Are Campus Foundations Playing a Shell Game?

BY MARTHA T. McCLUSKEY

This is a guest post by Martha T. McCluskey, a professor of law and William J. Magavern Faculty Scholar at the University of Buffalo. Her e-mail address is mcclusk@buffalo.edu. The views in this blog and related article do not represent any institution or group.

As public funding for higher education has declined, state colleges and universities have turned to affiliated foundations to generate revenue to fill the gap.  What could be wrong with foundations encouraging donors to take some of the burden off taxpayers and indebted students?  Plenty, when campus foundations are permitted to operate as “private” shields governing public academic resources with little transparency and oversight, as I discuss in an article in the January–February issue of Academe, “Following the Money in Public Higher Education Foundations.” A steady stream of news reports show widespread problems of affiliated foundation funding abuses in public higher educational institutions of all sizes and ranks in all regions of the country.  This seemingly “free” and “private” funding often comes at a steep public cost.

mccluskey-blogUnlike the standard nonprofit foundation, these campus foundations typically have an exclusive, inside, interdependent relationship with public academic institutions and especially with campus the public officials. This special access and influence means that campus-related foundations can become a conduit for diverting rather than contributing vital campus resources.  The problem is not individual bad actors. Instead, campus foundations will inherently invite abuse if structured to permit public academic funds to be raised, managed, borrowed, and spent under “private” non-academic cover insulated from standard rules for public and academic accountability.  The problem is exacerbated in recent years as many campuses have increasingly expanded foundations’ role far beyond handling donations and endowments to generating revenue from a wide range of sources, including non-degree educational programs, business enterprises (both on and off campus), and debt financing.

Campus foundation boards often include non-academic executives with business interests in campus spending, creating the appearance if not reality of self-dealing and conflicting interests. Without transparency and independent academic governance, conflicting interests of board members and donors risk eroding academic integrity and freedom as well.  Faculty and students at a number of campuses have mobilized against recent efforts by donors (such as Charles Koch) who seek to use the power of their ample purses to buy control over academic hiring, research or teaching.  But campuses effectively sell off academic independence and excellence when they allow their foundations to prevent scrutiny of strings attached to private funds.  Non-transparent “private” foundations may also more indirectly and insidiously compromise academic governance if they provide a system of non-transparent extra compensation and expense accounts available to reward public administrators and faculty without standard public or academic oversight, creating at least the appearance of cronyism and corruption.

A number of states have responded to scandals and concerns involving campus foundations by clarifying or changing their laws to require public transparency, typically with some provisions protecting legitimate privacy interests of individual donors. In other states, including New York, higher education leaders have repeatedly resisted such reforms despite experiences of alleged abuses leading to public investigations and leadership resignations. Our local AAUP faculty advocacy chapter, along with our faculty and professional staff union and the Faculty and Staff Senates, have unsuccessfully pressed for transparency in the University at Buffalo campus of the State University of New York (SUNY). In 2012, SUNY did take one important step forward by subjecting its statewide research foundation to open government laws after that SUNY foundation’s president was accused of funding a no-show job for the daughter of a prominent state lawmaker.  The question of extending transparency to SUNY’s many other affiliated foundations and other nonprofit entities is once again getting public attention, following the fall 2016 resignation of a prominent campus president facing criminal charges for using SUNY-affiliated nonprofits for an alleged political corruption scheme.

Instead of transparency and strong public oversight, it may be tempting for public academic institutions to cope with the risks of affiliated foundations by going further to insist that these nonprofit entities operate as “private” and “independent” organizations outside public and academic governance, perhaps in hopes that this will help decrease public academic responsibility for any misdeeds. But a private, non-academic cover does not change the reality that these entities are inevitably closely integrated with public academic institutions, with special influence over vital public resources and public officials. Given that the reputation, resources and authority of public academic institutions are inherently at stake in affiliated nonprofit entities, public higher education leadership and faculty owe a duty to students and to the public to take responsibility for overseeing the highest standards of integrity, openness and accountability in these entities.

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