Public Policy Influences on Public College and University Foundations

College and university foundations originally set up to provide an added margin of excellence for their host institutions have evolved into aggressive fund-raisers to support day-to-day operations and endowments. Their rise has coincided with cuts in government spending on higher education and with public demands for more accountability for officials entrusted with spending taxpayer dollars.

Because foundations sometimes can straddle the line between public and private, they occasionally encounter legal challenges from news organizations and interest groups seeking to make public their internal financial records. A growing body of case law has made it clear that foundations need to take prescribed steps to preserve their privacy and the sensitivities of their donors while retaining the public trust.

Some state legislatures have created statutes and policies that impose requirements on college and university-affiliated foundations in such areas as disclosure and operations. At the federal level, the trend is toward greater disclosure and increasing responsibility for foundations to keep clear records related to gifts, financial analysis, and financial reporting.

Campus-based foundations should heed new Internal Revenue Service regulations designed to deter nonprofits from overcompensating their executives. They also should be familiar with guidelines from accounting industry authorities that permit foundations to borrow the common business practice of pooling different types of assets for purposes of strategic planning.