A report Friday from the nonpartisan Legislative Audit Bureau found the University of Wisconsin had made payments much higher than previously reported to private organizations intended to reduce the System’s dependency on public funds.
These private organizations provide money to system schools for construction projects, equipment and academic programs, and reduce the university’s dependency on funding from public tax dollars.
A recent case involving the former UW-Oshkosh chancellor and the UW System, however, brought the relationship between the university and these private organizations under closer scrutiny.
In that case, the UW-Oshkosh chancellor and chief business officer were sued by the UW System for transferring $11.3 million from the university to the private UW-Oshkosh Foundation — the reverse direction of the usual relationship between a UW System school and its private foundation.
The System believed this transfer of funds was improper, prompting state lawmakers to call for the LAB to audit the UW System’s financial transactions with private organizations.
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In that audit, which was released Friday, the LAB found that from 2007 to 2017, the UW System schools and their corresponding private foundations were not appropriately separated. This finding has since raised concerns about the control UW System President Ray Cross has over university funds.
In a statement Friday, Cross said the System has made changes in the past year to prevent occurrences like the incident at UW-Oshkosh from happening again.
“The proactive steps we announced last spring are a step in the right direction in providing additional accountability and transparency in the UW System’s relationships with its fundraising and real estate foundations,” Cross said. “While we have made significant progress, we appreciate the feedback from LAB in assisting us in those efforts. We continually strive to ensure the ongoing integrity, efficiency, and transparency of these organizations.”
The audit report, however, said Cross’s efforts to reform UW’s relationship with its private organizations only affected a small portion of transactions. The report found hundreds of millions of dollars still did not comply with legal guidelines regulating the relationship between the UW System and private organizations.
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In October, the UW System reported payments totaling more than $36 million from the university to private foundations in the past seven years. Friday’s LAB report, however, found that total to be closer to $81.6 million — much higher than the figures reported by the university. Going back ten years, auditors found this total to be even larger, totaling $258 million.
The audit report said much of this discrepancy is due to a flaw in UW System bookkeeping. The LAB report called on the UW System to fix the bookkeeping flaw and ensure its remaining transactions with private foundations are in compliance with Board of Regents guidelines.
Cross said the remaining UW System schools and private foundations which are currently not in compliance will sign new agreements by November 1.
Despite these measures, state Sen. Steve Nass, R-Whitewater, said in a press release Friday he will be introducing legislation to regulate the financial relationship between the University of Wisconsin System and private foundations.
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While Nass did not go into greater detail on how these transactions would be regulated, he said the UW Board of Regents cannot enact regulatory policies like these and intervention from the state government is necessary.
“We can’t rely on the Board of Regents to enact policies to regulate themselves in these situations,” Nass said. “I will be drafting legislation to, by law, regulate the relationship of UW System campuses and private foundations.”
The audit posited several recommendations to the UW System to clear up any bookkeeping flaws and ensure transaction compliance going forward. These recommendations include organizing financial records so they are more easily tracked, rewriting agreements in compliance with System policy, prohibiting UW employees from serving as board members at private foundations and requiring annual reports assessing outside groups and transactions with them.
The report called on the UW System to update the state legislature’s Joint Legislative Audit Committee on the fulfillment of these recommendations by June 29.
