University foundations are non-profit entities that receive donations from private citizens and corporations to benefit the public, taxpayer-fundedschools with which they are associated. Over the years, many university foundations have grown into multi-million dollar organizations tasked withseveral fundraising missions: raising money for new or existing academic programs, alumni activities, scholarships, memorial funds, fellowships, endowedchairs, internships and the construction or renovation of university facilities. They may also accept gifts-in-kind, such as art objects, equipment foruniversity use, securities, real estate andtrusts.[1]
How this money is raised and how it is spent can play an important role in shaping universitypolicies and student life and students, taxpayers and donors often relying on the news media all have a keen interest in tracking afoundation’s activity.
While foundations have undeniably benefited the universities they support, recent scandals have highlighted the need for morevigilant public scrutiny. The Atlanta Journal-Constitution, for example,reported in January that University System of Georgia Foundation donor lists’ which were disclosed only after a legal battle revealed that theuniversity awarded companies lucrative contracts after they made large donations to a fund that supplemented the university chancellor’s salary.[2] At Iowa State University,it was learned after an independent audit in 1999-2000 and considerable public pressure that the ISU Foundation was still paying a formerfootball coach, who resigned in 1994, over half-a-million dollars a year as part of a deferred compensation contract payable over 20 years. (While actually employed by the university, the coach’s annual salary was $111,197.[3]) At Florida AtlanticUniversity, a 2003 investigation revealed that its foundation had set aside $42,000 to purchase a red Corvette for the school’s outgoingpresident.[4] And at Bowie StateUniversity in Maryland, The Washington Post reported that an annual audit discovered that its foundation had, among other things, spent its money to fund a cruise for foundation employees and donors and purchased two Washington Redskins football team season tickets for foundation employees.[5]
Despite such incidents, it can sometimes be difficult to obtain information about foundation donors and expenditures. In recent years, as foundations’ assets have swollen and their influence upon university policy and practice has become more pronounced, disputes between those seeking information about a public university’s foundation and foundation officials struggling to maintain secrecyhave become increasingly common.
State open records laws that require public universities to disclose their records do not always apply in the same way to their “private” foundations, leaving large areas of a public university’s spending and fundraising free from public oversight.
Whether university foundations are extensions of public colleges and universities and therefore subject to state open record laws or more similar to private, non-profit corporations which are not subject to these laws is ahotly contested issue.
STATE OPEN-RECORDS LAWS
The applicability of a state open records law to a public university foundation frequently turns on the precise wording of the statute and itsdefinition of what constitutes a “public body” or “public agency” covered by the law, which can vary by state. Whether a university foundation is subject to open records laws turns, in large part, on its relationship with the university; the closer the relationship, the more likely it is a foundation will be subject to state sunshine laws.
In determining the applicability of a state’s open records law to a public university foundation, the following factors are among those that may influence a court’s decision: 1) whether the foundation shares the same directors with the university, 2) whether it uses university employees, 3) whether it uses university property or resources, 4) whether it receives state funds and 5) whether it is responsible for managing university assets. Unfortunately, courts have ranked the relative importance of each factor differently and one judge’s analysis may not prevail in a neighboring jurisdiction. Moreover, as noted above, foundations have’ not surprisingly tended to fiercely guard their ability to secretly collectand allocate their funds and many have worked hard to organize themselves in a manner calculated to avoid having to comply with various public disclosure laws.
Even if a foundation is covered under an open records law, the foundation may not have to make all its records public. For example,donor lists can sometimes be kept secret even if disclosure laws apply generally to university foundations. Some states, such as Indiana, South Carolina and Washington, have laws exempting disclosure of the identity of a donor of a giftmade to a public agency if the donor requires that as a condition of making the donation.[6] Many other states haveexemptions in their open records laws that protect individuals from unreasonable invasions of their privacy. University foundations have frequently argued that disclosing the names of donors would violate such provisions and potentially dissuade some contributors. In response, journalists must convince a court thatthe benefit of disclosing donor lists and the public oversight of a foundation’s fundraising activities outweighs the privacy rights of donors and any chilling effect on donations.[7]
OTHER SOURCES OF INFORMATION
Because getting information through an open records law can be costly andtime consuming if a foundation is uncooperative, it is useful to identify othersources that may provide information on university foundations. First, manystates require that non-profit corporations submit an annual report givingdonors an idea of how foundation money is spent and raised. Such reports shouldbe fairly easily obtained from the foundation, with many even making themavailable through their Web site. Second, the federal government requires thatnon-profit organizations make their tax returnspublic.[8] An IRS Form 990 and thesupporting schedules that go with it disclose a wealth of information, much ofwhich may be of interest to campus journalists. The form can be obtained eitherthrough the IRS or inspected on the organization’s premises.Alternatively, Guidestar.com maintains a free, online database that includesrecords (often including the Form 990) and information about more than onemillion nonprofit organizations in the United States, including most universityfoundations. Third, where university foundations receive state money, there maybe state auditor reports that provide a detailed account of university finances.To find out if such reports are available for your school’s foundation, checkwith your state auditor’s office. Finally, foundation records are sometimes alsoin the possession of the public university it benefits. When this occurs,student journalists should simply request the documents directly from the schoolsince its status as a “public body” subject to the open records law cannot bedisputed.
