Posted September 25, 2009
1. Relationship Between UConn and The Foundation
Since 1994, the University and the Foundation have established a fee-for-service partnership, secured by an annual Memorandum of Understanding, which stipulates that the Foundation will conduct private fundraising on behalf of UConn.
This is a long-standing, perfectly legal, common practice at UConn and most other major public universities. A 1995 State Attorney General’s Opinion confirmed that the University's Board of Trustees has the authority to enter into contracts to aid the performance of its mission. And that “(i)t is equally clear that the University's Board may retain a contractor (in this instance, the Foundation) to provide fund-raising services and the University may pay the Foundation for its fund-raising services."
A 2006 survey by the Council for the Advancement and Support of Education (CASE) determined that 35 percent of public universities had similar fee-for-service contracts with their privately held foundations. (It is worth noting that at a great many more institutions the fundraising staffs are employed by the university, whereas at UConn these costs are borne by the Foundation.)
In order to receive funding from UConn, the Foundation is required to raise substantial amounts of money to return to the University. Since 2000, UConn has provided roughly $52 million in funding to the Foundation to support fundraising operations; during this same period, the Foundation has raised $536 million from private sources for direct operational and endowment support at the University. This is a greater than 10:1 return on the University’s investment in the Foundation.
2. Source of University Funds to Support the Foundation
NO state appropriations—taxpayer dollars—go from the UConn operating fund to the Foundation. The funds that go to the Foundation are from the operating fund, but they are made up of non-appropriated money, not state dollars.
3. Benefits to the University
The partnership holds extraordinary financial benefits for UConn. Investing $52 million in the Foundation and receiving $536 million back over the same period of time is a very wise and profoundly advantageous investment for UConn to make. The real beneficiaries are the students and the faculty. Due to declining state budget support nationwide, our public universities depend increasingly on the ability of their foundations to carry out their missions. The UConn Foundation has been and will continue to be an extremely productive partner for the University. Its Board of Directors includes many of the University’s most successful graduates, who are also our major donors. It is a private corporation, but it is totally dedicated to UConn.
4. Why Doesn’t the Foundation Pay Its Administrative Costs from the Money It Raises?
When people donate, they are donating to the University through the Foundation—not to the Foundation itself. Normally, they donate for a specific purpose. For example, if someone donates $10 million and they specify that they want it go to a particular UConn scholarship, the Foundation must restrict that funding for that specific scholarship—the Foundation cannot spend it on their own operating costs, since that wasn’t what it was donated for. So the millions the Foundation raises from donors is earmarked for UConn according to the specific wishes of the person who donated it. These gifts are considered to be restricted as their purpose.
5. Restricted vs. Unrestricted Gifts
The vast majority of gifts the Foundation receives are designated for specific purposes at the University. In fiscal year 2009, more than 99 percent of the gifts we took in were “restricted” by the donors to support a particular scholarship, faculty or program fund. The Foundation is required in all of these cases to honor the wishes of the donors. It cannot appropriate any of these restricted funds for the operating expenses of the Foundation, for example, or for any other purpose not in keeping with the specific provisions laid out by the donors when making their contributions.
6. Level of Public Disclosure
The UConn Foundation’s financial dealings are subject to public disclosure in the following ways:
- The Memorandum of Understanding between the University and the Foundation is signed by the President of the University, the Chief Financial Officer, the Chair of the Foundation Board of Directors, the Foundation President and the Executive Vice president of the Health Center. It is then sent for approval by the Attorney General’s Office in Hartford.
- The Foundation retains PricewaterhouseCoopers to conduct an annual, independent audit of all its financial matters; for the past several years there have been no negative findings in any of the audits. (Link: Audited Consolidated Financial Statements)
- The audit results are reviewed and approved by the President of the University and the Chief Financial Officer. The University is then required by statute to file a copy of the audit results with state auditors.
- The Foundation publishes an annual report that includes its audited financial statements and significant fundraising activities. It is available on the Foundation’s Web site.
- The Foundation is required under federal law to file a Form 990, which is a publicly available document.
- The Foundation Board of Directors executes its fiduciary responsibilities under the strictest of guidelines. Many members of the Board are Presidents and CEOs of major corporations who understand the need for transparent and ethical dealings in all matters so as not to jeopardize our status as a 501(c)3 non-profit corporation. Many also happen to be alumni and major donors to this institution.
7. Conclusion
All public and private universities raise funds from their alumni and friends, and every one of their budgets carries an expense for this purpose. Most public universities elect to delegate fundraising to their affiliated foundations—one of the reasons is in order to separate their gift assets (private funds) from their public assets (state appropriations). The institutions would not make these investments if they did not generate a reasonable return. And UConn’s $10 return on a $1 investment in the Foundation is excellent by any standard.
