The Corner


University Foundations Can Hide Wasteful Spending

University of North Carolina – Wilmington (Wikimedia)

Both public and private universities entrust their endowments to foundations and, because the operations of those foundations are mostly hidden from public view, there’s a strong temptation for wasteful spending and shady practices. You might expect that public-university foundations would at least be covered by transparency laws, but that’s not always the case.

Jenna Robinson and Joseph Warta discuss this problem in today’s Martin Center article.

They write,

While foundations have their legitimate purposes and motives — historically, they have focused on serving as the fundraising arm for universities — they also act as the source of many examples of waste, fraud, and abuse that should concern any taxpayer or donor.

As you’d probably suppose, university presidents tend to manipulate these foundations to pad their already hefty pay packages. “Often,” write Robinson and Warta,  “university presidents gain undue rewards, such as at Florida Atlantic University. In 2002 the foundation’s director gave President Anthony Catanese funds to purchase a $42,000 Corvette, circumventing executive board rules. Funds for the car were given when the director ‘arranged to channel the money [for the car] through a decorating firm, cloaking it as a consulting fee for [Catanese]’s wife.’”

Plush homes are a common perk, such as the 8,400 square foot home for the chancellor of East Carolina University, a modest school in a rather humble town (Greenville, N.C.), where it must stand out like a palace. Chancellor positions are already well paid; there’s no need to glop a thick layer of icing on the cake.

What to do? The authors write,

Donors and alumni can put pressure on private university foundations to which they give, insisting on open and transparent accounting practices and contracts. State legislators can make university foundations that benefit public universities subject to the same open records laws that govern the universities themselves.

George Leef is the the director of editorial content at the James G. Martin Center for Academic Renewal.


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