A Watchful Eye: Lawmakers restrict public spending by university foundations

In February 2016, Mike Morsberger, CEO of the University of Central Florida Foundation, decided to accompany a UCF doctoral student to a global government conference in Dubai. The student, an engineer from Tampa, had created a non-profit that makes 3-D plastic printed limbs for children and was to speak at the conference. “Many of the world’s top corporations and major philanthropists were going to be there,” Morsberger says. “Because of the potential for fundraising, I decided to go.”

Morsberger bought a business-class plane ticket for $6,701, paid for with foundation money generated in-house. Previously, he says he always flew coach, but he planned to go straight to the conference after the 16-hour flight to Dubai. The business-class seat enabled him to get off the plane quickly, better rested and ready to work, he says. “It was my best opportunity to be able to step off the plane, straighten my tie and go right to my first meeting.”

A year later, Morsberger and his counterparts at foundations for all 12 schools in the State University System were summoned to appear in front of the Florida House Appropriations Committee in Tallahassee. Before the three-hour hearing on the 2017 session’s second day, House Speaker Richard Corcoran (R-Land O’Lakes) had asked the fundraisers to provide a detailed accounting of their finances, including an itemized list of their recent expenditures. Lawmakers quizzed the foundation employees about their travel policies, salaries and the beneficiaries of their fundraising efforts.

The foundations, although privately financed, receive support from universities in the form of state-funded employees, opening the door to Corcoran’s inquiry. Corcoran also was looking into the spending practices of Visit Florida, which had signed a $1-million contract with singer Pitbull to promote the state. “We were just looking at every aspect of the budget and trying to find areas where there was a gratuitous waste of taxpayer dollars,” Corcoran says.

When Morsberger’s turn came, lawmakers asked him if flying business class was a good use of foundation money. “It was a 16-hour flight,” Morsberger replied. “We decided after talking to administration and the foundation board that business class was worthwhile.”

In addition to his role as foundation chief executive, Morsberger serves as UCF’s vice president for advancement. He says that while he didn’t return from Dubai with donations, he considers the trip a success. “We ended up walking away with several new partnerships,” he says. “Nobody gave us a million-dollar check, but that wouldn’t have been expected. It takes time to cultivate relationships.”

Morsberger’s trip wasn’t the only thing that rankled lawmakers. There also were $61,473 in expenses at the University of Florida for 19 trips to Paris by faculty and students. “Typically, our faculty travel all over the world to do research,” says UF Foundation head Tom Mitchell.

All told, the 12 foundations spent nearly $14 million on both domestic and international travel, with the latter spanning more than 70 countries on six continents. The foundations used about $2 million themselves for fundraising, and the rest went to faculty and student travel for academic purposes.

House Appropriations Chair Carlos Trujillo, a Miami Republican, called the spending extremely troubling. “There’s one goal for these universities — that’s to graduate students,” Trujillo told the Orlando Sentinel. “Their goals are not to send people to China. Their goals are not to fly first class to Dubai.”

Lawmakers also questioned why the foundations had used a large percentage of their grant dollars to supplement the salaries of professors and administrators. At UF, for example, the foundation had provided $39 million for salary supplements — about 35% of its total private support — and $23 million for student scholarships.

Universities say the money for extra pay enables them to hire leading administrators and researchers who bring prestige and funding to the schools. Fundraisers note that donors typically limit the use of their financial gifts to specific purposes — more than 90% of donations are restricted for things like faculty recruitment and retention or campus construction projects. The foundations also point out that they have targeted campaigns aimed at raising money for scholarships.

“In a perfect world, the university’s priorities align with the donor’s interests, but it doesn’t always work that way,” says Tom Jennings, vice president for advancement at Florida State University and president of the FSU Foundation. “Donors tend to give you a lot more if you’re able to put their money to use in a way that’s meaningful to them.”

Ordinarily, the type of spending discussed at the hearing would not have been disclosed to the public. The foundations — separate legal entities with their own governing boards — historically have not had to disclose the details of their spending under Florida’s public-records law. Corcoran says the House compelled them to produce the documents and “basically forced them to come testify under the threat of a subpoena if they didn’t. They were going to show up anyway because we’re the ones appropriating money,” he says.

The House review revealed that during the prior fiscal year, the foundations received nearly $60 million in combined public funds from their host universities — about 12% of their total revenue of $490 million.

After the hearing, lawmakers voted to bar the foundations from using university- funded employees, hoping to end the transferring of tax dollars between universities and foundations. “We didn’t want to see universities drawing down state appropriations and parking them in a third-party entity that’s not under the jurisdiction of the Legislature,” says Rep. Ray Rodrigues (R-Estero).

The proposed ban was included in an education budget bill that passed out of the Legislature, but Gov. Rick Scott then vetoed the bill over a broader dispute with Corcoran, who also has pushed to cut funding for Enterprise Florida, the state’s business recruitment agency.

This year, lawmakers took up the issue again and passed a new bill without public opposition from the foundations. In the intervening months, the foundations had warned that without staffing support from universities, they might be less effective at fundraising. Rodrigues says lawmakers didn’t want to do anything that could diminish the foundations’ ability to raise money for scholarships.

Under the new legislation, which Scott signed into law, universities no longer may transfer state funds to the foundations to help with staff costs, though the foundations may use university-funded employees for their operations. Foundation travel must now be both privately funded and publicly disclosed, and university trustees must appoint the boards of their respective foundations. (In the past, university presidents appointed the foundation boards.)

Corcoran argues that the foundations should be able to do their jobs without tax dollars, adding that if other nonprofits can do it, “so can they. In fact, they should be able to do it twice as well because they’re a brand.”

Meanwhile, Morsberger says travel will remain an important part of his fundraising activities at UCF. “Although social media and direct mail are effective ways to cultivate relationships, that’s not really how the bulk of money is raised,” he says. “We do have to travel and see people one on one. In the end, the price of a plane ticket or a lunch could be rewarded with a six- or seven-figure gift.”

Tags: Education