General Counsel
Foundations Affiliated with UW System
This document provides a summary of the law in this area and answers questions frequently asked of attorneys in the Office of General Counsel. However, the information presented here is intended for informational purposes only and nothing in this document should be construed or relied upon as legal advice. The Office of General Counsel or your Campus Legal Counsel should be consulted regarding the specific facts and circumstances associated with any legal matter.
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.
Independence Checklist
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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.