Several UW System institutions have affiliated foundations that raise funds for or otherwise support the institution. Particular institutional units, such as Wisconsin Public Radio, also may have supporting organizations that perform similar functions. By and large, it is desirable that these foundations remain independent of the institutions they support. Without maintaining such independence, a foundation may be subject to the state open records and open meetings laws – risking the confidentiality of donor files, for instance – or exposed to liability it would not otherwise face as an independent private entity. This section is intended to provide a brief checklist of the factors that may determine whether a university-affiliated foundation maintains its independent status. The relevant factors in gauging a foundation’s independence cover the entire span of the foundation’s operations and its relationship with the institution. They include:
- how the foundation is governed,
- how it is staffed,
- how it obtains office space and supplies, and
- how it makes its funding decisions.
To maintain their independence, UW System-affiliated foundations may enter into a comprehensive written agreement specifically setting forth the factors that affirm the foundation’s independence.
This area is complex, and the following checklist is meant only for general guidance. Institutions or affiliated entities with specific questions regarding their status or relationship are encouraged to seek legal counsel. (As noted below, seeking legal counsel does not necessarily mean calling a UW System attorney. A foundation’s sharing legal counsel with its affiliated institution may itself be an indicator that the foundation is not independent.)
In addition, in 2008 the Wisconsin Supreme Court issued an opinion finding that the Beaver Dam Area Development Corporation (BDADC) was a quasi-governmental corporation subject to the open meetings and public records laws. While the key factor in the court’s analysis was the BDADC’s public funding, the factors included in the checklist below were also considered in the court’s analysis.
- Governing structure. Frequently, the foundation’s board of directors will include university executives and this may be desirable to promote communication between the institution and the foundation. In itself, having university personnel on the foundation’s board probably will not compromise the foundation’s independent status. However, if a majority of the foundation’s directors are university executives, or if university personnel are perceived as controlling the affairs of the foundation, the foundation will most likely be deemed a state entity. The foundation may consider giving university personnel non-voting roles on the board to lessen the appearance that the university controls the foundation’s operations. University personnel serving on a foundation board should be aware that they are covered by conflict of interest laws applicable to directors of non-profit corporations (§ 181.0831, Wis. Stats.) and any requirements imposed by the board’s articles of incorporation, by-laws or resolutions. These ethical obligations are in addition to those contained in UWS Chapter 8 – Unclassified Staff Code of Ethics.
- Staffing. Ideally, only foundation employees should serve the foundation. In practice, however, it is common for the foundation to be staffed with at least some university employees who split their time between the foundation and the university. In those circumstances, the foundation should pay the employee directly for any prorated services it receives, including the value of retirement benefits or other non-monetary compensation. These arrangements should be expressly spelled out in the foundation-university agreement.
- Office space. To best maintain its independent status, the foundation should enter into an arm’s-length lease agreement with the university and pay a fair rental rate for the space it occupies. Receiving rent-free office space from the institution makes the foundation appear to be an agent of the state.
- Logistical support. The foundation should likewise purchase its own equipment and supplies from its own bank account to maintain independence from the university. Where the foundation’s space benefits from university services such as heating, light and maintenance, the foundation should reimburse the university on a cost basis.
- Legal counsel. To preserve its independence, the foundation should retain its own legal counsel.
- Fundraising decisions. Fundraising decisions and allocations should be in the foundation’s sole discretion. The foundation’s board may obtain advice from university personnel without risking its independence, but the foundation must make the final decisions.
- History and predecessor organizations. Courts may find that the university’s relationship with the foundation’s predecessor organizations is relevant to the foundation’s current status, particularly in cases where a foundation’s predecessor was highly dependent on the university. In such cases, it is best for the parties to ensure that their agreement adequately addresses all areas implicated by the former relationships.