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California university fundraising 'auxiliaries': Secrets don't help

After a string of questionable transactions by the foundations, the need for legislation to open their records is obvious.

August 18, 2009

As they stretch every dollar, California's public universities have understandably turned to novel ways of raising and spending money. Many have established private foundations, known as "auxiliaries," that solicit contributions from private donors and then hand that money out in the form of grants, scholarships and the like. Auxiliaries today supply the Cal State system with roughly 20% of its $6.7-billion annual operating budget.

The trouble arises when those foundations use their vague legal status -- they are private entities affiliated with public universities -- to shield themselves from scrutiny. And the public has ample reason to question how some of this money is being spent. A foundation affiliated with Sonoma State University lent money to a former member of its board, then got stuck with a bill when he could not pay the money back. A foundation affiliated with Cal State Fresno built an arena on campus and awarded some donors luxury boxes; when the Fresno Bee asked for the names of the donors and what they had contributed, it was denied, and a court held that the California Public Records Act did not cover the foundation. And a former chancellor of San Francisco City College has been indicted on charges that include allegedly diverting money from a foundation account to pay for a club membership, liquor and other expenses.

Confronted with those and other troubling allegations, state Sen. Leland Yee (D-San Francisco) has introduced legislation to open the records of these auxiliaries by insisting on what should be obvious: Foundations affiliated with public universities should be subject to the same disclosure requirements as the universities themselves. In this case, that means extending the reach of the public records act to cover them, as it does the colleges and universities they serve. His bill, SB 218, deserves swift and overwhelming approval by the Legislature.

University leaders defend the foundations, arguing that they perform an important mission by fundraising for scholarships. That's true, and Yee's bill would do nothing to stop them. Defenders also suggest that some donors may be less likely to give if they know their contributions will be subject to public review. But Yee's bill offers a special exemption, allowing donors to give anonymously and allowing the foundations permission to withhold their names from disclosure unless the donors have received some benefit from the foundation -- a loan, for instance, or a luxury box.

It is wrong to suggest that transparency and accountability are in conflict with sound fundraising practices. To the contrary, secrecy has bred trouble for these foundations. Openness will restore faith in their purpose and legitimacy to their work.

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