With the cost of higher education rising and the demands on state resources increasing, public colleges and universities are facing many financial challenges. Institutions will no doubt reach out to their institutionally related foundations (IRFs) not only to increase fundraising initiatives, but also to consider ways to raise additional funds through various entrepreneurial activities, such as real estate purchases and development activities directly related to the institutions they serve.
The challenge for foundation leadership is how to respond positively to the needs of the institution while maintaining their fiduciary responsibility for the assets entrusted to them by their many donors: alumni and friends, foundations and corporations, faculty and staff. As institution presidents and chancellors request that IRFs become engaged in additional financial activities, mostly entrepreneurial ones which might present unacceptable risks, the IRFs’ missions will be challenged. “Mission creep” is a real danger for IRFs.
So, how do IRFs address expanding their scope of operations while staying true to mission?
First, an IRF needs to be prepared for what is eventually coming. Start by facilitating open discussions at the board level today about what it means to be a fiduciary of the foundation’s assets. Then, engage in discussions about what risks are acceptable in light of the expected financial return. Discussions such as these are a must and usually take place during board retreats. Retreats should include the institution’s president or chancellor, members of the leadership team, and senior staff members of the foundation.
Additionally, an IRF should complete audits to ensure that current operations are in compliance with the foundation’s articles of incorporation, bylaws, missions, and visions. The audits should also review the policies and procedures that are in place and ensure they are up to date and represent the higher education industry’s best practices. It is of critical importance that an IRF ensures excellent governance is in place and not waver from those governing principles.
A well-defined memorandum of understanding (MOU) between the institution and the IRF is an absolute requirement. Such MOUs should spell out the role of each party in supporting each other. The MOU should include financial and operational commitments and a way to resolve conflicts as they arise. While the MOU is a document of guiding principles, it must include a process ensuring for open dialogue between the two parties.
In summary, IRFs are going to be asked to expand their scope of operations in support of the institutions they serve, if they haven’t already. Be prepared!