Shaking the foundation: Fighting for access to university nonprofit foundations

Schuyler Kraus has spent seven months battling the University of Kansas for public records from the university’s nonprofit foundation. The documents, which the university said would come with a $1,800 price tag, could connect the director of KU’s Center for Applied Economics with libertarian billionaires David and Charles Koch.

Kraus, president of KU’s Students for a Sustainable Future, said her group raised $1,800 to foot the bill for any contracts between the Kochs and KU. They ran into another roadblock, however, when economics department director Art Hall sued the university to keep the records private.

The student group would need $35,000 in attorney fees to fight Hall’s suit, an amount they were able to raise through an online fundraising campaign. Now, Kraus says, the group has begun a months-long legal battle that may continue after the funds run dry. (Since this article was originally published in the spring edition of the Report, KU has released a limited number of the documents in a settlement.) 

SSF is one of several groups at campuses across the country questioning the extent of donor influence on their campus, and wondering if evidence exists in university contracts and gift agreements, fighting for records from their university’s nonprofit foundations. 

Public, taxpayer-funded colleges and universities create foundations to handle donations that create scholarships, raise money for programs and build memorial funds, among other things. Whether an institution’s foundation is subject to public records laws varies from state to state and sometimes from case to case. 

While public institutions argue in favor of respecting donors’ privacy, this secrecy can create opportunities for abuse.  

Six East Stroudsburg University graduates filed a lawsuit against the former university foundation director Isaac Sanders in 2009, alleging he sexually abused them after using university foundation money to ply them with scholarships, campus jobs and gifts, The Pocono Record reported.

And in 2011, The University of North Carolina’s John William Pope Center for Higher Education Policy, named for the father of major donor Art Pope, issued a report arguing that university donors should have a bigger say in how their money is used.

The report, “Games Universities Play: How Donors Can Avoid Them,” advises donors not to give unrestricted funds, to give specific instructions along with each gift and to give annually, rather than committing to multi-year donations, in order to ensure that the money is being spent properly.

“It is usually the case that the universities wish to untie or eliminate the strings donors have carefully attached to their gifts,” according to the report. 

What is a university foundation?

Most public colleges and universities set up foundations to handle a variety of functions from fundraising to alumni outreach to scholarship creation. These foundations can handle millions of dollars each year, and as news stories surface detailing misuse or abuse of funds, college communities question how their foundations are spending money. 

Because public institutions are state entities, they manage donations – monetary or otherwise – through 501c nonprofit foundations. Donors’ gifts to the school become tax-deductible charitable contributions, incentivizing donations further.

Private schools, which don’t receive taxpayer money, are able to receive donations directly and with minimal disclosure.

As non-profit entities, whether a foundation is required to make all of its records public depends on state public records laws, how the state defines “public body” or “public agency,” as well as how closely the foundation works with its college or university.

Colorado, Georgia, Minnesota and Nevada all have state laws dictating which foundation records should be disclosed, but most allow exemptions for donor lists. Nevada’s is the only public records law that does not allow any exemptions for foundation documents. 

Foundations are free to disclose more than is required by law, but many refuse to divulge more than the state-required minimum. Most states allow exemptions for certain records, usually including donors’ names. 

But because nonprofits are required to make their tax returns public, the community can access their IRS Form 990s to find out how foundations raise and spend money, said Harvey Dale, director of the National Center on Philanthropy and the Law at New York University.

Some institutions’ foundations issue annual reports, which are easily accessible with a Freedom of Information request, Dale said. 

Examples of donor influence

The majority of donors gifts’ don’t come with terms, Dale said. Some donors may require the gift to fund a scholarship or a specific program, but many gifts come in undesignated. 

But it isn’t unheard of for donors to expect something in exchange for their generosity, even if there isn’t a written agreement. In January, a former professor sued the University of Illinois over his firing as a tenured professor in the American Indian Studies program after he spoke out against Israel’s Gaza bombing last summer. 

Steven Salaita’s suit includes a claim against a handful of university donors who, in an email chain obtained through a public records request, warned they would discontinue their funding if Salaita wasn’t fired for his anti-Israel remarks. 

And in 2011, a donor asked the University of Connecticut for a $3 million refund because the institution didn’t consult him in their search for a new football coach. 

Donors sometimes give schools money for teaching certain curriculum or promoting specific ideas. In May 2011 Bloomberg reported that John Allison, a former chairman of BB&T banking, had used the company’s foundation to set up a grant  – up to $2 million – for schools interested in teaching a course on capitalism with “Atlas Shrugged” as required reading. At the time, at least 60 schools, four of them University of North Carolina campuses, had chosen to accept the grants. 

Situations like these are exactly what student-led movements like UnKoch My Campus aim to eliminate, as they raise awareness about roadblocks the public runs into navigating the grey area in many states’ public records laws. 

A piece of the bigger picture

KU is only one campus with an incarnation of the UnKoch My Campus movement, a student-led effort rallying students and faculty members to demand transparency and accountability on college campuses. 

The Koch brothers, who are among the nation’s largest donors for conservative causes, fund six charitable foundations to support higher education. In 2012, just two of these foundations provided colleges and universities with more than $12.7 million. 

Their funding for higher education, according to a report by The Center for Public Integrity, has helped pay for academic programs that “reinvigorate the teaching of America’s founding principles and history,” 

The billionaire Koch brothers are known for advancing their libertarian, deregulatory political ideology with millions of dollars in donations to politicians, nonprofits and colleges. 

The Kochs aren’t the only billionaires financing academic research and programs. Democratic billionaire financier George Soros has set up several foundations to funnel tens of millions of dollars into higher education, both in the United States and overseas, according to The Center for Public Integrity’s reporting. 

