UW Foundation’s fees from Blue Cross donation questioned

Guy Boulton:

“We all said, ‘Expense recapture fee? What’s that?'” said Leean, a former state senator and former secretary of what was then the Department of Health and Family Services. “Well, it’s a fancy name for essentially funding their fundraising operation.”

Thomas Hefty, the former chief executive of Blue Cross Blue Shield United of Wisconsin, also said he did not learn of the 1% fee until the 2010 audit.

“It never occurred to us that they would take such a high fee out of money intended for education and faculty and research and public health,” Hefty said. “This was the third-largest gift to a medical school in history, and they chose to skim some of the money for other purposes.”

“The money was given for one purpose and they used it for another,” he added. “That’s the bottom line on this.”

In January 2012, the UW Foundation lowered its fee to 1% up to $250 million of the endowment and 0.7% on the amount above that.

For the $381 million in the endowment at the end of 2013, that works out to $3.4 million for the year.

“They threw a little bone toward the medical school and the public health grants, but that’s about all they did,” said Leean, who met with the UW Foundation after the first audit.

With the reduction, the total fee was about 0.9% of the endowment.

The Wisconsin Partnership Program — the entity that allocates the money — has a target of spending on average a total of 4.5% of the endowment on grants and administering the program each year. This means that 16.7% of the total money spent from the Blue Cross endowment in 2013 went to the UW Foundation.

Here’s the math: 0.9% equals 16.7% of the total amount distributed from the endowment — the sum of 4.5% for programs plus 0.9% given to the foundation.

At the time the Blue Cross money was donated, no one thought to ask whether the UW Foundation would charge a fee beyond the cost of managing the endowment, Leean said.