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Report: $5.4 million in questionable UW transactions

By TODD RICHMOND
Associated Press

MADISON, Wis. (AP) — University of Wisconsin System schools conducted about $5.4 million in questionable transactions with their private foundations between 2010 and 2017, according to a system report released Wednesday. The transactions weren’t apparently illegal but they didn’t always follow best practices, the report found.

System officials began a review of transactions between schools and their foundations in January after accusing former UW-Oshkosh Chancellor Richard Wells and former UW-Oshkosh Chief Business Officer Thomas Sonnleitner of illegally transferring money from the school to its foundation.

The report analyzed 377 transactions of at least $5,000 between mid-2010 and the end of January 2017. Nearly $35.5 million was moved from the universities to the foundations during that period.

The report notes a number of valid reasons for a school to make a payment to its foundation, including paying back a foundation scholarship if a student quits and renting space in a foundation-owned building. Donors might also mistakenly send gifts that should go the foundation instead to the university. According to the report, 329 transactions had complete and proper documentation; the remaining 48 transactions, worth nearly $5.4 million, required additional investigation.

Eight of the transactions involved accounting and record-keeping matters.

One transaction involved UW-La Crosse’s paying its foundation $183,805 in May 2015 to cover renovations at its football stadium.

The foundation had pledged to chip in $500,000 for the project but was only able to raise $316,195, causing a negative balance for the foundation. The foundation asked the school to repay it $183,305 after the project was over.

System analysts questioned the validity of the payment, saying if the foundation had come to the school about the flaw during construction, the project would have gone back to the state building commission for adjustments.

In 26 instances, a check was written incorrectly, sending gifts that should have gone to UW-Madison’s foundation instead to the school itself. The university chose to transfer the money back to the foundation even though the university is supposed to keep the money if the donor’s intent is unclear.

The report went on to note 14 instances in which schools collected revenue through contracts and transferred the money to their foundations. For example, documents show UW-Madison received $3.5 million from Learfield Communications in December 2015 as part of its contract with the company for sports media rights. The school transferred the same amount to its foundation in January 2016. The system’s finance office is working with UW-Madison to decide what part of future Learfield payments the university should retain.

The report notes that the system has put a number of checks in place. Chancellors now must attest annually that all financial records are accurate and complete, prevented UW officials on a foundation board from voting, required  foundations to abide by tougher reporting standards and provide more detailed financial reports and called on foundations and schools to ratify agreements stating both sides understand they’re legally separate.

“These vital partnerships must be executed with integrity and remain above reproach,” UW System President Ray Cross said in a news release announcing the report. “This analysis demonstrates the integrity of foundations across the system, and we will continue to take the appropriate steps to ensure transactions are handled appropriately.”

The Legislative Audit Bureau is also reviewing UW System schools’ relationships with their foundations.

The system and the state Department of Justice filed a civil lawsuit against Wells and Sonnleitner in January accusing them of theft.

The lawsuit alleged they secretly transferred $11.3 million from UW-Oshkosh to its foundation between 2010 and 2014 to help pay for various construction projects. The lawsuit goes on to accuse them of illegally guaranteeing UW-Oshkosh would back the foundation’s loans.

Wells has said he hasn’t personally benefited and the system doesn’t have in place a clear set of rules for universities and foundations. The lawsuit is still pending, and a jury trial has been scheduled for August 2018.

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