AGB-CASE Illustrative Memorandum of Understanding Between a Foundation and Host Institution or System

Preamble

Public college and university foundations are incorporated 501(c)(3) organizations affiliated with two-year or four-year publicly supported postsecondary institutions. Foundations exist to raise and manage private resources supporting the mission and priorities of public institutions, and provide opportunities for students and a margin of institutional excellence unavailable with state funds.

The basic foundation structure tends to be fairly consistent across higher education, although variations exist based on institutional setting (some foundations are related to a single campus, others to a system that has separate campus-based foundations) and the degree of foundation independence (fully dependent on institutional support; interdependent, with partial support emanating from the related institution; or fully independent or autonomous). Foundation responsibilities, operations, and funding vary from state to state and institution to institution. A foundation may support a single campus or an entire system. Individual institutions within a system may have separate foundations as may individual schools or divisions within an institution.

Working with a national task force, the Association of Governing Boards of Universities and Colleges (AGB) and the Council for Advancement and Support of Education (CASE), have jointly developed an illustrative Memorandum of Understanding (MOU) for institutions and foundations. It is presented for consideration at a time when many public institutions and foundations are reviewing or redrafting their current working agreements. It is not intended to serve as a formal document recommended for adoption by all institutions or systems and their related foundations. Rather, the illustrative MOU is designed to enumerate elements that "best practice" suggests need to be considered for inclusion. History, campus culture, and legal dictates ultimately will affect the contents of particular MOUs.

In some states foundation status is determined by state legislation. State court rulings have established various interpretations of foundation independence. Institution and foundation counsel should be consulted in all instances where the MOU (the legal contract that defines the working relationship between an institution or system and its related foundation) is being reviewed. Special attention should be paid to governance, use of state funds, staffing, and other issues that have a significant bearing on foundation independence.

The MOU should not be lengthy, but it should include the following elements:

• An introduction that summarizes the overall relationships between the foundation and its host institution or system. This statement should broadly define the foundation's responsibilities and clarify the foundation's standing as an independent public trust. The introduction should provide the foundation with the appropriate authority to use its own name and service marks and the name and service marks of the institution in the conduct of its work. It should specify that the assets the foundation holds are dedicated to support the mission of the host institution or system.
• A description of the governance and leadership selection process of the institution or system and the foundation.
• An outline of the responsibilities and mutual expectations of the institution or system and the foundation.
• A statement on foundation and institution or system accountability.
• A brief overview on how funds shall be transferred between the foundation and the institution or system.
• A description of donor and alumni records owned either by the institution or foundation and policies governing the use and sharing of such records.
• A description of foundation administrative structure and how the foundation is financed.
• Definitions of terms and conditions, including circumstances for terminating the relationship or the dissolution of the foundation and distribution of the assets it holds.
• A formal adoption of the MOU by the institution's and/or system governing board's leaders and the foundation board's leadership.

Not all MOUs will contain each of these elements; however, to facilitate a favorable and productive relationship between the two parties, the agreement should at least consider these issues for inclusion. MOUs should demonstrate to the many constituencies of a public higher education institution or system that a formal set of understandings exists with the related foundation. In today's litigious society, a clearly articulated MOU is a useful instrument in establishing and reinforcing the foundation's legal standing.

AGB and CASE recognize that despite similar responsibilities and structures, foundations and institutions have nuanced missions and relationships, with special issues that require careful consideration.

These two are especially important:

• Institution - Foundation Relationship.
  
  The MOU should clearly define the relationship between the institution or system and the foundation. A fully autonomous or independent foundation should clearly articulate its relationship with the host institution. An interdependent foundation should clearly articulate its standing as a separate 501(c)(3) organization serving a public trust; such a statement may help protect the foundation's donor-privacy policy from challenging litigation. In crafting the MOU, foundation officials should pay close attention to those areas that they consider important to remain confidential.
• Compensation of the Institution or System Chief Executive and Other Senior University Administrative Staff.
  
  While it is fairly common practice for a foundation to supplement the compensation of an institution or system chief executive (and other senior university administrative staff), AGB and CASE encourage governing boards to assume full responsibility for providing for the compensation of institutional leaders. When private support is necessary, institutions and foundations should structure such supplements in ways that limit the foundation's influence in presidential selection or oversight.

AGB and CASE commend this illustrative Memorandum of Understanding to their members for consideration when drafting or revising their own such documents. Both organizations welcome reactions and suggested improvements to the document.

Task Force:

Mr. James Lanier (chair) president, East Carolina University Foundation
Mr. David Bahlmann, president and chief executive officer, Ball State University Foundation
Mr. Brad Barber, assistant vice president for institutional advancement, University of California System
Mr. Roger Blunt, chair, University of Maryland Foundation and president and chief executive officer, Blunt Enterprises, LLC
Mr. Louis Friedrich, former board chair, University of Illinois Foundation and managing director, Bernstein Investment Research and Management
Mr. Richard Imwalle, president and chief executive officer, University of Arizona Foundation
Mr. Richard Legon, executive vice president, AGB
The Honorable Diana Murphy, chair, University of Minnesota Foundation; Board of Directors, AGB; U.S. Circuit Judge for the U.S. Court of Appeals for the Eighth Circuit
Dr. Robert T. Tad Perry, executive director, South Dakota Board of Regents
Dr. Gary A. Ransdell, president, Western Kentucky University
Mr. Thomas A. Roha, partner, Roha and Flaherty law firm
Dr. Charles Steger, president, Virginia Tech

AGB/CASE Staff:

David Bass, director, foundation programs and research, AGB
Brian Flahaven, director of government relations and institutionally related foundations, CASE

Download the illustrative MOU (PDF)

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