Hasta la vista, transparency – Sen. Yee’s attempt at reforming university foundations falls victim to Terminator 2

True Movie Trivia Fact: Actress Linda Hamilton suffered lasting hearing impairment as a result of loud gunfire on the set while filming “Terminator 2.”

So perhaps this provides a medical explanation for the deafness of her co-star, California Gov. Arnold Schwarzenegger, who — for the second year in a row — has inexplicably vetoed (“terminated?”) a bill by state Sen. Leland Yee aimed at making university foundations accountable to the public.

California is the last state that should need reminding of the potential for abuse when foundations are inadequately monitored. The Santa Rosa Press Democrat won a first-place award from the Society of Business Editors and Writers earlier this year for its dogged coverage of dubious investments by the Sonoma State University Academic Foundation. The Press Democrat documented how SSU’s foundation board authorized millions in inadequately secured loans, most of them through an investment firm operated by a board of trustees member, who himself received a $1.25 million loan that he was unable to fully repay.

The author of those stories, Nathan Halvorsen, leads a 45-minute webinar about covering foundations, co-presented by the SPLC and ideal for college classroom use or self-study, that’s available for downloading here.

Yee, D-San Francisco, believed that the SSU matter made a compelling case for increased transparency in universities’ “secret governments.” But Schwarzenegger bowed to the foundations’ claims that disclosure would deter publicity-shy givers from donating (although there is no evidence that openness has slowed the pace of donations in Florida, Iowa, Nevada or any of the other states in which courts, legislatures or attorneys general have declared foundations to be covered by open-records laws).

SSU is not, by far, the only foundation where managers insulated from public oversight have mismanaged money intended to benefit education.

At Pennsylvania’s East Stroudsburg University, reporting by the Pocono Record during 2008-09 exposed discrepancies in the way the university foundation doled out scholarship money. The Record‘s reporting raised questions about whether the foundation’s former director – sued in February 2009 by six former students who alleged that the director pressured them for sex – used foundation money to cultivate inappropriate relationships with students.

A former University of Idaho administrator pleaded guilty to misuse of public money and was sentenced to probation in 2007 for his role in a scheme to use foundation money to prop up a financially troubled and mismanaged branch-campus expansion.

In light of these (and many more) scandals involving the mishandling of donors’ money, it is a testament to colleges’ political mastery that they can still convince legislators and governors to let foundations operate on a trust-me basis.

For a complete, handout-friendly guide explaining how to get IRS records and other financial information about the workings of university foundations, click here.