Soros and the Kochs join the ranks of many well-connected million- and billionaires who make a point to donate substantial amounts to causes where they hope to attain some influence, whether it be higher education or political campaigns. 

As of April, nearly 250 colleges in the United States had Koch-funded programs, according to The Koch Family Foundations website. The Kochs have been known to request some influence over hiring decisions along with their grants, creating debates about whether schools should accept their money. 

Students at colleges where donors wield millions of dollars worth of influence often question how the money is being spent and what effect it could have on the campus community, Kraus said, and so, UnKoch My Campus is about more than just David and Charles Koch. Members hold the billionaire industrialists up as an example of the dangers of donor influence, and at KU, many of the newest members are law and graduate students, pushing back against the “corporatization of higher education” – the increasing reliance on donations to fund academic endeavors. 

Kraus said many students believe that opening university foundation records to the public is an important first step in raising awareness about the circumstances that drive universities to seek financial benefactors and separating public education from privatization.

“I think that lawsuit is a little piece of the bigger picture,” Kraus said.

Behind UnKoch

In 2011, some students and faculty of the Florida State University became outraged when two FSU professors published an editorial in the Tallahassee Democrat, criticising a 2008 agreement between FSU and the Charles Koch Foundation: in exchange for $1.5 million in funding, the Kochs received control over FSU’s economic department’s hiring decisions.

The story gained national attention as the FSU Faculty Senate recommended Koch contract revisions and concerned students formed the Florida State Progress Coalition, which pushed for more transparency and accountability. 

Students at other universities, including George Mason, Suffolk and the University of Kansas, fearing donor influence on their campuses, launched their own awareness campaigns and submitted records requests to their university foundations, demanding to know more about how their programs were funding. The UnKoch My Campus movement was born.

Just miles away from the nation’s capital, students at Virginia’s George Mason University have been pressuring the administration for information about the campus’ two Koch-funded think tanks since August 2014.

Sam Parsons, a member of Transparent GMU’s organizing team, said the university’s president has refused to sit down with the group to address their concerns and attempts to request records of the university have been futile, because the university handles donations through a 501c nonprofit.

Transparent GMU has been able to identify some donor information through the foundation’s tax returns, which all nonprofits are required to make public, Parsons said, but the tax return doesn’t include information about the foundation’s grant agreements or any conditions that might come with the Koch’s funding. 

The organization, which was denied public records for the university foundation’s grant agreements and contracts, has been asking GMU president Angel Cabrera for a meeting since fall 2014, using an online petition to gather signatures from the community. 

Before winter break, the group delivered 292 candy canes – one for each petition signature – to Cabrera’s office, along with a handmade sign declaring, “All we want for the holidays is a meeting with you.” 

But Cabrera ignored their requests, Parsons said. 

Should colleges rely on donations?

Private universities have relied on fundraising for centuries, but public institutions only began soliciting alumni contributions about 50 years ago, said Noah Drezner, an associate Professor of Higher Education at Columbia University’s Teachers College, whose research focuses on college and university philanthropy and fundraising. 

As states allocate less and less money to higher education, schools are forced to rely on tuition dollars and donations to fill funding gaps, Drezner said. Without donor funding, schools would have to charge higher tuition rates.

Despite donors’ prevalence in higher education, most aren’t seeking academic or institutional control, Drezner said. Donors and institutions often draw up a written gift agreement, which is typically inaccessible through public records.

But the particulars of a typical gift agreement are usually “pretty bland,” including how much money would be paid over how many years as well as an out clause, he said.

“I don’t think there’s a lot of negative donor influence on institutions,” he said. “Generally, situations like the Kochs’, where donors specifically spell out conditions in a written contract, are far outside the norm.”

Dale said nonprofit foundations choose protect donor anonymity, not releasing donor lists or disclosing gift agreements for a variety of reasons. 

If a donor wishes to remain anonymous, Dale said, releasing the donor’s names and gift amount might open wealthy donors up for solicitation, putting a chill on giving. 

And requiring nonprofits to release donor information could create problematic consequences for some donors, he said, citing the 1957 NAACP v. Alabama precedent. In order to deter potential donors from giving to the NAACP, the state of Alabama required the organization to release its donor lists – an action the Supreme Court held violated donors’ right to freedom of association. 

Looking ahead

At some institutions, friction between the foundation and its community members has resulted in a call for action. The Louisville Courier-Journal reported that news of multimillion-dollar deferred compensation packages from the University of Louisville Foundation to President James Ramsey and his top employees has two trustees insisting that the foundation should be absorbed into the university. 

University oversight of the foundation, which operates independently, would create more transparency and financial accountability, the trustees argue. 

Kalin Jordan, a grassroots organizer for UnKoch My Campus, said she hopes to see policy changes, like the one proposed at Louisville, at colleges and universities across the country.

And although she said she isn’t sure what the policy change will look like yet, she hopes records will become more accessible for individuals demanding accountability. 

Although each campus’ UnKoch movement looks a little different, Jordan said each is built around the same common goal: transparency, not just for information about the Kochs, but for all donors. She said she hopes students will question the source of their school’s funding and be mindful of donor influence, regardless of whether it is Koch-affiliated.

Jordan said social media has played a big role in students’ transparency campaigns, allowing them to reach national audiences, and raising awareness among alumni and local communities. 

From KU’s crowdfunding efforts to online petitions, like one Transparent GMU launched, to Facebook and Twitter pages, Jordan said social media plays a huge part in rallying the community and putting pressure on administrators. 

“Students pay to go there,” Jordan said. “As shareholders, they have the right to ask questions and the right to get answers.”