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IX - 2.00 - POLICY ON AFFILIATED FOUNDATIONS
(Approved by the Board of Regents on March 1, 1989; amended
on November 29, 1990 and amended on October 1,1999)
The Board of Regents of the University System of Maryland
recognizes the importance of voluntary private support and
encourages grants and contributions for the benefit of the
University System, its constituent institutions and
components (hereinafter collectively referred to as "the
System") or for any or all of the educational and support
activities that are operated by the System. Accordingly,
the Board of Regents wishes to encourage a broad base of
support from many sources, particularly increased levels of
voluntary support. To achieve this goal, the System will
cooperate in every way possible with the work of affiliated
foundations. The Board of Regents may recognize as an
affiliated foundation an organization that is created and
operated in support of the interests of the University
System of Maryland or one of its constituent institutions or
components, and has as its purpose one or more of the
following:
1. To facilitate fund-raising programs and contributions
from private sources to foster and promote the general
welfare of the System or one of its components;
2. To manage and invest private gifts and/or property for
the benefit of the System or one of its components; or
3. To promote, sponsor, and implement educational,
scientific, research, charitable or cultural activities for
the benefit of the System or one of its components and to
engage in activities to enhance further the educational,
research or service mission of the System.
A subsidiary legal entity formed or owned by an affiliated
foundation may use the name or facilities of the System
(including any of its institutions or components) only if it
is
separately recognized by the Board of Regents pursuant to
this policy. Each organization recognized as an affiliated
foundation shall comply with the policies listed below.*
Pursuant to its statutory responsibilities, the Board of
Regents may revoke its recognition of a foundation that
fails to comply with these policies, in which case the
foundation shall no longer be entitled to use the name or
facilities of the System.
Establishing a Foundation
1. A foundation may be affiliated with one of the
following entities: the University System of Maryland, one
of the 13 institutions of the System, or such other
component of the System as the Board of Regents may
determine. The following official shall be the System
official responsible for relations with foundations
affiliated with his or her institution; including
monitoring compliance with System policies and
agreements between the foundation and the System:
(a) The University System of Maryland -- the
Chancellor
(b) The 13 institutions and any component of the
institutions - the appropriate President
unless otherwise approved by the Board of
Regents.
The officials listed above shall hereinafter be
referred to as the "Responsible Official" with respect
to any foundations affiliated with his or her
institution or component.
2. In accordance with Senate Bill 296, Laws of Maryland,
1999, the President of a constituent institution may
establish campus-based foundations without the approval of
the Board of Regents. All foundations shall operate in
accordance with policies adopted from time to time by the
Board of Regents in consultation with the Presidents of the
institutions and approved for form and legal sufficiency by
the Office of the Attorney General.
3. A President shall give the Chancellor timely
notification of any new affiliation with a foundation. Such
notice shall include the name of the foundation, its mission
statement, its initial Board members, and copies of its
Articles of Incorporation and corporate bylaws. Any issue
about the propriety or right to a foundation's name shall be
resolved by the Board of Regents. The Board of Regents
shall be notified of any change in the purposes or scope of
activities of an affiliated foundation occurring after its
recognition by the Board.
4. Each foundation shall enter into an annual written
agreement with the System or with the component or
institution with which the foundation is affiliated. The
written agreement shall establish the relationship between
the parties, describe the purpose of the foundation, and
acknowledge the applicability of these policies, which shall
be incorporated by reference therein. Written agreements
must be signed by the Responsible Official and by the
foundation officer authorized to sign such agreements and
shall be approved by the Chancellor or the Chancellor's
designee to ensure consistency with all applicable Regents'
policies.
5. The written agreement between the institution and the
foundation shall condition the organization's use of the
institution's name or any other name, emblem, or mark to
which the University has any legal right, upon the
foundation's continuing compliance with the agreement and
all System policies on affiliated foundations.
6. Ensuring foundation compliance with Regents' policies
and reasonably prudent business practices shall be included
in the President's and, if different than the President, the
Responsible Official's annual evaluation.
Structure and Independence
7. Each foundation shall operate as a Maryland not for
profit non-stock corporation that is legally separate
from the System and is recognized as a 501 (c) (3)
public charity by the Internal Revenue Service. The
management and control of a foundation shall rest with
a board of directors. Officers and staff members of a
foundation and system staff assigned to carry out
functions of a foundation shall be bonded and liability
insurance for directors and officers shall be obtained
by the foundation, in amounts to be determined by the
board of directors.
8. Presidents may only be ex-officio and non-voting
members of the foundation's board of directors. System
employees may serve as voting members of the board of
directors of any affiliated foundation, provided that
System employees do not constitute more than 20% of the
foundation's board of directors.
