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January 13, 2020; The Conversation

The question of whether a large donor will attempt to influence how the organization is run is a common concern to nonprofits. And not just public charities, either; foundations can feel this pressure too, particularly the philanthropic foundations whose sole purpose is to support universities. Often, the agreements between grantor and foundation grantee are secretive, struck behind closed doors.

It was revealed in 2018 that George Mason University had allowed the Charles Koch Foundation to actively participate in hiring and reviewing faculty as part of their grant gift agreements Since 2005, the Koch grants to GMU total about $96 million. The uproar led the school to create new policies, made public in commentary by Angel Cabrera, GMU’s president. The new transparency policy would release “as much information as possible” without betraying a donor’s privacy.

However, that’s the decision of just one university. There’s no consistency from one foundation to another or one state to the next. For instance, the Research Foundation for the State University of New York (SUNY), which serves all the schools in the New York public higher education system, making it the largest research foundation for public higher education institutions in the country, must reveal information because more than half its $1.2 billion in revenue is government funding. Generally, government support generally goes right to the college, making government funding to a school foundation somewhat unusual. Accordingly, the foundation has now been included in the state oversight agreement for purchasing that covers SUNY institutions. Most of the other individual school foundations in the 64-college SUNY system do not have the same guidelines.

College foundations are private, separate organizations under their own 501c3s. They answer to the IRS and state agencies in charge of nonprofits—and they don’t all answer to the public. It is understandable that foundations protect their donors, who, in the case of universities, are often wealthy individuals and alumni. Donors may want privacy, so they aren’t overwhelmed with requests, and foundations frankly do not want to share donors with other foundations.

It often takes Freedom of Information Act requests to see any information at all, and many institutions do not have to answer FOIA requests. Virginia’s GMU Foundation demonstrates the singularity of a public university foundation; it did not have to release information, even under that state’s own Freedom of Information Act (VFOIA). The VFOIA applies to public agencies, organizations funded wholly or in part by public monies, bodies “of the public body created to perform delegated functions of the public body.”

Nevada is the only state that delineates university foundations as entities of the government, although it still allows donors to remain private. Several states, such as Colorado and Minnesota, require that foundations make some financial records available to the public.

A student advocacy group, Transparent GMU, attempted to see the Koch gift agreements starting as far back as 2014; they were sure there were strings attached to the donations. For years, they were refused. GMU Foundation stood by its position that it was a private foundation. Transparent GMU sued the foundation in 2017, arguing that the foundation raised money solely for use by a public university, so the gift agreements should be public.

The Virginia supreme court finally agreed to hear the case in April of 2019, but Transparent GMU lost in the December decision. The Virginia supreme court determined that the George Mason University is privately held and not a public organization. In the meantime, the school changed its gift acceptance policy in answer to the public pushback. They will have their gift conditions in writing so that they are part of the public record.

The GMU Foundation pays a majority of the president’s salary—which is, at best, awkward, since the foundation is providing payroll for someone who is not (or should not be) an employee of the foundation—but it still is not considered a public body.

“Had the General Assembly intended the unreserved inclusion of nonprofit foundations, that exist for the primary purpose of supporting public institutions of higher education, as public bodies under VFOIA, it could have so provided, but it has not,” Justice Cleo Powell wrote. “Policy determinations of this nature are peculiarly within the province of the General Assembly, not the judiciary.”

The Charles Koch Foundation is a private non-operating foundation which is required to have written gift agreements; after the backlash from the GMU gifts, it will now make public long term commitments to colleges and universities.

California passed a law in 2011 that requires university foundations make their financial records, correspondence, and contracts available to the public. Donors can maintain their privacy unless the donor gets something in exchange with a value more than $2,500, or they try to influence school operations or curriculum, or receive a no-bid contract within five years of the gift.

Virginia has two proposed bills for university foundations. One would open the dollar amount, the purpose, and any terms of donations to Freedom of Information Act. The second proposed bill would make the schools accept terms and conditions of gifts in writing so those records can be viewed.

Rather than trying to fit private foundations into a public mold, it seems easier to regulate their transparency. While some foundations do have a culture of openness, it will take state legislators to make the changes needed to have all public university foundations behave similarly. While the foundations may be private, and the gifts they receive come from private donors, they are working for public organizations and are in a vulnerable position, open to influence from larger donors. The foundations in question control billions of dollars, so the public should know if the donors behind those dollars are exerting pressure on the universities.—Marian Conway

Disclosure: Marian Conway is the chair of the board of the Empire State College Foundation.