PA 16-93—sSB 333

Higher Education and Employment Advancement Committee

AN ACT CONCERNING THE FOUNDATION OF THE UNIVERSITY OF CONNECTICUT

SUMMARY: This act imposes several requirements on foundations established to support constituent units of higher education (“institutionally related foundations”), including barring them from engaging in certain conduct. Existing law defines the following institutions as constituent units: UConn, the public universities that comprise the Connecticut State University System, the regional community-technical colleges, and Charter Oak State College.

Specifically, the act requires all institutionally related foundations for constituent units to do the following:

1. refrain from engaging in any prohibited acts listed under the state Solicitation of Charitable Funds Act and

2. submit, to both the executive authority of the constituent units they support and the attorney general, two separate annual reports, rather than one, containing additional fiscal auditor opinions as part of their fiscal year auditing process.

Additionally, the act requires the UConn Foundation to do the following:

1. provide informational filings annually to the Higher Education and Employment Advancement Committee and legislative leaders if the foundation has an endowment fund with a market value exceeding $1. 5 million per year and

2. add provisions to the contract between the foundation and UConn about (a) cash compensation paid from the university to the foundation and (b) efforts to raise gifts and commitments for student support.

The act also makes technical and conforming changes.

EFFECTIVE DATE: July 1, 2017

NEW REQUIREMENTS FOR INSTITUTIONALLY RELATED FOUNDATIONS

Solicitation of Charitable Funds Act Compliance

The act prohibits institutionally related foundations from engaging in any act that violates the state's Solicitation of Charitable Funds Act (see BACKGROUND). This law (1) regulates organizations, activities, and professions related to charitable giving and (2) prohibits individuals and charities from performing specified acts related to charities. (Presumably, prohibitions that apply to both individuals and charities apply to such foundations. )

Fiscal Year Audit Reports

The act requires institutionally related foundations to submit two audit reports, rather than one, to both the executive authority of the constituent units they support and the attorney general as part of their fiscal year auditing process. The reports must include additional fiscal auditor opinions. By law, the foundations must undergo fiscal year audits either (1) annually if their fiscal year receipts and investment earnings total $100,000 or more or (2) in the last fiscal year of any three-year period if receipts and investment earnings total less than $100,000 per fiscal year for three consecutive fiscal years.

Table 1 compares the fiscal audit report requirements under prior law and the act.

Table 1: Foundation Audit Report Requirements under

Prior Law and PA 16-93

 

Prior law

(CGS 4-37f(8))

The Act

Number of required reports

One

Two

Required report content

Financial statements

Management letter

Audit opinion on conformance of foundation operating procedures to state law and recommendations for corrective actions needed to ensure such conformance

Report one:

Audit opinion on financial statements

Management letter

Report two:

Audit opinion on conformance of foundation operating procedures to state law

Recommendations for corrective actions needed to ensure such conformance

Total number of audit opinions

One

Two

NEW REQUIREMENTS FOR THE UCONN FOUNDATION

Annual General Assembly Filings

The act requires the UConn Foundation, when its annual endowment funds exceed $1. 5 million, to annually provide to the Higher Education Committee and the six legislative leaders a copy of each of the following items:

1. the most recent annual foundation report;

2. the most recent audited financial statements, management letter, and audit reports of the foundation required by law;

3. the legally required written agreement between UConn and the foundation;

4. the legally required written policy on investigations of ethical and legal violations and whistle-blowing;

5. the foundation's conflicts of interest policy and bylaws;

6. the foundation's most recently filed IRS form 990, including all portions and schedules required by federal law to be available for public inspection;

7. a list of the current members and officers of the foundation's governing board;

8. a list of all deanships, professorships, chairs, schools, institutes, centers, or facilities that were named in recognition of foundation donors upon the UConn Board of Trustees' approval during the previous fiscal year;

9. the identity of any person, firm, corporation, or other entity donating funds or other items of value to the foundation on or after July 1, 2017 unless the donor has requested that his or her identity not be publicly disclosed;

10. the total number and average size of foundation disbursements made to UConn for (a) undergraduate and graduate scholarships, fellowships, and awards; (b) program and research support; (c) equipment; and (d) facilities construction, improvements, and related expenses; and

11. the position of each UConn employee for whom the foundation contributes all or some of the salary, wages, or fringe benefit expenses, along with the financial reimbursement amount from the foundation for these expenses for each position.

The act deems all of the above information reported by the UConn Foundation to the Higher Education Committee and leadership to be a public record under the Freedom of Information Act.

Required Contract Provisions

By law, each institutionally related foundation must enter a written agreement with the constituent unit or public higher education institution that governs their relationship. The act requires that the UConn Foundation's agreement with UConn include two additional provisions beginning July 1, 2017.

The first new provision governs the cash compensation paid by UConn to its foundation. The act requires that the agreement contain the following three statements governing this compensation:

1. Cash compensation paid by UConn to the foundation in a fiscal year must decrease from the greater of the amount paid in the preceding fiscal year or the fiscal year ending June 30, 2016, and it must decrease by (a) $1 million when the market value of the foundation's endowment fund is between $500 million and less than $700 million as of January 1 of the preceding fiscal year, (b) $1. 5 million when the market value of the fund is between $700 million and less than $900 million as of January 1 of the preceding fiscal year, or (c) $3 million when the market value of the fund is between $900 million and less than $1. 25 billion as of January 1 of the preceding fiscal year.

2. UConn may not pay the foundation any cash compensation when the endowment fund is $1. 25 billion or more as of January 1 of the preceding fiscal year.

3. If the foundation's endowment fund market value decreases to an amount below any of the above thresholds as of January 1 of the preceding fiscal year, then UConn must increase the cash compensation it pays to the foundation to the same amount that it paid before the threshold was exceeded, until the July 1 following a January 1 on which the market value of the endowment fund once again exceeds the threshold.

The second new provision requires the foundation, on and after July 1, 2017, to use reasonable efforts to raise gifts and commitments each fiscal year for student support, including scholarships, assistantships, fellowships, awards, and prizes. Such gifts and commitments must equal at least 15% of the total amount of all gifts and commitments raised by the foundation in the same fiscal year.

BACKGROUND

Prohibited Acts under the Solicitation of Charitable Funds Act

The Solicitation of Charitable Funds Act makes it illegal for an individual to do the following:

1. misrepresent (a) a solicitation's purpose or beneficiary, (b) a charity's purpose or nature, or (c) that any other person sponsors or endorses a solicitation;

2. use or exploit the charity's registration with the Department of Consumer Protection to make the public believe that the registration constitutes state endorsement or approval;

3. use the charity's name or display its emblem, device, or printed matter without its express written permission;

4. make any false or misleading statement on any document required by this law;

5. fail to comply with this law's requirements; or

6. appropriate a charity's property for private use.

It is also unlawful for any person conducting a charity's affairs to engage in any financial transaction unrelated to accomplishing its charitable purpose.

Additionally, it is unlawful for any charity to do the following:

1. engage in any financial transaction unrelated to accomplishing its charitable purpose,

2. expend an unreasonable amount of money for solicitation or management,

3. use a name which is the same as or confusingly similar to another charity's name unless the latter charity provides written consent to do so,

4. represent itself as being associated with another charity without its express written acknowledgement or endorsement, or

5. use an unregistered fund-raising counsel's or paid solicitor's services.

It is also unlawful for a fund-raising counsel or paid solicitor to perform services for an unregistered charity (CGS 21a-190h).

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