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Open-government advocates unite to support transparency in university foundation finances

A string of mismanagement scandals at university foundations across the country demonstrates the urgency of opening foundations’ financial records to public scrutiny, open-government advocates told the Virginia Supreme Court in a brief filed Monday.

A coalition of government-transparency organizations led by the Brechner Center for Freedom of Information is supporting student activists at George Mason University who want access to records that would show whether big donors are attaching contractual “strings” to their contributions.

“This is the reality of how foundations operate: Their finances are
inextricably intertwined with those of their host institutions, and when
the foundation’s management is corrupt or incompetent, it detrimentally
affects the public’s interests just as if the wrongdoing took place at the
university itself,” says the brief, prepared and filed with the assistance of media lawyer Leslie Paul Machado of LeClairRyan in Alexandria, Va.

The brief was joined by the Student Press Law Center, National Freedom of Information Coalition, Society of Professional Journalists, Reporters Committee for Freedom of the Press, and the George Mason University chapter of the American Association of University Professors.

Higher-education foundations are typically incorporated as nonprofit corporations, even though their operations and finances are intertwined with the public universities they support. Lawyers for George Mason University and its foundation insist that the fundraising organization is a wholly separate entity not controlled by the university.

A Virginia circuit court judge accepted the university’s arguments and refused to hold the foundation responsible for responding to requests under the Virginia Freedom of Information Act. Under the state FOI law, even a private corporation must allow the public to inspect its records if the corporation is performing a governmental function under the direction of a state agency.

The Brechner Center brief supports two public-records requesters who are asking the GMU Foundation to disclose whether major donors received concessions, such as input into faculty hiring, in exchange for their contributions.

Courts and legislatures across the country have afforded the public access to records from nominally private foundations affiliated with state universities, including those in California, Iowa, Kentucky, Michigan, New Mexico, North Dakota, Ohio, Pennsylvania and South Carolina.

The brief points to recent instances in Pennsylvania and Wisconsin in which state universities have been on the financial hook to guarantee risky investments made by their purportedly “separate” foundations. It also points out that the GMU Foundation enjoys benefits that would never be offered to a truly separate corporation, including the use of shared staff, a university email address and website, and GMU marks and logos; in fact, when a donor submits a contribution to the foundation, a thank-you email comes back from the university.

“If the Court decides that a university may ‘spin off’ a core institutional function and evade public accountability merely by creating a private shell corporation, there is nothing to stop a public university from incorporating Campus Policing, Inc., or Campus Fraternity Oversight, Inc., and throwing a cloak of secrecy over governmental activities,” says the friend-of-the-court brief.

The Brechner Center, an advocate for public access to civically essential information, regularly files briefs in state and federal court cases supporting the rights of open-records requesters. The Center’s “Shadow Governments” project is focused on promoting pro-disclosure policies at quasi-governmental organizations, such as university foundations, that do public business behind a veneer of private incorporation.

Posted: April 22, 2019
Category: News
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