Universities Face New Scrutiny Over Spending by Private Foundations

It’s the beauty of Italian wine country, combined with “the magic of autumn.”

That’s the sales pitch for the Florida International University Alumni Association’s annual trip to Tuscany and Florence. Travelers experience “wine in the making” during VIP visits to renowned wineries, while also hopscotching between restaurants, museums, and “charming hilltop villages.”

The cost is several thousand dollars for an alumnus, but the head of the university’s fund-raising foundation, Howard R. Lipman, billed his $3,508 travel expense to the foundation.

The justification: building relationships with 16 potential university donors.

“These trips cultivate engagement and philanthropy among travelers, who have given more than $8 million to various FIU programs,” states the explanation of Mr. Lipman’s trip, included in a spreadsheet of expenses provided to state lawmakers. He did not respond to an interview request from The Chronicle.

As state funding for public universities continues its decades-long decline, private foundations have stepped in to fill much of the void. The nonprofit entities — which often operate with little to no public oversight — can help balance a university’s books in an era of lean budgets and public outcry over rising tuition. A successful foundation can pay for itself by bringing in seven or eight dollars for each dollar it spends wooing donors.

The foundations also provide a vehicle for colleges to chase aspirations of greatness, whether in the form of superstar faculty, championship athletics, or groundbreaking research.

But allegations of lavish spending, without public scrutiny, have cropped up at colleges across the country. In 2015, for example, a Chicago Tribune investigation found that the College of DuPage, Illinois’s largest community college, operated a foundation rife with insider deal-making. Foundation board members received no-bid vendor contracts, and college leaders spent thousands of dollars on food and alcohol.

Shielded From Public View

In most states, university foundations are exempt from public-records laws or their status is unclear.

The lines between university and foundation can also be blurry — particularly when foundations sometimes tap into millions of dollars in taxpayer funds to pay for their employees or overhead expenses.

In the Florida Legislature, the speaker of the House of Representatives, Richard Corcoran, is among those calling for more accountability.

“The speaker’s made it abundantly clear that any entity that receives even a dime of taxpayer money should be open, transparent, and public,” said Fred Piccolo, Mr. Corcoran’s spokesman.

Mr. Lipman’s October trip to Tuscany became public only because Florida lawmakers recently demanded that all of the state’s universities provide details about their foundations’ international and out-of-state travel, staff salaries, lobbying activities, and other expenses.

That spending is usually exempt from Florida’s public-records laws. But because it has now been turned over to the Florida Legislature, most of Florida’s public universities also provided their itemized list of expenditures to The Chronicle. For the colleges that didn’t, The Chronicle examined a summary of expenditures released by state lawmakers.

What does the data show? Plenty of airline flights, often for meetings with donors or for a faculty member to attend a conference or perform research. Occasionally, the foundations paid for student travel for auditions, research, or volunteer service projects.

Some colleges allow their administrators to upgrade from coach on a longer flight. The University of Central Florida’s vice president for alumni relations, Michael J. Morsberger, took advantage of that perk when flying to Dubai last month for the World Government Summit.

That airfare cost the UCF Foundation $6,701.

The foundation has also spent at least $14,503 for John C. Hitt, Central Florida’s president, and other university leaders to travel by private chartered jet. On at least two of those chartered trips — to Miami for a Board of Trustees summit and to Atlanta as part of a search for an athletics director — the university’s student government president was also on board.

Chad Binette, the university spokesman, said the institution “uses charter flights infrequently for university business.” The November 2015 flight to Miami, he said, was an early-morning flight that “saved the cost of several hotel rooms.”

Asked about the student-government president also being a passenger, Mr. Binette noted that her role made her a member of the university’s Board of Trustees.

“The university invites the student-government president just as we invite other board members,” Mr. Binette said. “Each board member can choose how he or she wishes to travel.”

‘Animal for Research’

Some of the other foundation expenses reported by Florida universities raise eyebrows in different ways.

An $817 expenditure from Florida State University’s foundation reads as follows: “Attend a juggling conference to recruit research study participants.”

A university spokesman could not immediately provide details about the spending, such as how many jugglers were successfully recruited or what sort of research was being done.

At the University of Florida, a $125,203 line item, which is partially redacted to protect the donor’s identity, is explained as “animal for research.”

University officials said that, although the expense line item suggests that one very-high-priced animal was bought, the funds were used to purchase multiple animals and to pay for research.

The university declined to elaborate.

“We are not going to want to go into specific details about that because of some ongoing issues with animal-rights activists,” said Janine Sikes, a university spokeswoman.

At a Florida House Appropriations Committee hearing last week, the University of Florida and other state institutions were put on the defensive during aggressive questioning about their spending.

