Just under $150 million of University of Wisconsin’s surplus was discovered to be without documentation in an audit report released Friday, triggering heightened public and legislative concern for UW’s spending accountability.
Mike Mikalsen, spokesperson for Rep. Steve Nass, R-Whitewater, the chair of the Assembly Committee on Colleges and Universities, said the $142 million in “administrative costs” making up 12 to 15 percent of a total research grant from the federal government, went unallocated.
According to Mikalsen, UW System officials told state legislators last spring there were no administrative costs from these research grants. However, the funds did exist and could have been used for scholarships for middle-class students, Mikalsen said.
Eighty percent of the university’s $755.4 million of revenues have a designated purpose, and the remaining 18 percent, or $142 million, consist of federal indirect revenue to support the research enterprises at UW-Madison, UW System’s flagship campus, David Giroux, UW system spokesperson, said.
“We know what it’s there for,” Giroux said. “[It’s] federal indirect revenue held by UW-Madison to support research at UW-Madison.”
The total UW surplus comes from a variety of different resources, including student tuition, chargebacks and taxpayers dollars, Mikalsen said.
The recent audit, which took a deeper look into the specific designations of the surplus, is an offshoot of the discovery of nearly $650 in reserves in the spring of 2013, Mikalsen added. The audit is the first of several reviews by the audit bureau looking into the surplus.
According to a statement from UW System president Kevin Reilly, more than $100 million of the total $142 million in question was used for the annual operating and infrastructure costs for UW-Madison’s research enterprise.
While some Wisconsin lawmakers remain unconvinced of the reserve funds’ actual purpose, it is the unaccountable manner in which the university spent the money that raises central concerns, Mikalsen said.
The reserve was a way for administrators to follow through with projects that did not receive funding approval from the UW System Board of Regents or the Legislature, Mikalsen added.
“This development is further evidence that this was an orchestrated, organized activity to build these surpluses and in many cases to keep the public and the Legislature confused as to exactly where this money comes from, and how it was being spent,” Mikalsen.
After every two-year budget cycle, upon the UW’s completion of meetings with the Legislature regarding the university’s finances, UW administrators have two years where money can be spent without direct legislative oversight.
“Rep. Nass along with other representatives are now very, very convinced that officials inside of the UW system were hiding money,” Mikalsen said.
Reilly said in his statement he is open to discussion with legislators about appropriate levels of funds and how the funds should be used.
Upon Reilly’s resignation in December, UW-Whitewater Chancellor Richard Telfer will become the interim UW System president until a new, permanent president is found.
“I think you are going to see significant areas of reform once a new permanent president is put in place,” Mikalsen said.
Mikalsen added new leadership will change how finances are treated by UW System administrators.
“There was no question that this surplus was built at the direction of high level administrators and the secrecy and the way in which it was done is not going to change until there is new leadership,” Mikalsen said.
