University Foundations: A President’s Perspective
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At a time of reduced state support and questionable federal support, many colleges and universities turn to institutionally related foundations. A little-known entity in higher education, the foundation is separately chartered, and audited, to support the college or university but is not required to have overlapping governance. However, it is imperative that there be good communications between the governing board and the foundation board. The foundation should not operate outside the priority parameters of the governing board.
There are institutionally related foundations in two-year and four-year colleges and universities, and both public and independent institutions. Most, however, are related to public institutions.
Like other boards, the foundation board should have up-to-date by-laws delineating the role of the foundation, the method of electing members, and the guidelines of good governance. These include the duties of care in preparation, participation, and protection of institutional autonomy; loyalty to one institution at a time; and obedience to mission and charter. The boards are generally self-perpetuating in membership.
Often, a governing board member will serve as a liaison to the foundation board and vice versa. The president of the institution should serve ex officio on the foundation board and the executive director of the foundation is often the vice president for institutional advancement of the university.
The role of the foundation is to:
- raise and receive funds in support of the university's students, research, and learning environment
- manage the endowment in compliance with the Uniform Prudent Management of Institutional Funds Act, often via an out-sourced service
- issue bonds
- act as fiscal agent of government grants
- acquire real estate on behalf of the institution
- advocate for the institution and higher education at large
- communicate with the various constituencies of the institution
- assist the institution in strategic planning and marketing
- sponsor public-private partnerships
- serve as a source of members for the governing board and various advisory councils and review committees, among others.
Foundations raise funds from the institution itself, usually in the form of compensation for staff, unrestricted gift funds, investment revenue from unrestricted funds, management fees from endowed income and real estate, and gifts. College foundations raise funds through sponsored research grants; individual, corporate, and foundation fundraising; special events; and ticket sales.
Foundations are accountable to state and federal regulations, private donors, and the institution with which they are affiliated. They are susceptible to petitions for ESG investing and boycotting certain products and countries.
In summary, the foundation board serves as a trusted partner with the institution, an informed advocate, the philanthropic leader, steward of donations, manager of assets, and entrepreneurial agent.
There are three types of foundation boards based on their relationship to the institutional governing board and institutional resources. The "dependent" foundation relies upon institutional resources for operations, including salaries and benefits, HR, IT, legal, finance, and audit. The "independent" or autonomous foundation is financially independent of the host institution. The third model is the "interdependent" foundation which has at least one senior staff member wholly compensated by the foundation.
There are over 17,000 institutionally related foundations supporting schools and colleges in the United States. They vary in size from fewer than 10 employees to more than 1,000 but overall employ over 26,000 people. They have total assets of $169 billion. Nearly three-quarters have assets over $100 million. University foundations, including private ones such as Harvard Management Private Equity Corporation, tend to be the largest.
Institutionally related foundations are created to build the assets, such as endowments and real estate, of a college or university without commingling privately raised monies with state appropriated funds, federal grants, and tuition and fee revenue.
Unfortunately, university foundations are not exempt from scandal. Controversies usually involve:
- improper use of funds
- donor-foundation disputes over the investment and allocation of funds
- non-transparent support of the institution's president in terms of compensation, entertainment, and housing
- interference in university operations such as academic programming, student admissions, and athletics
- unbudgeted and excessive spending, among others.
I remember a time when a disgruntled former employee called the local newspaper to allege that I had misused college funds. I asked the board and foundation chairs to accompany me to the interview with the reporter covering the story. While I was told that this was unnecessary, I wanted all three to hear my side of the story -- which fortunately never appeared in print.
It is best practice for the foundation to be transparent in its relationship with the institution. Therefore, it is incumbent upon the parties to schedule periodic meetings with the leadership of both entities; communicate with all constituents, including faculty, staff, students, and parents; and determine who speaks for the institution in times of crisis.
Foundations can be valuable partners to affiliated institutions at all times, but especially when traditional sources of funding are problematic.