Members of the committee pressed the colleges to explain some of their international travel, and one lawmaker called it “shocking” that Florida’s universities together spend only about 17 percent of their foundation funds on student aid. Lawmakers also wanted to know why foundations need to tap into public dollars to pay for overhead and employee salaries. Why can’t they be self-sufficient?

The universities said their foundations need public support because donors are typically motivated to give by their passion for a particular field: It could be supporting the academic department that they passed through as an undergraduate, or funding research to battle a disease that affects a loved one.

Public dollars, the colleges argued, help pay for the electricity bill and staff salaries, which donors by and large aren’t interested in financing.

State Rep. Carlos Trujillo, the committee chair, worried that foundations have functioned as a back-door method of avoiding the spending restrictions that govern public institutions.

“Some of that money could have been used to pay for very, very exorbitant travel that is otherwise prohibited,” said Mr. Trujillo, a Republican.

The colleges said most international travel is done by faculty, not foundation employees, and the trips may involve research that is required by the terms of a donor gift. Florida State University’s representative told lawmakers that the university tries to follow state and federal guidelines with its travel expenses — while acknowledging there may be times that those guidelines have been exceeded.

At Florida Gulf Coast University, the expense of entertaining donors also has some wiggle room, according to Chris Simoneau, vice president for university advancement. Mr. Simoneau told lawmakers those expenses are “situation specific” and “a lot of it is at the judgment of the individual and their supervisor.”

It’s unclear if Florida lawmakers will attempt to overhaul the laws governing foundations — by requiring more public disclosures, for example — or if the foundation spending will simply be used as a political talking point during budget negotiations. The Florida House, where foundation spending is being scrutinized, is proposing a leaner higher-education budget than what is being considered in the Florida Senate.

Michael McKee, the University of Florida’s chief financial officer, said in an interview that it’s unclear where the Florida debate will lead. He stressed that foundation support is essential to recruiting the best faculty and performing the type of research associated with a pre-eminent institution.

“Honestly, that’s not something that we can afford with the state appropriation and tuition that we get,” Mr. McKee said.

Murky Legal Landscape

The fundamental legal question surrounding university foundations is whether they should be treated as public entities, like the colleges with which they are affiliated. There is little consensus from state lawmakers, attorneys general, and judges on this issue, according to a 2015 Quinnipiac Law Review analysis.

Some states, like California, have passed legislation that explicitly makes university foundations subject to public-records laws. California’s law, passed in 2011, came after California State University-Stanislaus refused to disclose the terms of a contract with the former Alaska governor Sarah Palin, who was hired to appear at a foundation event. A state senator, Leland Yee, asked for the information, but the college said it did not have to provide those details under the law.

So Mr. Yee, a Democrat, sponsored legislation that changed the law. The terms of Ms. Palin’s contract included a $75,000 payment for a 30-minute speech, along with first-class travel, luxury hotel accommodations, and a chauffeured car during her trip.

Other states, such as Connecticut, have passed legislation that specifically exempts foundations from complying with open-records laws. Colleges in Connecticut, as well as other states, have argued that these legal provisions protect donors who want to remain anonymous.

Courts in various states have split on the issue. One factor in those legal battles: whether the foundation receives university or taxpayer funds, which can strengthen the legal case for the disclosure of records.

A Showdown in New Mexico

The latest legal skirmish is now playing out in New Mexico, where a journalist who runs a news website focused on athletics at the University of New Mexico at Albuquerque is suing for documents related to the naming-rights agreement for WisePies Arena. The journalist, Daniel Libit, says he asked the university for bank documentation showing that the New Mexico pizza chain WisePies has submitted the required payments under its $5-million naming-rights deal. Mr. Libit, who operates the NMFishbowl website, also requested internal foundation emails about the arena.

The foundation responded that it is a “non-profit, non-public entity” and therefore not subject to public-records laws.

Mr. Libit’s suit, filed this month, argues that the foundation is “substantially controlled” by the university, with the university president serving on the foundation’s board, along with two college deans. The lawsuit also states the foundation received nearly $5 million in financial support from the university in the 2014-15 fiscal year.

“UNM doesn’t even seem to pretend that there’s any distinction,” Mr. Libit said in an interview. “Other than when you ask for public records, there’s barely any effort to try to delineate between the foundation and the university.”

The university’s director of media relations, Dianne Anderson, responded that Mr. Libit’s lawsuit “misunderstands” the relationship between the university and its foundation, which Ms. Anderson described as a “stand-alone organization.”

“Having a separate, non-profit smaller organization focusing on philanthropic efforts provides for a more efficient development operation, therefore maximizing the return to the university,” Ms. Anderson said in an email. “We are grateful to have an independent partner like the UNM Foundation.”

Michael Vasquez is a senior investigative reporter. Follow him on Twitter @MrMikeVasquez, or email him at michael.vasquez@chronicle.com.