STATE-BY-STATE GUIDE
Unfortunately, alternative sources are sometimes inadequate to thoroughlyinvestigate a foundation and it is necessary to seek more detailed records fromthe foundation itself. The following contains a summary of various states’statutes, court decisions and attorney general opinions that have addressed theissue of their open records law’s applicability to public universityfoundations.
If your state is not mentioned, it is likely that the issue hasnot yet been specifically addressed. In such cases, you should first look toyour state’s open records law to find its definition of a “public body.” Next,investigate and identify any connections between the university and foundation.Finally, familiarize yourself with cases and scandals in other states. This canhelp bolster your argument that there are good public policy reasons why a courtshould favor disclosure.
State Laws
Some state legislatures have addressed the issue of whether their openrecords law applies to public universities.
Colorado: Financialexpenditure records of university foundation records are subject to the openrecords act. Names or other identifying information about specific donors andthe amounts of donations areexempt.[9]
Georgia: TheGeorgia legislature has passed a bill making donor names non-public informationunless the donor has done business with the university within three years of thedonation. The governor is expected to sign thebill.[10]
Minnesota: InMinnesota the names and gift ranges of donors to public university foundationsare public information.[11] However,other information related to fundraising, including the specific amount of adonor’s gift, the dates of the gift, letters from donors, research informationabout prospects and donors and donor financial or estate planning information isexempt.
Nevada: In Nevada, university foundations are subject to openrecords laws.[12]
Court Decisions:
Records Disclosed
California: In California State University, Fresno v. McClatchyCo., a California court of appeals found that a non-profit,university-affiliated corporation (not the university’s foundation) that helpedraise money for California State University was not subject to the state’sopen record laws.[13]
Theuniversity, however, admitted that it was in possession of the documents soughtby the Fresno Bee. The court held that because the university’which was a state agency had the documents and they related to theconduct of public business, they were public records subject to theCPRA.[14]
The court also ruledthat the interest in the public knowing if a donor “gained an unreasonableadvantage at the expense of public dollars” outweighed any harm ofdisclosure, especially because the university did not present credible evidencethat donations were conditioned onanonymity.[15]
Florida:In Palm Beach Community College Foundation v. WFTV, the court ruledthat a college foundation was a state agency and its records subject to statepublic records law.[16] Florida lawrequires disclosure of public documents from state agencies and defines the termagency broadly to include a “corporation, or business entity acting onbehalf of any publicagency.”[17] The foundationdid not contest that it was a state agency and subject to Florida’s openrecord laws but unsuccessfully argued that it did not have to disclose theinformation pursuant to an exception to the law that has since beenrepealed.[18]
Iowa: InGannon v. Board of Regents of the State of Iowa, the Iowa Supreme ruledthat the Iowa State University Foundation was subject to the state’sFreedom of Information Act.[19] Because the foundation raised money for the university and managed funds on itsbehalf, the court found the university was contracting with the foundation toperform a government function.[20] In ordering the foundation to disclose its records, the court noted”[s]uccessful fundraising and management is a very important, if notvital, function of the modern university and an integral part of its continuingviability.”[21]
Kentucky: In Univ. of Louisville Found. v. CapePubl’ns, a Kentucky appellate court found that the University ofLouisville Foundation was covered under the Kentucky Open RecordsAct.[22] The court first looked tothe text of the Open Records Act, which defines “public agency” inpart as an entity “created, and controlled by a publicagency.”[23] After findingthat the foundation was created by the University of Louisville, a state agency,the court then examined whether it was controlled by theuniversity.[24] On one hand, thecourt noted that directors who were not part of the university controlled thefoundation board. However, the record also showed that the state gave money tothe university through the foundation. The court also found that “for thepurposes of soliciting contributions, the University and Foundationsact asone.”[25] Finally, the courtfound that the foundation acted as “custodian and administrator” ofgifts given to the university and was required to act on behalf of theuniversity in carrying out its duties. Considering the above, the court ruledthat the foundation was controlled by the university and thus subject to thestate’s Open Records Act.