9. With the approval of the Responsible Official, an
officer or employee of the System may also serve as an
officer or employee of an affiliated foundation. An
employee or officer of a foundation who is also an
employee or officer of the System may not represent
both parties in any negotiation between the foundation
and the System.
a. The executive director and support staff of an
affiliated foundation should be paid employees of
the foundation and not of the institution. Support
staff are defined to be those individuals who
provide direct services to the foundation, such as
clerks, secretaries, and accountants and does not
include fundraisers. Should this not be practical
(e.g. an institution employee provides only part-
time services to the foundation), the foundation
shall make a direct reimbursement to the
institution for its share of the employee's
salaries and fringe benefits. The foundation shall
reimburse the institution for at least 33% of
these costs beginning July 1, 1999, 66% beginning
July 1, 2000 and 100% beginning July 1, 2001.
If a foundation requires a 100% level of effort
from an individual, that individual shall be a
paid employee of the foundation and not of the
institution. If an institution employee currently
provides that level of effort and would lose
benefits if transferred to the foundation, then
the foundation shall hire and pay for that support
when the current employee no longer provides that
support.
b. Alternatively, institution staff may be assigned
to carry out functions of an affiliated
foundation, including serving as administrative
officers and support staff of the foundation
without reimbursement to the institution. In any
such case, the University resources so used shall
be quantified, included in the written agreements,
and measured against funds transferred from the
foundation to the institution. Also, the written
agreement shall require that the foundation's
funds may be expended only by transfer to
appropriate institution accounts from which they
may be paid out only in accordance with donor's
wishes and applicable system and institutional
policies and procedures. Any exception to that
requirement must be approved in advance by a
member of the foundation's board of directors who
shall not be a university employee and shall be
reported annually to the Chancellor.
10. A foundation may use non-staff resources (e.g. space,
equipment, facilities) of its affiliated institution
without direct, dollar for dollar reimbursement to the
institution. The resources shall be quantified,
included in an annual agreement, and measured against
funds transferred from the foundation to the
institution, or paid by the foundation on behalf of the
institution.
Activities
11. Foundations may not engage in activities that conflict
with federal or state laws, rules and regulations,
System policies, or the role and mission of the System.
Foundations shall comply with applicable Internal
Revenue Code provisions and regulations and all other
applicable policies and guidelines.
12. All activities of affiliated foundations shall be in
conformance with Section 501 (c) (3) of the United
States Code. In particular, "No substantial part of
the activities (of an affiliated foundation shall be)
carrying on propaganda, or otherwise attempting to
influence legislation." Furthermore, no affiliated
foundation shall directly or indirectly "participate
in, or intervene in (including the publishing or
distributing of statements) any political campaign on
behalf of (or in opposition to) any candidate for
public office." In particular, an affiliated
foundation may not make any contribution, whether in
money or in kind, to any candidate for public office.
The purchase of tickets to an event intended to raise
money for use by a candidate in a political campaign is
a violation of this policy.
13. Except with the express, prior approval of the
Responsible Official, no foundation shall conduct
educational or research activities (including administration
of a research grant or contract) that would be considered
within the normal scope of the mission of the System or any
of its components. If approved, the Responsible Official
must justify in a letter to the Chancellor the reasons for a
federal or state contract or grant to be managed by the
foundations.
14. Pursuant to State law, a foundation may not offer an
educational program (i.e., an organized course of study
that leads to the award of a certificate, diploma or
degree) unless it has obtained a certificate of
approval from the Maryland Higher Education Commission
to operate as an institution of postsecondary
education. A foundation shall not apply for a
certificate of approval without first obtaining written
approval from the Responsible Official.
Business Operations
15. All correspondence, solicitations, activities, and
advertisements on behalf of a foundation shall use the
name of the foundation and shall be clearly identified
as an activity of that foundation to ensure that the
public is aware that the activities undertaken by the
foundation are separate and distinct from those of the
System. The letterhead of a foundation shall carry the
complete legal name of the foundation (e.g., The
University of Maryland Foundation, Inc.). Trademarks,
service marks, logos, seals, or the name of the System
or any of its constituent institutions or components
may be used by a foundation only with the prior written
approval of the Responsible Official.
16. In all negotiations and transactions with third
parties, for fund raising, enterprise activities and
all other activities, foundation officers and employees
shall take care to ensure that all parties involved are
aware that the foundation is an independently
established and separately operated legal entity from
the System. Obligations of affiliated foundations
shall not be obligations of the System or the State of
Maryland.
17. Foundation funds shall be kept separate from System
funds. System trust funds shall not be transferred to
foundations for any purpose except, when appropriate,
by action of the Board of Regents after approval by the
Attorney General's Office. Funds or gifts payable to
the Regents, the University System of Maryland, one of
its constituent institutions, or to any other system
component shall not be deposited with a foundation.
