Opinion ID: 1293508
Heading Depth: 3
Heading Rank: 3

Heading: The Iowa State University Foundation

Text: In 1988, the ISUAF changed its name to the Iowa State University Foundation, the same moniker as one of its incorporators. At the time of the filing of this action, the Foundation operated under its Third Amended and Restated Articles of Incorporation. As stated in the Articles, the object of the Foundation is to promote the welfare of ISU faculty, students, and alumni and to identify, cultivate, and solicit donors for the exclusive benefit of ISU. The Foundation will accept, hold, administer, invest, and disperse for educational and scientific purposes gifts, grants, bequests, and devises ... exclusively for the benefit of [ISU]. Upon dissolution, the Foundation's assets are to be transferred to an organization whose objects and purposes are the same as its own or directly to the State of Iowa for the exclusive benefit of ISU. Like the ISCF before it, the Foundation's Board of Directors is divided into four classes. The first class consists of three members. One member is required to be the President of ISU. In addition to the designated seat of the President, two other members of the Foundation's Board happen to be affiliated with ISU or the Board of Regents. The Board of Directors is responsible for deciding whether to accept or reject gifts to the Foundation. The Board of Directors has delegated this responsibility to a Gift Acceptance Committee in accordance with a gift acceptance policy. One member of the Committee is an ISU faculty representative chosen in consultation with the ISU Faculty Senate. The policy gives guidance to Foundation employees regarding the acceptance of prospective gifts. For example, the Foundation requires gifts of significant risk (e.g., gifts of real property) be documented with a written understanding between the donor, the Foundation, and ISU before the Foundation will accept them.
Historically the Foundation was staffed with ISU employees and located on the ISU campus. In October 2001, however, the Board of Regents Office recommended the Board of Regents approve an agreement between ISU and the Foundation. The Board Office noted that pursuant to this agreement ISU would lease its employees to the Foundation until the Foundation could arrange its own financial compensation package for them. On August 21, 2002, ISU and the Foundation executed (or renewed) an elaborate service agreement. According to the agreement, ISU desire[d] to engage the expertise of the Foundation to provide advice, coordination, and assistance in the fundraising and development area, and in the operation, accounting and fund investment management thereof, and the Foundation desire[d] to provide such services, not as an employee or agent of the University, but as an independent contractor. The service agreement does not specify how much ISU must compensate the Foundation for its services. In 2002, ISU agreed to pay the Foundation $750,000 annually. The Foundation presently employs its own personnel  85 full-time employees and 150 part-time employees. In 2001, the Foundation also purchased a facility off-campus for its headquarters with ISU Foundation funds. Today the ISU Foundation styles itself not as a part of ISU but rather as a wholly independent and private not-for-profit corporation organized to raise and manage private gift support for the exclusive benefit of ISU. The Foundation conducts a variety of comprehensive fundraising-related services for ISU, including telemarketing, direct mail, coordinated capital campaigns, donor solicitation and identification, investment and securities management, database management, gift receipting, estate planning and structuring, and planned giving consultation regarding the tax implications of wills, trusts, and life insurance. The Foundation manages two types of funds for ISU. The first category consists of funds donated to ISU that ISU then transfers to the Foundation. The service agreement requires the Foundation, as [ISU's] agent, to separately account for such funds and hold them in accordance with the donor's intent and at the direction of ISU with the same care applicable to fiduciaries of charitable trust funds. The second category consists of funds donated directly to the Foundation in trust for the benefit of ISU. The Foundation invests both types of funds in accordance with an investment policy. As of 2002, it appears the Foundation retained $234 million in private endowment funds. In 2001-02, the Foundation provided $38.9 million in expendable contributions and endowment earnings to [ISU] as specified by donors to support university programs, scholarships, facilities, and projects. The agreement contemplates that the parties will coordinate with all University support organizations and meet annually to plan future activities. The President of the Foundation is required each year to give reports to ISU detailing past and contemplated activities performed on ISU's behalf. ISU faculty, staff, and administrators develop lists of fundraising and spending projects for the Foundation; after the Foundation responds to ISU about the fundraising feasibility of the projects, [ISU] adopts the fundraising priorities. The Foundation is also obligated to provide ISU's president with an annual independent audit report and a copy of its tax return. ISU also has the right to audit the Foundation once a year for all accounts and records relating to property donated in the name of the ISU, but held and managed by [the] Foundation. The service agreement requires that ISU's President remain a voting member of the Foundation's Board of Directors and a member of its Executive Committee. It also grants the Foundation access to ISU's telephone systems, computation systems, printing, stores, ... professional support and services generally available to University departments, access to [ISU's] Human Resources Services and benefit programs, space for its telemarketing programs, and other services available to [ISU] units and departments. Foundation employees are provided identification cards, parking privileges, admission to athletic events, access to the ISU library, and staff recreation and fitness programs on the same terms as ISU employees. The Foundation is also permitted to use the ISU name, logo, and website. In addition, the Foundation has access to private data files on graduates, students, employees, and retirees of the university. For example, the Foundation can know a particular individual's demographic information and degree, as well as whether he or she received a scholarship.