The court then ruled that the Act’s privacyprovision did not create a blanket exemption for donor names. Rather, the courtheld that corporate donors’ names could be excluded on a case-by-casebasis if their privacy interest outweighed the policy for public disclosure andopenness.
It is worth noting that this case, decided in 2004, followed asimilar ruling by the Kentucky Supreme Court about a decade before that KentuckyState University’s foundation was covered under the state open recordslaw.[26] The validity of that rulingwas challenged, however, after state lawmakers changed relevant provisions ofthe open records law.[27]
Michigan: In Jackson v. Eastern Michigan Univ. Found., the court held that the foundation was a “public body” subject to the state’s Freedom of Information Act (FOIA).[28] Under FOIA, a “publicbody” is defined, in part, as including: “[a]ny other body which is …primarily funded by or through state or localauthority.”[29] The courtfound that in 1992, the university transferred $7.7 million into the foundation,which constituted a majority of its funds at thetime.[30] Therefore, the courtfound, the foundation was a public body because it was primarily funded throughthe university.
Ohio: In State ex. rel. Toledo Blade Co. v.Univ. of Toledo Found.,[31] the Ohio Supreme Court ruled thatthe University of Toledo Foundation was subject to Ohio’s open recordslaw.[32] The court held that thefoundation was a public entity because it exercised a government function: itwas responsible for “the solicitation and receipt of donations for theuniversity, and keeping records of theactivity.”[33] The courtfurther held that there was a “significant public interest in knowing fromwhom donations come and how that relates to where the university, as a publicinstitution, chooses to spend itsmoney.”[34] Finally, inordering that donor names also be disclosed, the court noted that thelegislature did not create a privacy exception to the state’s open recordslaws and it refused to create a common law exception.
South Carolina:In Weston v. Carolina Research and Development Found., the SouthCarolina Supreme Court held the university foundation was subject to the SouthCarolina Freedom of Information Act(FOIA).[35] The Act defines a publicbody, in part, as “any organization, corporation, or agency supported inwhole or in part by public funds or expending publicfunds.”[36] The court listedfour transaction showing the foundation was supported by public funds and thussubject to FOIA: 1) the foundation received part of the proceeds when theuniversity sold a hotel; 2) the foundation accepted federal grant money to helppay for the construction of a university building, using university employees tohelp carry out the project; 3) the foundation accepted grants and real estatefrom South Carolina cities to build another university building; and 4) thefoundation kept a portion of proceeds derived from research contracts withuniversity employees.
Records Not Open
Indiana: In State Board of Accounts v. Indiana Univ. Found., a state appellate court ruled that the IU Foundation was not a”public agency” covered by the Indiana Public RecordsAct.[37] However, the court left thedoor open for future arguments that the Act applies to universityfoundations.[38] The term “stateagency” in the Public Records Act has many definitions, including one thatdefined a state agency as any entity that is subject to an “audit by thestate board of accounts.”[39] The court ruled that the foundation was not subject to the board’s auditauthority and therefore did not fall under this definition of “stateagency.”[40] However the court didnot rule on whether or not the foundation was a state agency under otherdefinitions in the Act. Among those is a provision that more broadly defines a”state agency” as any “board, commission, department, division, bureau,committee, agency, office, instrumentality, or authority…exercising any part of the… administrative … power of thestate.”[41]
Louisiana: Louisiana courts have created their own legal jambalaya intrying to sort out whether university foundations are subject to the state’sopen records law. In State ex rel. Guste v. Nicholls CollegeFoundation, the Supreme Court of Louisiana said it needed more informationbefore it could determine whether or not the Nicholls College Foundation was apublic body, but it did rule that the foundation possessed at least some publicrecords that could be examined under the Public Records Act.[42] The court held that recordspertaining to the expenditure of funds contributed to it through the NichollsState University Alumni Federation were public as they were distributed underauthority of state law.[43] However,funds that the foundation received from other sources such as privatedonations, which constituted the bulk of its assets were not deemed tobe public.[44]
While the stateSupreme Court declined to answer whether or not the foundation was a publicbody, a year later a state court of appeals determined that the foundation was a”private corporation not subject to the Public RecordsAct.”[45] Most of the evidencepresented in the case focused on the foundation’s receipt of unsolicited statefunds. Unfortunately, that was not enough, as the court eventually ruled thatthere were not sufficient connections between the foundation and the universityto establish the foundation as an “instrumentality ofstate…overnment.”[46] Ascommentators have noted, the decision “underscores the need for requesters tomake clear the nexus between university foundations and the universities theyserve in more than purely financialterms.”[47]
West Virginia:In 4-H Road Community Association v. West Virginia University Foundation,the Supreme Court of West Virginia held that the foundation’s financial activitywas not subject to the state’s Freedom of Information Act(FOIA).[48] The Act covers any”body which is created by state or local authority or which is primarilyfunded by the state or localauthority.”[49] The courtfound that, for a variety of reasons, the foundation did not fit this definitionand thus was not subject to the Act. First, the court noted that the foundationwas not funded with public money. It did not hold any university funds, onlydonations made directly to the foundation. It was not located on state property.Nor did it utilize state employees. Second the court found that the foundationwas not created by state or local authority but rather chartered as a non-profitcorporation by private citizens.
