Foundation still needs to be more transparent

By Iowa City Press-Citizen

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“There's a reason you're confused. They want you to be confused.”

That's what Gary Fethke told the folks over at the Des Moines Register about why they were having trouble getting straight answers from the University of Iowa Foundation.

And we think Fethke - former dean of the UI Tippie College of Business and the interim UI president between David Skorton and Sally Mason - summed it up well.

As much as we support the fundraising work being done by the foundation on behalf of the university, we don't like how its fundraising efforts and finances begin to dust up any money trail until it's all but opaque.

Take the relationship between UI and the Old Capitol Town Center, for example.

It's convenient shorthand to say that the university “owns” about two-thirds of the Old Capitol Town Center - which UI calls University Capitol Centre.

But the truth is the spaces occupied by UI are owned by UI Facilities Corp., a taxable nonprofit arm of the UI Foundation. Over the past few decades, UI Facilities Corp. has assisted in financing UI buildings such as the Eckstein Medical Research Building, the Medical Education and Biomedical Research Facility, the Pomerantz Center and the Carver Biomedical Research Building.

In the case of the University Capitol Centre, back in the mid-2000s UI Facilities Corp. financed the purchase and improvements of the former Younkers mall space through issuance of tax-exempt bonds. It then entered a lease agreement with the Iowa state Board of Regents stating that, at the end of the 20-year financing period and lease term, the property could be transferred to UI. A similar process was used when UI Facilities Corp. financed additional space in the mall on behalf of the Board of Regents and the university after the 2008 floods.

There's nothing necessarily shady about the arrangement. (The UI Foundation folks stress that all of these transactions were approved by the Board of Regents and that the corporation “receives no pecuniary benefit from leasing to the university as all lease payments go to satisfy acquisition debt.”) But it just makes following the money that much more difficult.

So, we're not surprised that - when our Register colleagues began looking into how much of the foundation's $1.1 billion in assets is going for student aid - they discovered just how quickly that trail becomes murky.

“The foundation tells the IRS its financial statements are available online,” the Register Editorial Board wrote Monday. “The Des Moines Register opinion staff couldn't locate a comprehensive statement and finally had to ask the foundation to send one. Officials did - along with a message that any future questions (including whether the foundation could have allocated more than $13.7 million to student financial aid last year) should be directed to the university.”

And we don't quite understand the foundation's tactic here of deferring further questions to the university. Back in 2005, the Iowa Supreme Court clearly ruled that the university foundations were subject to the state's open government laws.

“A government body may not outsource one or more of its functions to a private corporation and thereby secret its doings from the public,” the court wrote.

For years after the court ruling, we received a number of similar responses from the UI Foundation when we requested information - as foundation staff were adjusting to the new political reality and perhaps hoping the Iowa Legislature would change the law to shield them from such public scrutiny.

But it's long past time for the UI Foundation to ensure that it is as transparent as possible.

As the Register wrote, “There is no doubt the finances of such a huge foundation are complicated. Of course that complexity is exactly why more detailed financial information, including auditors' reports, should be easily available to the public.”

That's the only way the foundation is going to be able to defend itself against its critics. And that's the only way the foundation is going to maintain trust among Iowans interested in ensuring that their donated dollars go to benefit students.