Loose UWO transfers, tighter UWS controls

You can look at the mishandling of funds at the University of Wisconsin – Oshkosh (UWO) as a blot on the accounting controls of the University of Wisconsin System (UWS), or you can applaud the efforts of former UWO Chancellor Rick Wells to integrate his campus and its related foundation with the economic development of its region.

Or you can do both.

First, let it be said that there is no evidence to date that Wells and his deputy got even a nickel personally from the UWO support of nearby development projects. They were undertaken to help UWO and the community.

Wells was aggressive in promoting the local economy, maybe too aggressive, but no one can argue that our 13 four-year campuses should not be engines of a university-centered economy.

About UWS governance and the transfer of UWO funds to its related foundation and to various deals:

1.) If UWS did consolidated financial reporting at the campus and system levels, the questionable practices would have been transparent. “Consolidated” means that off-balance sheet entities are included in the financial reporting. (Remember Enron? It was the off-balance sheet irregularities that camouflaged Enron’s failings.) A statewide audit could have headed off the loose UWO transfers.

2.) This is not a small matter for UWS. At UW-Madison alone, there are some $7 billion in unconsolidated assets at the UW-Madison Foundation, the Wisconsin Alumni Research Foundation (WARF) and the UW Hospital & Clinics Authority. Did you know, for instance, that UW Health took on $250 million commitment, including some loan guarantees, when it went out of state to buy the Swedish Hospital System in Rockford, Illinois? Few taxpayers do know. Could the $250 million purchase price have been used in Wisconsin? Of course. Did UW Health need Swedish as a feeder system? Doubtful, since UW Health already has long waiting lines for needed surgeries.

3.) For some unknown reason, Gov. walker vetoed a bill in the last legislative session that would have required a comprehensive audit. The UWO revelations may change his mind the next time around.

4.) Practices vary across the campuses on how they handle unconsolidated assets, such as those owned by related foundations. UW – Milwaukee is very transparent in how it runs its three foundations, all audited. (Disclosure: I am treasurer of one of them.) But controls and accounting rules should be uniform across all 26 UW campuses.

5.) UWS, with a $6 billion operation, has gone without a Chief Financial Officer for six years, and some of the other financial; posts have been revolving door.

The inadequate financial controls for the University System are just one more reason for calling a Blue Ribbon Commission to examine higher education in Wisconsin. There has not been a high-level overview since two university systems were merged 46 years ago.

The second reason would be to examine what Chancellor Wells was striving to accomplish. To my mind, he was directionally right to thrust UWO into the economic dynamics of Winnebago County and the Fox Valley.

He led the charge to integrate the Valley’s educational institutions with business and government. One positive outcome was the formation of a K-20 education council to link education at the elementary, secondary, tchnology colleges and universities, public and private, to the prosperity of Northeastern Wisconsin.

A Blue Ribbon Commission might want to reorganize the 26-campus system on a regional basis with better governance and uniform financial accountability at both the regional and state levels.

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  • Gerard McKenna

    John, Your suggestion for a Blue Ribbon Commission makes too much sense and that is probably why it has not happened. We can only hope that this idea sees the light of day.

  • Boris Ostensky

    There is no such entity named the “UW-Madison Foundation.” The UW Foundation is a non-profit corporation, not subject to control by the Legislature or Governor. Its assets are immune from confiscation or alternate use by the state. Same with WARF. You know this, of course, but prefer to peddle misinformation.

    The people who contributed to the UW Foundation earmark virtually all of their contributions for specific use. Should the state attempt to “redirect” these funds, two things would occur. First, litigation would ensue — litigation which the state would lose. Remember that the UW Foundation has a fiduciary duty to its donors. Second, future donations would dry up.

    Remember the billion dollar plus “tobacco settlement” funds which the state received? Two Governors — one from each party — pissed it away over two legislative sessions. Same thing would happen to the funds held by the UW Foundation if the clowns (of both parties) at the other end of State Street got access to them. The alumni who set up WARF in the 1920’s and the UW Foundation in the 1940’s were wise men and women.

    Furthermore, the thought that you — or anyone else — knows best about how a donor’s contributions should be used is preposterous. It smacks of socialism.