Attorneys General Opinions
While attorney general opinions are not binding on state courts and do nothave the force of law, they can prove influential to judges and foundationofficials.
Arkansas: In 1988, the state Attorney General ruled thatthe Razorback Scholarship Fund was no longer subject to the state freedom ofinformation following operational changes which resulted in the foundation nolonger relying on public facilities, personnel or equipment to accomplish itsgoals.[50]
Georgia: InFebruary 2004, the Georgia Attorney General sent a letter to the University ofGeorgia Foundation warning that its board of trustees violated the state’s openmeetings law when it entered into private sessions to discuss issues related tothe compensation of the University of Georgia’s president. The foundationsubsequently agreed to conduct its meetings in accordance with the Open MeetingsAct.[51]
Iowa: In 1978,the state Attorney General ruled that a university foundation was covered underthe state’s open freedom of information laws because it was “designated bythe Board of Regents to act in the place of the Board in the acceptance oradministration of trusts.” The attorney general noted: “In suchsituation, the foundation takes on the character of governmental entity andaccordingly, it is subject to the open meetingslaw.”[52] As discussed above,the Iowa Supreme Court reached a similar result in 2005.
Oklahoma:The Oklahoma Attorney General issued an opinion stating that the “identityof donors who make donations to the public body through a foundation”could be keptconfidential.[53]
Texas:The Texas Attorney General ruled that a university could not keep donornames secret. However, the opinion did not address the issue of whether or not afoundation was subject to the state’s open recordslaw.[54]
Conclusion
University foundations have become an integral part of nearly every public college or university’s fundraising campaign. Millions ofdollars have been contributed sometimes secretly and spent also sometimes secretly purportedly to benefit the school’s to which they are tied. Not surprisingly, as their assets have grown so has their influence over the university’s policies and practices. And so, too, thelikelihood that the foundation may seek to do in private what the university itself could not or would not dare do in public. In recentyears, the positive contributions made by some foundations have beenovershadowed by charges of scandal and abuse.
Courts and others have often but not always seen public university foundations for what theyare: public bodies cloaked in a thin private veneer. And they have ruled thatfoundations, no matter how they describe themselves, must comply with a state’spublic disclosure laws. Yet, in an attempt to maintain their veil of secrecy, foundations have become increasingly adept at devising organizational structures more likely to avoid public scrutiny. It is something of a game of cat and mouse. But as has been made evident by the growing number of scandals involving university foundations, it is a game that journalists particularly student journalists and more importantly, the public they represent, can ill afford to lose.
