Wichita State Board of Trustees’ conflict of interest policy raises questions

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Wichita State Board of Trustees’ conflict of interest policy raises questions

A concern about public perception of transparency and openness has prompted the Wichita State Board of Trustees to consider whether or not they should be disclosing conflicts of interest.

A routine audit of the university that was released last year notes that the Board of Trustees doesn’t have a conflicts of interest policy in place and includes a recommendation that the board adopt such a policy. The board is in charge of spending more than $8 million in public dollars.

Audit recommendations

“It is recommended that the Board of Trustees consider adopting a Conflicts of Interest Policy similar to the one in place for the University,” the audit reads.

“Potential conflicts of interest should be disclosed for Board of Trustee members, as well as members of their immediate families and should address consulting arrangements, significant financial or managerial interests (holdings greater than $5,000 or 5%), or employment by an outside entity,” the audit reads. “The annual disclosures should be reviewed by the Board of Trustees on an annual basis.”

The audit was conducted by BKD, LLP, one of the largest accounting and advisory firms in the United States. The audit was obtained by The Sunflower through an open records request to the Kansas Board of Regents early last year.

Executive Director of the Board of Trustees Andy Schlapp said the findings of the audit came to light again recently due to The Sunflower’s reporting on conflicts of interest with the regents and Wichita State Innovation Alliance, a non-profit that manages Innovation Campus.

“The Sunflower wrote a story about, none of these people have conflict of interest [forms],” Schlapp said after the Board of Trustees meeting Friday. “And it blew into this really big deal of, oh look at all the secretive stuff going on. Oh, they’re cheating and they’re stealing and all this stuff, was kind of the public perception. The reality was it was a pretty minor finding (in the audit).”

Andy Schlapp is the executive director of the Board of Trustees. He is also WSU’s executive director of government relations.

Addressing the Trustees during the meeting, Schlapp emphasized the distinction between a legal obligation to disclose conflicts of interest and making an ethical decision to do so.

“You guys need to understand you are under no obligation to follow the laws of substantial interest at the state level,” Schlapp said to the board members.

“Which is a good thing because it’s a pain in the butt we have to fill out annually,” he said.

“I’m always one who says we shouldn’t voluntarily follow a law you don’t have to,” Schlapp said.

“Having said that, there is a need from a transparency and openness standpoint to let people know that you’re not making decisions that have conflicts,” Schlapp said.

Attorney recommendations

The meeting included the discussion of written statements from Stacia Boden, associate general counsel at WSU, and Mert Buckley, the Board of Trustees’ attorney.

Boden’s email statement reads in part: “I think it would be a good practice (to complete a conflict of interest disclosure) but I would push that question to the BOT and their counsel, Mert Buckley.”

Boden’s email was addressed to Anna Lanier, deputy chief of staff at WSU President John Bardo’s office, and Chris Cavanaugh, director of internal audit at WSU. The email was dated Sept. 12.

The statement from Buckley addresses whether or not the Trustees are legally required to file annual statements of substantial interest disclosing conflicts of interest. The undated statement addresses Schlapp and cites a state law that says board members meeting two qualifications must file statements of substantial interest — they must be “under the jurisdiction of the head of any state agency” and “listed as designees by the head of a state agency.”

Mert Buckley is the WSU Board of Trustees’ attorney.

Buckley wrote that he has “not seen anything in the statutes” stating that the Board of Trustees falls under the jurisdiction of a state agency.

“But it seems arguable at least, that the BOT is under the jurisdiction of the governor because the governor appoints board members, or under the jurisdiction of the Board of Regents because some board action must be approved by the BOR (Board of Regents),” Buckley wrote.

Buckley also wrote that he is “not aware” of board members being listed as designees by the governor, the Kansas Board of Regents, or any other state agency.

“I do not see where the members of the Board for Trustees have been listed as “designees” and thus do not see where they are required to file a statement of substantial interest,” Buckley wrote.

Public dollars and the role of the board

The board is in charge of allocating $8,153,926 in public dollars for fiscal year 2019. The money comes from a local tax — a 1.5 mill levy that went into place in 1963 to cover the municipal University of Wichita’s debt as part of its entry into the state system and transition to Wichita State University. Members of the board are appointed by the governor and are not paid to serve.

None of the Trustees that spoke during the meeting seemed to be in favor of setting the precedent of filing statements disclosing conflicts of interest.

Board member Joe Norton said he agreed with the legal opinion that the board is not required to file statements of substantial interest.

“We are not an agency of the state,” Norton said. “I think one of the big differences . . . is that to my knowledge, all of our budget expenditure items go to other public entities.

Joe Norton was appointed to the Board of Trustees in 2017. Norton is a shareholder and director of Gilmore & Bell, P.C., a public finance law firm.

“We don’t fund any private business. I think there’s a big difference there. To me, the intent of the conflict of interest statutes are, okay, we have public funds, we funnel them into a project that, in theory, you know, my brother-in-law owns a company that’s making money off of this. That’s what we’re trying to avoid. I don’t know that we make any of those expenditures,” Norton said.

“It’s probably the most scrutinized budget of any entity in the state,” Norton said, noting that the City of Wichita, Sedgwick County, and the Kansas Board of Regents all have to sign off on the Trustees’ budget.

“I have nothing to hide but I’d hate to start something that I don’t agree with that there’s no way to stop it, practically,” Norton said.

Board member Sheryl Wohlford agreed.

Sheryl Wohlford was appointe to the Board of Trustees in 2017. She is the president and co-owner of Automation Plus, Inc., and previously served as chair of the Wichita Metro Chamber.

“I think we certainly want to err on the side of open and transparent but I’d hate to set a precedent and start a document that’s not necessary.”

In the absence of five board members, the Trustees agreed to defer the discussion to a later meeting when all members are present. The next Board of Trustees meeting is Dec. 3.

Faculty Senate President’s recommendation

Faculty Senate President Betty Smith-Campbell attended the Board of Trustees meeting Friday. On Monday, she reported back to the rest of the Faculty Senate about the Trustees, saying she thinks it’s important that the board disclose their conflicts of interest.

Betty Smith-Campbell is the Faculty Senate president. She attended the Board of Trustees meeting representing university faculty.

“I did talk to Andy Schlapp,” Smith-Campbell said. “(I) told him as a faculty representative that I would highly encourage the Board of Trustees to have some type of conflict of interest form,” she said during the Faculty Senate meeting.

“I think it’s very important, even though they may not make specific decisions related to the Wichita State [Innovation] Alliance, some of the funds do transfer over there, and there’s for-profits and things going on. So I really think it’s important that they have conflict of interest statements.”