The state attorney general's office has reached an agreement with the Milton Hershey School and the Hershey Trust Company to address concerns over the administration of the Milton Hershey School Trust, Attorney General Kathleen Kane announced Wednesday.
The agreement is the result of a two-year investigation into the management practices of the trust company and the school.
Kane said that while the investigation found no evidence of wrongdoing, all parties agreed to implement certain reforms to help ensure that the school will continue to provide a stable home and quality education to disadvantaged children.
The changes announced Wednesday stem, in part, from allegations that school trust assets had been misused for excessive board compensation and benefits, unnecessary facility upgrades, and questionable land purchases; specifically, the purchase of the former Wren Dale Golf Course adjacent to the Hershey campus in 2006.
The Hershey Trust said it bought the course for $12 million to expand the school campus, but an investigation by the Philadelphia Inquirer revealed the fair market value was just $4.5 million, and critics accused board members of paying an inflated price to shield well-connected investors from certain loss.
The state attorney general's office concluded that the purchase price was consistent with the property's fair market value.
As part of the agreement, Kane said school managers may no longer serve simultaneously on the boards of The Hershey Company and the Hershey Entertainment and Resorts Company.
In addition, no more than three school managers may serve simultaneously on the board of directors of The Hershey Company, and no more than one may serve on the board of the Hershey Entertainment and Resorts Company at the same time.
To address concerns over compensation Hershey Trust board members can receive for their service, Kane said an independent consulting firm formulated new and reduced levels, which are on the "low end" of compensation paid by similar institutions.
Any future adjustment to compensation levels will result from a pay study conducted by an independent consultant selected by the Hershey Trust Company with input from the state attorney general's office, she said.
Hershey Trust Company has additionally adopted a new conflicts of interest policy that requires directors to disclose "all actual or potential conflicts of interest" with the company or the school, and the policy cannot be modified or amended without the prior written approval of the state attorney general's office, Kane said.
In addition, Milton Hershey School and Hershey Trust Company are required to provide written notice to the attorney general's office at least 30 days before any real estate transaction involving either a lease of three or more years or more than $250,000 of consideration.
Hershey Trust Company will also implement a travel and expense reimbursement policy that ensures board travel, meeting and entertainment costs are carefully controlled and documented, according to Kane, who said the policy mandates the use of "coach class" for all air travel.
Kane said her office will receive annual written reports on Hershey Trust Company's compliance with the terms of the agreement.