Foundations hit by strict scrutiny

April 15, 2005

State universities are worried that fear of public attention may discourage donations from corporations and alumni, as the foundations through which they give money come under scrutiny after several scandals.

Critics say the secrecy behind which the foundations have traditionally worked - although the institutions they support are publicly operated - may tempt them into the kind of corruption seen at companies such as Enron.

Fundraising foundations are set up to safeguard donors' privacy since many prefer to remain anonymous. But that has allowed misuse of contributions that sometimes total hundreds of millions of dollars.

For example, the $700 million (£412 million) University of Colorado Foundation was forced to provide records to the state auditor after refusing to hand them over to authorities investigating a recruiting scandal. Foundation officials deny that they had anything to do with the scandal, in which prospective football stars were allegedly given alcohol and sexually assaulted several women. But public outrage prompted state legislators to propose a Bill making the foundation's revenues and expenditures (but not donors' names) public.

Publicity is the last thing most foundations want. After the University of Louisville Foundation was forced by a judge to give donor information to a newspaper, it emerged that it had received substantial gifts from tobacco companies and a military contractor.

The state Supreme Court ruled that the $304 million Iowa State University Foundation must make its donor records public. These revealed the foundation had sold a 97-hectare farm left to it on condition that it be kept by the university. And records from the University System of Georgia Board of Regents Foundation revealed that 14 companies holding valuable contracts with the system had donated $114,000 in the past four years.

Together, those companies got $29.3 million-worth of university contracts.

When the family of Sam Walton, founder of Wal-Mart, gave $300 million to the University of Arkansas, it allegedly asked that John A. White should remain chancellor of the Fayetteville campus for five years. But a court protected the public from learning about that or any other conditions. Rick Cohen, executive director of the National Committee for Responsive Philanthropy, wrote in the Chronicle for Higher Education that Arkansans have "a right to know what their state university gave in return".

But foundations' concerns about a donor backlash are also gaining a hearing. Georgia legislators are considering a Bill that would limit public access to donor information. Its backers claim it is the only way to protect university foundations from losing nervous contributors.

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