Institutionally Related Foundations. Review each of the following cases that describe a public university and a foundation related to it (i.e., an institutionally related foundation). Explain whether the GASB criteria are met so that the organizations should be discretely presented in the financial statements of the public university.
1. University Alumni Association. KMH University Alumni Association was established as a legally separate, tax-exempt organization to support both KMH University and its students. Generally, when the university awards a scholarship to a student ‘ho meets the criteria established by the Alumni Association, the university requests funds from the Alumni Association’s resources. Normally, the Alumni Association honors the request and transfers the funds to the university. In the current year, the Alumni Association has endowed a chair and financed 14 scholarships for the KMH University School of Business and has donated funds for these purposes to KMH University. The funds donated directly to the university and the resources held by the association are significant to the university’s financial statements.
2. University Fund-Raising Foundation. CCB University Foundation is a legally separate, tax-exempt organization whose bylaws state that it exists solely to provide financial support to CCB University. The foundation regularly makes distributions directly to the university and pays certain maintenance expenses by making payments directly to vendors and contractors rather than the university. Separately, the direct cash payments to the university and the maintenance expenses of the university paid by the foundation are not significant to the university: however, they are significant when combined. The economic resources of the foundation that are restricted for the benefit of the university are significant.
3. University Research Foundation. Ten years ago, the State University Research Foundation was established as a legally separate, tax-exempt organization to provide the buildings, laboratory facilities, and administrative support necessary for the faculty of State University to competitively attract and carry out research grants, principally from the federal government and corporations. The foundation’s total research and administrative costs were significant to the university in the current year. The foundation occupies two buildings that it constructed on campus on land leased from the university. A significant portion of the instructional faculty in the School of Engineering, Science, and Technology carry out research at the foundation, and the annual university performance evaluations and merit increases of these faculty are based to a certain extent on the research they perform at the foundation.
The completion of a research grant typically results in the submittal of a report of research findings and recommendations to the grantor, and often the publication of results in academic and professional journals. This research activity is deemed integral to the duties of faculty and is consistent with the university’s mission.
A formal agreement between the university and the foundation requires the foundation to make its general lecture and meeting rooms available, upon request, to the university, and to make certain research laboratories available for special lectures and seminars. The university’s personnel office provides administrative support for hiring foundation personnel, including research technicians who typically are selected by faculty committees. The relationship between the university and the foundation is disclosed in a brochure for prospective faculty of the university.
Students enrolled in university graduate courses work at the foundation as research assistants. They are compensated through stipends paid by research grants through financial aid work-study programs administered by the university. Faculty are required to periodically report their research, instructional, and other efforts through a reporting system administered jointly by the foundation and the university. Faculty working on research grants typically receives a portion of their compensation from grant funds.