18. Acceptance of gifts by the System or a foundation is
subject to applicable University System of Maryland policies
on gifts. Fund-raising campaigns and solicitations of major
gifts for the benefit of the System by foundation personnel
shall be approved in advance by appropriate System officials
and should be compatible with the plans and needs of the
System. Before accepting contributions or grants for
restricted or designated purposes that may require
administration or direct expenditure by a constituent
institution or other component of the System, a foundation
must obtain the prior approval of the
Responsible Official. The foundation shall assure that
each gift shall be used in accordance with the legally
enforceable terms and conditions attached to such gift.
19. Financial activities of a foundation shall be
administered in accordance with prudent business practices.
Each foundation's board of directors shall adopt an expense
authorization and reporting process. The process shall
define the dollar threshold and nature of expenses requiring
approval of a member of the board of directors, who shall
not be a USM employee, and it shall define the type and
frequency of expense reporting to the board of directors.
20. Should an affiliated foundation's investments
underperform appropriate market indices for three
consecutive years, the Regents may request from the
foundation an independent review of its investment
strategies along with plans for corrective action.
21. All USM affiliated foundations shall be assessed an
annual overhead charge that shall be determined by the Board
of Regents in consultation with the Presidents. The charge
shall be transferred to the University of Maryland
Foundation, Inc. (UMF) to cover certain costs incurred by
UMF on behalf of the Board of Regents and the Chancellor.
Audits and Reports
22. Each foundation shall be audited annually by an
independent certified public accountant who is not a
director or officer of the foundation and who is approved by
the Responsible Official. Each foundation should conduct
its fiscal operations to conform to the University System's
fiscal year. Each foundation shall prepare its annual
financial statements in accordance with generally accepted
accounting principles. The independent audit shall be a
full scope review, performed in accordance with generally
accepted auditing standards. As part of the audit, the
auditor shall verify a summary annual report of transfers of
funds made to the System. Additionally, each foundation
shall have a management letter prepared annually by its
independent certified public accountant and submitted to the
foundation's board of directors.
23 To ensure compliance with Paragraphs 11 and 12 of this
policy, each year each affiliated foundation shall provide a
separate audit of all unrestricted funds available to the
Chancellor and/or the President(s).
24 Foundations shall make use of an internal auditor to
strengthen their ongoing commitment to continuously improve
internal operations and processes
Foundation internal auditors shall possess sufficient
experience and training to be able to carry out their
duties in a professional manner. They must adhere to
the Standards for Internal Audit published by the
Institute for Internal Auditors, Inc.
25. From time to time, the directors and chief officers of
each foundation should review their responsibilities
and the business and operational risks facing the
foundation. The Director of Internal Audit of the USM
shall coordinate meetings with the presidents,
foundation boards, directors and principal managers of
each foundation to discuss these risks and the
potential impact on the foundation. These meetings may
also take place at the request of the Chancellor,
president, or the foundations' board of directors, but
shall occur at least every three years. Such reviews
shall include such topics as engagement letters from
outside auditors, review of tax laws as they impact
foundations, best business practices, internal control
structures, and the experiences of similar foundations
throughout the country.
26. A foundation shall permit the Responsible Official or
his or her designee to inspect, at reasonable times,
the following documents: the foundation's books and
records; its most recent federal and state tax returns;
and a list of employees, consultants, and legal counsel
for the fiscal year.
27. Within 120 days after the close of the System's fiscal
year, each foundation shall provide the Responsible
Official with copies of the following:
· annual financial audit report;
· annual audit report of transfers made to the system;
· annual audit report of unrestricted funds available to
the Chancellor and/or the President(s);
· a list of foundation officers and directors;
· a list of System employees who received compensation or
other payments from the foundation during the fiscal year
and the amount of that compensation or payment;
· a list of all state and federal contracts and grants
managed by the foundation; and
· an annual report of the foundation's major activities.
28. Should the foundation not submit the required reports
within the required time period, the Chancellor and the
responsible official shall issue a joint warning to the
foundation. Should the foundation not demonstrate
satisfactory progress toward immediate compliance, the Board
of Regents may revoke its affiliated status or take other
appropriate action.
29. The Chancellor may request from the Responsible
Official information on affiliated foundations
according to the schedule and format specified by the
Chancellor.
30. At the request of the Chancellor or the Chairperson of
the Board of Regents, the foundation shall permit the
internal auditors of the Board of Regents access to all
books and records of the foundation.
31. The Chancellor shall annually send any revised Regents'
policies, foundation audits and other reports required
by the Board of Regents in this policy to the
Legislative Reference Office within 180 days of the end
of the USM fiscal year.
32. The Board of Regents shall issue an annual report to
the Legislative Joint Audit Committee regarding the
operations of the affiliated foundations. The report
shall be available no later than 180 days after the end
of the System's fiscal year.
· Note: Clinical practice plans and alumni associations
are not covered by this policy, but shall be governed by a
separate policy. The following provisions of this policy do
not apply to the University Research Corporation
International: 1) second sentence of #8; 2) #9a and b; and
3) #13.
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