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Red Flags in Institution-Foundation Partnerships

Red Flags in Institution-Foundation Partnerships

The AGB Board of Directors recently released a statement on institution-foundation partnerships that provides guidance regarding mitigating potential risks stemming from foundation activities, enhancing the alignment of foundation activities with institutional priorities, and fulfilling governing boards’ fiduciary responsibility for oversight of affiliated entities. The red flags outlined below are excerpted from the statement.

Scenarios like the following may create serious tensions in institution-foundation partnerships; entail financial or reputational risk; and, if neglected or improperly managed, lead to breaches of fiduciary responsibility:

  • Efforts by foundation boards to wield inappropriate influence over institutional personnel decisions or strategic direction by withholding requested funds or raising funds for purposes at odds with institutional priorities;
  • Attempts by university personnel to conceal expenditures by routing payments or reimbursements through a foundation;
  • Excessive accumulation in institutional or foundation accounts of endowment distributions or other donated funds that could be used for current charitable purposes;
  • Requests for significant investment by the foundation in real estate projects or other ventures to be undertaken by the institution without a sound financial plan;
  • Significant investments by the foundation in entrepreneurial projects not undertaken at the request of or in consultation with the institution or otherwise benefiting the institution;
  • Co-investment by campus or foundation administrators or board members in real estate projects or other business ventures undertaken by the foundation or transactions with donors or other “insiders” that could create conflicts of interest or constitute excess benefit transactions;
  • Unilateral efforts by institutional presidents to make significant changes in personnel or previously agreed-upon roles of foundations that employ their own staff and fund their operations;
  • Public criticism of institutional leaders or institutional action by the foundation board or foundation advocacy efforts at odds with institutional positions or priorities.
Learn more and download the full statement here. Seeking to further your understanding of important foundation issues? Consider the 2017 Foundation Leadership Forum, January 22-24, 2017, in Naples, Florida.
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