired to Florida. Even though millions of taxpayer dollars were involved, much of this happened with almost no oversight and little paperwork.

In response to these revelations, the Joint Legislative Audit Committee asked the LAB to evaluate the relationships between all UW institutions and their affiliated organizations. The scope of the evaluation included almost all UW universities and colleges and 90 affiliated organizations from fiscal year 2007-2008 through fiscal year 2016-2017.

What the study found is a mess of poor accounting, weak oversight, sloppy management and comingling of public and private finances.

The LAB couldn’t track all the finances because not every affiliated organization had a unique identification number in its accounting system, thus rendering a full accounting impractical. But what the LAB could count showed that $257.9 million flowed from UW institutions to the affiliated organizations over the period of the study. Remember that the money is usually supposed to flow the other direction.

In one relatively small example, UWMadison received$3.5 million in 2015 for media rights related to certain athletic programs and then immediately sent that entire amount to the UW Foundation. UWMadison said an unspecified portion of the $3.5 million was intended for coaches who had assigned their share of the funds to the UW Foundation, but did not provide any detail or accounting. UW-Madison is apparently so awash with money that a mere $3.5 million does not warrant scrutiny by university officials.

The LAB evaluation also found that there is very little separation between affiliated organizations and the universities they support. The various foundations and affiliated organizations are private organizations while the UW institutions are public entities subject to public scrutiny and oversight. They are supposed to be separate.

The LAB report showed that UW employees worked as the executive directors of most foundations for the four-year universities. Even though nine of the foundations reimbursed the taxpayers for some or all of the salary and benefits for the 50 employees who also worked for the foundations, it is impossible to determine if all expenses were reimbursed because those employees did not track the amount of time they spent working for the foundations. Meanwhile, four of the affiliated organizations that were not primary fundraising foundations had UW employees as voting members of the boards of directors.

Until December, the UW Board of Regents did not have a written policy governing the relationships between UW institutions and their primary fundraising foundations. The regents finally established that policy, but still do not have a policy to govern the relationships with all of the other affiliated organizations.

The citizens, taxpayers, students and staff who support the UW System deserve better than this. The lack of oversight, shady accounting, comingled governing structures and incomplete record keeping is intolerable in a system where hundreds of millions of taxpayer dollars are at stake. Such poor management practices allow abuses like what happened at UW-Oshkosh.

The UW Board of Regents has been slow and incomplete in their response to this growing problem. The Wisconsin Legislature may need to step in and demand action on behalf of their constituents.

One Response to Sloppy management practices in UW System invite abuse

  1. billphoto says:

    So $257M went out of the UW system instead of $257M + more going in but they need more money from taxpayers.  I can understand my no one understands their accounting.

    I think UW-Madison should cancel the Elvish as a Second Language course and other ridiculous study programs like it and refund millions and millions of dollars to taxpayers along with an apology.

    Still waiting for my “slush fund” refund.

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