A Real Home Field Advantage: Access to Public University Foundation Records

Journal of Law and Education, Jul 2005 by Reinardy, Scott, Davis, Charles N

In 1998, an annual audit of the Bowie State University Foundation in Maryland discovered a rash of inappropriate expenditures, including a $31,513 bill to move the university's Office of Institutional Advancement to a different building on campus and purchase new furniture, artwork and equipment.20 Another was a $3,356 cruise arranged for foundation volunteers and major donors that was so poorly organized that few guests arrived and the tickets were instead given to students. Also, the foundation spent $5,312 on a reception to host the National Conference for Christians and Jews, $10,270 to host a local high school track meet, $5,757 to assist a faculty member publish a novel without receiving ownership rights or income from its sale, and funds provided to purchase two Washington Redskins season tickets for foundation officials.21 In two years, the foundation accumulated a $181,968 operating budget deficit, forcing it to borrow from endowment funds contributed to the university.22

When Maryland's Joint Audit Committee began drafting legislation that would allow auditors to examine university foundation records, university officials argued against the additional oversight, claiming the scrutiny might deter donors who have privacy concerns.23 In 1999, the Maryland Board of Regents adopted measures to ensure foundation funds were not being misused. Those measures limit the staff overlap between the foundations and their affiliated universities and improve the authorization and reporting of expenses. The foundations' records, however, remain closed to the public.24

Audits-by definition public records-often provide the only public glimpse into university foundations. A 2000 legislative audit by the State of Louisiana discovered that the Grambling State University Foundation had approximately $2.9 million available to be used for Grambling State University. The audit discovered that about $1.5 million clearly intended for the university was donated by the university to the foundation in violation of the Louisiana Constitution. Additionally, many of the funds were inappropriately distributed by the foundation. For instance, the foundation spent $1.25 million on its own administrative expenses, including $316,463 in payments to its executive director and $187,570 to support its sports bar and student housing operations. While the foundation collected nearly $1.4 million from private donations, only $580,540 was used for university scholarships, individual university departments or other university needs. More than $776,000 was transferred to the general operating account and used for administrative and operating expenses.25

Five years ago at Iowa State University, three women agreed to an out-of-court settlement in a sexual-harassment suit filed against Leonard Goldman, director of the Iowa State University Research Park, a nonprofit affiliated corporation of ISU. The state paid $157,000 to settle the case, and Goldman was awarded $200,000 in severance pay from the Research Park. The Research Park also paid the women's damages, but the information was never made public because of the private status of the Park. The information was later revealed by the independent audit of the Research Park.26