MADISON — UW System campuses should increase oversight and monitoring of their relationships with affiliated organizations such as fundraising foundations, according to an audit released Friday.
The Legislative Audit Bureau report comes after a scandal at UW-Oshkosh over the transfer of $11.3 million to its foundation between 2010 and 2014 to help pay for a number of construction projects.
UW System President Ray Cross said the system has already taken steps to increase accountability and transparency with organizations examined under the audit.
The Audit Bureau analysis found numerous problems with operations of UW campuses and foundations prior to the Board of Regents instituting a new policy in December.
The audit found that between 2007 and 2017 the operations of many UW institutions and foundations were not fully separate and independent, the system lacks a complete list of all organizations affiliated with its schools and the system didn’t track how much money was flowing from schools to the foundations and other affiliated organizations.
Auditors discovered that 14 foundations each had at least one UW employee as a voting board member between 2007 and 2017. UW officials provided auditors with annual lists that showed the number of affiliated organizations grew from 59 in 2007 to 90 in 2017 but the lists excluded some organizations.
UW institutions paid out $257.9 million to all known affiliated organizations over the decade, according to UW’s accounting system, but auditors said the actual payout is unknown because UW System administration didn’t assign a unique vendor number to each organization.
Auditors also reviewed 24 agreements UW institutions and foundations reached in 2017 and found five didn’t comply with the regents’ December policy. The agreements didn’t consistently indicate specific services and payments that foundations provide for the time UW employees work for them, didn’t require foundations that use UW office space to pay rent or make in-kind payments or indicate the specific services and payments foundations were required to provide.
Auditors’ recommendations include assigning unique identification numbers for each organization in UW’s accounting system, correcting operational agreements to comply with regent policy and prohibiting UW employees from serving as voting members of boards governing primarily fundraising and real estate foundations.
Cross wrote in a letter responding to the audit that system officials expect to implement identification numbers in October; UW institutions have submitted updated agreements; and UW officials on organization boards could no longer vote as of November. He added that the audit revealed no other illegal loans or guarantees like the ones made at UW-Oshkosh.
Sen. Steve Nass, a Whitewater Republican and frequent UW critic, issued a statement saying money is supposed to flow from foundations to universities, not the other way around and the audit reveals a lack of UW policies to prevent conflicts of interest and unethical conduct. He promised legislation regulating relationships between UW institutions and affiliated organizations.