An escalating controversy involving a California State University foundation that hired Sarah Palin to give a speech has shed light on legal loopholes that allow such foundations to operate with little public oversight—and now some stakeholders are calling for greater accountability for these auxiliary organizations.
The state attorney general’s office announced April 13 that it would investigate California State University, Stanislaus, and its foundation for their handling of the contract for Palin’s speech. Meanwhile, a California group that advocates for open government filed a lawsuit April 16 against the university over its refusal to disclose documents related to the speech.
The state attorney general’s investigation has sparked a new round of calls for greater transparency and financial accountability for organizations embedded within California’s public universities, particularly given the size of their assets.
“Prudent financial stewardship is crucial at a time in which universities face vastly decreased state funding and increased student fees,” Attorney General Jerry Brown said while announcing his investigation.
Californians Aware filed a lawsuit in Stanislaus County Superior Court against CSU Stanislaus, seeking an order by a judge to release information about Palin’s contract with the school’s nonprofit foundation.
The former Alaska governor and Republican vice presidential candidate is scheduled to visit the Central Valley, Calif., campus in June. Palin is now a commentator for the Fox News cable television network.
The university has repeatedly denied public-records requests filed by Californians Aware, a state lawmaker, and the Associated Press (AP) seeking Palin-related documents. It says contract negotiations were handled by its foundation, which it claims is legally exempt from the California Public Records Act.
Palin’s fee and accommodations will be covered entirely by private donations, not state funds, foundation board president Matt Swanson has said.
Students said they found part of the contract with Palin in a university trash bin after state Sen. Leland Yee, D-San Francisco, had formally requested records related to Palin’s appearance.
The university told Yee it did not have any documents related to the speech and said it had referred the matter to Swanson.
Swanson sent letters to Yee and the AP stating that Palin’s contract had a nondisclosure clause. He also said university foundations and other auxiliary organizations were not subject to the same public-records requirements as the university itself.
Geoff O’Neill, the University of California vice president for institutional advancement, called the investigation at CSU Stanislaus and related allegations regrettable.
“It’s unfortunate if these types of activities result in a lack of confidence in university or college foundations,” he said. “Here at UC, they really are instrumental in helping us raise significant sums of private support.”
Foundations at each of the 10 University of California campuses control assets totaling nearly $4 billion, according to an independent audit commissioned by the university. By comparison, UC received $2.6 billion in state general funds this year, the state budget office says.
The 93 auxiliary bodies and foundations at California State University campuses control $1.34 billion, according to the CSU chancellor’s office.
In 2009, CSU spent 40 percent of the money raised by its auxiliary organizations—or $570 million—on instruction, research, and academic support, according to Lori Redfearn, CSU’s assistant vice chancellor for advancement services. The rest was used to fund other campus services, including $41 million for scholarships, she said.
“Our auxiliaries play a vital role in making sure we can provide the best educational experience possible for our students,” Redfearn said. “We hope a particular incident doesn’t overshadow all the vital work these organizations are doing.”
The nonprofit university foundations, which raise money to supplement student fees and state funds, are subject to university oversight and provide regular financial reports to campus leadership.
A 2001 state appeals court case ruled that university foundations and auxiliary organizations are not subject to the same public disclosure requirements as universities themselves. However, the court also ruled that foundation documents must be made public when they are in the university’s possession.
In the 2001 case involving Fresno State University, a state appeals court ruled that auxiliary associations were not subject to the California Public Records Act because the act offers only a limited definition of what constitutes a public body.
Lawmakers and the union representing college professors have criticized the loophole, saying it has allowed foundations to escape proper scrutiny.
Last July, the California Faculty Association sent a letter to Brown asking him to investigate allegations of mismanaged donations. Those included more than $9.6 million in loans made by a Sonoma State University foundation to a former board member—the first payment coming two days after he resigned in 1995.
In October, Brown’s office informed the foundation it was conducting an audit.
“There has been an explosion of these very private—one could almost say secretive—foundations,” California Faculty Association president Lillian Taiz said April 14. “I don’t know that there are problems at all of them, but incidents seem to crop up almost monthly.”
Californians Aware described the CSU Stanislaus Foundation as a “virtual alter ego” of the university. All but one member of the foundation’s staff and several officers on its board are university employees, and the headquarters of the foundation is located in the university’s main administration building.
Several CSU Stanislaus students said they retrieved a portion of the contract with Palin from a trash bin outside the campus administration building last week.
The five-page document included perks such as first-class airfare for two, deluxe hotel accommodations, and bottled water with bendable straws. In addition, all audience questions after the speech must be prescreened and posed by a designated representative.
The students presented the contract along with piles of other paperwork, some of it shredded, to Brown on April 13.
Later that day, Brown’s office announced it would investigate the CSU Stanislaus Foundation’s finances and alleged dumping of documents.
Brown, a candidate for governor, said he would seek to determine whether the CSU Stanislaus Foundation, which has assets of more than $20 million, is spending its money to benefit the university. He said he was primarily concerned with ensuring that no foundation money is wasted or misspent, and the investigation has nothing to do with Palin herself.
CSU Stanislaus president Hamid Shirvani said the Palin document had been taken from a recycling bin inside the office of a vice president who also serves on the foundation board. He has asked police to investigate the alleged theft.
University spokeswoman Eve Hightower said Shirvani has also asked the Washington Speakers Bureau, which arranges Palin’s speaking engagements, to reveal her speaking fee to help quell the controversy. The agency has not yet responded to the request, Hightower said, and it had not returned phone calls or eMail messages from the AP seeking comment as of press time.
Yee has sponsored legislation that would require campus foundations and auxiliary organizations to adhere to public-records requirements. The measure passed the Senate in January and awaits an Assembly hearing.
Yee has argued that there is often significant overlap between universities and their foundation arms, and that both should be subject to the same disclosure requirements.
“There is not a fine line or even a blurry line between the foundation and the public university; there is absolutely no line,” Yee said.
He added: “Our public university executives need to stop acting like they are running private country clubs and personal slush funds.”
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