Endnotes
1 Donald L. Lemish, Establishing a University Foundation (American Assoc. of State Colleges and Universities)(1989).2 “It’s higher learning, not learning for hire; Corporate cash compromises the public purpose of the University System of Georgia Foundation,” The Atlanta Journal-Constitution, Jan. 2, 2005, at 14D.3 See Liz Allen, ‘ISU Foundation audit includes Walden’s pay,’ Ames Tribune, March 6, 2001, A1.4 Fred Grimm, ‘Catanese affair suggests a new FAU nickname,’ The Miami Herald, Sept. 30, 2003.5 Amy Argetsinger, ‘Audit at Bowie State finds extravagances,’ The Washington Post, August 29, 1998, 1D. See also Charles Davis and Scott Reinardy, University of Missouri, A Real Home Field Advantage: Access to Public University Foundation Records, paper presented at AEJMC Conference, Toronto, Canada, August 2004, which provides more information on all of the controversies mentioned here ‘ and several others ‘ involving university foundations, as well as an excellent analysis of current law and a look at arguments for and against more public disclosure.6 Ind. Code Ann. Sec. 5-14-3-4 (b)(15) (Burns 2004.); S.C. Code Ann. Sec. 30-4-40 (a)(11) (Law. Co-op. 2004); Wash. Rev. Code Ann. Sec. 42.17.315 (2005).7 In fact, Davis and Reinhardy point out that the available evidence actually contradicts such a “chilling effect,” with donations to foundations actually increasing following court rulings in Ohio and Michigan that required foundations in those states to provide greater public access. Id. at 38-39.8 See 26 U.S.C. 61049 Colo. Rev. Stat. Secs. 24-72-202(a)(IV) and (6)(b)(enacted April 2005).10 See LEGISLATORS, page 32.11 Minn. Rev. Stat. Sec. 13.792 (2005).12 Nevada Rev. Statute Sec. 239.010 (2005).13 California State Univ., Fresno Assoc. v. Super. Ct., McClatchy Co., 108 Cal. Rptr. 2d 870 (Cal. 2001).14 Id. at 879-80.15 See McClatchy Co., 108 Cal. Rptr. 2d 870 at 886.16 See Palm Beach Community Coll. Found., Inc. v. WFTV, Inc. 611 So.2d 588, *589′(Fla.App. 1993)17 Fla. Stat .Ann Sec. 119.011 (West 2005)18 See WFTV, Inc., 611 So.2d at 589-90 (claiming exemption under law that made foundation information not necessary to public audits confidential).19 See Gannon v. Bd. of Regents of the State of Iowa, 692 N.W.2d 31 (Iowa 2005).20 Gannon, 692 N.W.2d 31 at 39.21 Id. at 41.22 See Univ. of Louisville Found. v. Cape Publ’ns, 2003 WL 22748265 (Ky. Ct. App. Nov. 21, 2003) (unpublished decision), review denied (Ky. Supreme Court May 12, 2004).23 Ky, Rev. Stat. Ann. Sec. 61.870(j) (2005).24 Cape Publ’ns, 2003 WL 22748265, at *5.25 Id. at *7.26 Frankfort Publ’g v. Kentucky State Univ., 834 S.W.2d 891 (Ohio 1992).27 See 1992 Kentucky Laws Ch. 163 (H.B. 106).28 Jackson v. Eastern Michigan Univ. Found., 544 N.W.2d 737 (Mich. Ct. App. 1996).29 Mich. Comp. Laws Sec. 15.232 (2005).30 Jackson, 544 N.W.2d at 738-39.31 See State ex. rel. Toledo Blade Co. v. Univ. of Toledo Found., 602 N.E. 2d 1159 (Ohio 1992).32 Ohio Rev. Code Ann Sec. 149.43(B) (West 2005).33 University of Toledo Found., 602 N.E. 2d at 1163.34 Id.35 See Weston v. Carolina Research and Dev. Found., 401 S.E. 161 (S.C. 1991).36 See S.C. Code Ann. Sec. 30-4-20(a).37 State Bd. of Accounts v. Indiana Univ. Found., 647 N.E.2d 342 (Ind. Ct. App. 1995).38 See Id. at 355 n.6 (holding that the IU Foundation may be a state agency under a definition of the term not litigated).39 Ind. Code Sec. 5-14-3-2.40 See Indiana Univ. Found., 647 N.E.2d at 354.41 See Ind. Code Sec. 5-14-3-242 State ex rel. Guste v. Nicholls Coll. Found., 564 So.2d 682 (La. 1990).43 Id. at 689,44 Id.45 State ex rel. Guste v. Nicholls Coll. Found., 592 So.2d 419 (La. App. 1 Cir. Nov 22, 1991), writ denied, 593 So.2d 651 (La. Feb 07, 1992).46 Id. at 421.47 See Davis and Reinardy, at 27.48 See 4-H Road Cmty. Assoc. v. West Virginia Univ. Found., 388 S.E.2d 308 (W. Va.1989)49 W. Va Code Sec. 29B-1-2(3) (2005).50 Op. Ark. Att’y Gen. No. 88-004 (January 13, 1988).51 University foundation agrees to operate in the sunshine, SPLC Report (Spring 2004), p. 23.52 978 Iowa Op. Atty. Gen 369.53 Okla. Att’y Gen. Op. No. 02-027 (2002).54 Tex. Att’y Gen. Op. No. 590 (1991).