When news broke that their presidential-residence construction projects had rung up big cost overruns, North Dakota's university foundations made unwanted headlines.
It wasn't the first time, either in North Dakota or the nation. And it won't be the last, until the foundations start acting less like private organizations and more like public agencies, especially where transparency is concerned.
That's the way the foundations can regain North Dakotans' trust. Just as important, that's the way the foundations can keep the trust -- because making decisions in sunlight has a way of boosting the quality of those decisions.
Journalists no longer are the only ones saying so. "Trust is our only currency in philanthropic work," wrote Phyllis Lepke, vice president of the Iowa State University Foundation, in 2004.
"Our stakeholders must trust us, and we must earn and maintain that trust. ... College and university foundations are in the spotlight now, and we can either step forward with our own proactive public information policies or wait to be legislated, regulated or required by courts to open our records."
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Stepping forward is the better option by far.
The North Dakota headlines told not only of construction cost overruns, but also of such episodes as North Dakota State University President Joseph Chapman's $22,000 trip to Washington, which Chapman took on a chartered plane with his wife, two daughters and one daughter's fiance. Chapman resigned the day the story broke.
And while the fact that money donated to a foundation could be spent in this way may have surprised North Dakotans, it wouldn't have been news to Iowans. Iowa's university foundations now are known for their openness, but it wasn't always that way:
In 1999, an independent audit of the Iowa State University Foundation found a long-term liability of $529,400 per year listed under the heading of "Other."
"Initially, foundation officials would not disclose any further information concerning the liability," saying it was a "personnel matter," wrote Charles Davis in an education law journal in 2005.
Eventually, it turned out that the money was going to Jim Walden, a former football coach. Walden had resigned under pressure some years earlier but enjoyed a contract that gave him the "deferred compensation" payments for 20 years.
South Carolinians have foundation memories of their own. A state Supreme Court ruling in 1991 forced the University of South Carolina Foundation to release its records. That's when "it was discovered that the foundation had fraudulently used donors' conributions under directions from the university's president, James Holderman," Davis wrote.
Many of the records had been destroyed. But "the available records showed that ... Holderman had spent $533,000 provided by the foundation. Holderman was later sentenced to five years probation and 500 hours of community service after pleading guilty to receiving extra compensation and no contest to state income tax evasion."
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In Maryland, a foundation spent so carelessly that it had to borrow from the very university endowment fund that it administered to meet operating expenses. In Louisiana, a university foundation collected $1.4 million in donations, but then spent only about $580,000 on scholarships and other university needs. The rest went to the foundation's administrative costs, Davis wrote.
"The foundations' private status in many states allows them to conduct university business without accountability to the taxpaying public that supports their affiliated universities," Davis wrote.
"Incident after incident on campus demonstrate that university foundations can fail miserably in monitoring themselves. ... Whenever an organization, public or private, handles large sums of money on behalf of a state institution, impropriety can loom."
A policy of openness can help ward off that impropriety as well as command donors and the public's trust, Davis suggests.
Vice President Lepke of the Iowa State University Foundation agrees. In 2003, The New York Times carried a story with the headline, "They're mad as hell, and they're not making donations any more."
Given that story and many others, Lepke wrote, "we must all revisit our commitment to openness, transparency and accountability."
That's the lesson North Dakota's university foundations should learn.
-- Tom Dennis for the Herald
