Possession Is Nine-tenths of the Law*

*Editor’s Note: This blog post is adapted from James H. Moore Jr., “Endowments in the 21st Century: Truths, Myths, and Emerging Issues,” in The New Realities for Public Higher Education Foundations, ed. Richard D. Legon (Washington, D.C.: AGB, 2020), 81–83.

Before focusing on the mechanics of how endowments work and why they exist, the most important agenda must be the alignment and understanding between the institution and the foundation about the ownership of the endowed assets. If an institutionally related foundation (IRF) was established, one of its primary purposes was likely to be the fiduciary custodian and manager of gifted assets. A service agreement or a memorandum of understanding between the host institution and the IRF covers this responsibility and duty. Foundation governance documents provide considerable guidance on investment policies, committees, and, more recently, donor intent and stewardship issues. Often, the issues that cause friction between the institution and the foundation are more fundamental misunderstandings about the core mission of the related organization and a lack of acceptance of the foundation’s legal authority over the management of the endowed funds.

Although all parties typically will acknowledge the related organization is a non-public body, and, as such, typically not governed by its host institution policies and related state laws and guidelines, in practice this bright line can sometimes dim based on the formal relationship between the institution and the foundation. Decisions related to the use and purpose of funds, fee structures, and investment strategies can become polarizing and toxic issues for university and foundation administrators and their boards. These issues can be further exacerbated if the host institution happens to manage its own endowment pool. (A word to the wise: Try to remedy this situation. If this is not possible, attempt to manage both pools in a like manner.)

The foundation and the host institution must always be mindful of their joint obligation to be effective stewards of the assets they have been trusted to manage and use appropriately over time.

Leadership on all fronts must fight the temptation to step over material governance and legal lines. The related foundation exists to support the host institution. Being separate from the host institution is an asset that most benefits the host college or university. However, the degree of separation is an important consideration. Personal agendas, egos, and priorities should never supersede the fact that what matters most is perpetual support and advancement of the university. Equally, the foundation and the host institution must always be mindful of their joint obligation to be effective stewards of the assets they have been trusted to manage and use appropriately over time. It requires clarity and work to sort through some of these potential hurdles.

A breakdown of trust between the leader of the college or university and the leader of the foundation never ends well. Administrators of both the institution and the IRF, and their respective boards, must always be mindful of their unified and singular purpose, especially as it relates to the endowment. Extraordinary effort by all parties is required to maintain a collaborative and transparent relationship. The behavior of leadership at the top can have a positive or negative impact on board, donor, and staff relationships. Foundation chief executive officers (CEO) who report to a board of directors and not to the campus president should still behave as if they are a member of the president’s senior leadership team. Likewise, institution presidents must not be threatened by the separateness of the foundation and the reporting responsibility the foundation CEO has to the board of the foundation. In institution and foundation structures where the foundation is more closely embedded into the structure of the institution, the collaborative relationship is even more essential.

This is a delicate dance for all parties involved, and unfortunately, on occasion a toe is likely to be stepped on. Invariably, moments of tension and discomfort will occur. However, if leaders of the IRF and the institution are resolute in their commitment to working together, conflicts generally can be resolved without critically damaging relationships. When leaders allow personal agendas and egos to infiltrate their decision making, or when governance authority is a question, the risk of causing friction among staff and board leadership will be heightened.

The foundation CEO needs to intentionally and tactfully engage with campus leadership while at the same time lead and manage the non-public corporation. Institution leaders must acknowledge the necessity of a dual governance structure, realizing it may limit the campus president’s formal authority or control over the foundation and its assets.

In times of crisis or when resources become scarce, the risk of tension between the foundation and host institution can increase. During the Great Recession of 2008–2009 and the more recent global pandemic, some foundations were, and are again, being asked to become funding sources for sudden and unanticipated budget shortfalls. College and university administrators and public officials might perceive endowments as rainy day funds, likening foundations to grant-making organizations versus grant-receiving entities. Panic and an instinctive attempt to preserve capital also induced some endowment fund managers to shift from their long-term strategies by choosing to realize losses at the worst possible time.

Markets will rise and fall, leadership agendas will shift, and donors ultimately will determine how they want to support the institution. Endowment funds and foundation resources are investments intended to ensure the college or university is able to meet its mission for future generations. A strong and transparent partnership among leadership is pivotal to the long-term success of the foundation and its invested funds.

Multiple sessions at AGB’s upcoming Foundation Leadership Forum on February 1-3, 2026, in San Diego, as well as the Board Professionals Conference on March 26-28, 2026, and the National Conference on Trusteeship on March 28-30, 2026, in Denver will explore the relationship between institutions and their related foundations, providing insights for foundation board members, chief executives, and other foundation and campus leaders. AGB’s online orientation courses also provide more information on this topic for public and independent institutions, foundations, and community college boards.

James H. Moore Jr. is the president and CEO of the University of Illinois Foundation.