1. Association of Governing Boards of Universities and Colleges. All Rights Reserved. AGB Foundation Leadership Forum Terranea Resort, Los Angeles, CA Workshop for New Foundation Board Members AGB Foundation Leadership Forum Terranea Resort, Los Angeles, CA January 26, 2014 1www.agb.org

2. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Presenters Carol Cartwright Former president Kent State University and Bowling Green State University and AGB Consultant ccartwri@kent.edu David Bass Director, Foundation Programs and Research, AGB DavidB@agb.orgDavidB@agb.org (202) 776-0850 2www.agb.org

3. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Agenda Current Contexts Principles Foundations’ Role in Supporting Public Higher Education Responsibilities of Foundation Boards Foundation Roles in Fundraising Structure, Staffing, and Funding Effective Foundation-Institution Partnerships 3www.agb.org

4. Association of Governing Boards of Universities and Colleges. All Rights Reserved. About AGB The Association of Governing Boards of Universities and Colleges is the only national association that serves the interests and needs of academic governing boards, boards of institutionally related foundations, and campus CEOs and other senior-level campus administrators on issues related to higher education governance and leadership. Its mission is to strengthen, protect, and advocate on behalf of citizen trusteeship that supports and advances higher education. AGB has more than 1.250 member institutions including colleges, universities, and affiliated foundation Serve board members, presidents, and CEOs, senior administrators, and board professionals 4www.agb.org

5. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Current Contexts Public institutions are being held to heightened standards of accountability and governing boards are focusing increased attention on financial oversight and risk management Increased needs for private support are leading many institutions to explore changes to the structure of their development programs and, in many cases, look to their foundation to play a more active role in fundraising and assume responsibility for real estate projects Foundation boards’ obligation to ensure intergenerational equity has become increasingly challenging Velocity of Leadership Transitions and competition for development and investment talent 5www.agb.org

6. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Why Have a Foundation?--Practical Separation of privately contributed resources from state funds Facilitation of institutional objectives that would be impossible, impractical, or simply inefficient for state agents such as real estate acquisition and development, debt financed projects, entrepreneurial ventures and partnerships Provision of dedicated stewardship and management of privately contributed resources Safeguarding of donor privacy 6www.agb.org

7. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Why Have a Foundation? -- Strategic Philanthropic leadership (leadership gifts, prospect identification, cultivation, and solicitation, campaign leadership) Engagement of volunteers with specialized expertise (investment management, real property, etc.) Stewardship—Focus on compliance with donor intent Advocacy and advisory roles Continuity of leadership 7www.agb.org

8. Association of Governing Boards of Universities and Colleges. All Rights Reserved. A Different Type of Board Public Institution Boards Institutions that are part of a system may not have a separate board Appointed by governor or legislature (or elected) Composition limited Political Broad range of responsibilities Terms of service limited Foundation Boards Every institution can have its own foundation Self perpetuating Recruited from dedicated supporters Apolitical Narrowly focused on fundraising, management of contributed funds Long-serving 8www.agb.org

9. Association of Governing Boards of Universities and Colleges. All Rights Reserved. The Value of Volunteers “Foundations turn outsiders into insiders” Stature and relationships with community/business leaders Philanthropic leadership Compelling advocates Technical and professional expertise Long-term perspective and visionary thinking Continuity of leadership 9www.agb.org

10. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Giving to Higher Education 1975 - 2010

11. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Growth of Public Higher Ed Fundraising

12. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Public Institution Fundraising Prior to the 1970s most public institutions had neither the ability nor the need to seek significant private support. In the past 4 decades public higher education fundraising has grown exponentially -- volunteer-led foundations have, in addition to their stewardship role, emerged as drivers of public higher-education fundraising. 1990: 39% of $8.2 billion 2000: 43% of $19.4 billion 2010: 48% of $23.5 billion 12www.agb.org

13. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Fundamental Principles The Duty of Care requires full attention to one’s duties as trustee, setting aside competing personal or professional interests insofar as possible The Duty of Obedience refers to trustees’ obligation to promote the mission of the organization within legal limits The Duty of Loyalty requires board members to put the interests of the trust before all others The Duty to Serve the Public Interest in accordance with the foundation’s status as a publicly supported charity 13www.agb.org

14. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Principles for Foundation Boards Absolute clarity regarding the roles, responsibilities, and obligations of the institution and affiliated entities The foundation board is responsible for prudent management and stewardship of privately contributed resources and may play an important advisory role but does not determine institutional priorities The foundation is a philanthropic partner; assets are generally donor restricted. It is not an ATM. Trust of constituents depends on complete fiduciary accountability 14www.agb.org

15. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Commitment to Accountability and Transparency Commitment to accountability should be guiding principle for all parties Affiliated entities should comply with the highest standards of transparency commensurate with the safeguarding of donor privacy or sensitive confidential business information Trust, but verify. Ask uncomfortable questions Apply the smell test, newspaper test, and vampire test Avoid conflicts of interest 15www.agb.org

16. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Responsibilities of Foundation Boards I Maintain the foundation’s fiscal integrity, preserve and protect its assets and provide financial oversight Ensure that the work of the foundation is aligned with the strategic priorities of the host institution Work with the chief executive on the foundation’s long- term strategic plan, and participate in, approve, and monitor progress of the foundation’s plan 16www.agb.org

17. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Responsibilities of Foundation Boards II Engage directly in fundraising, and provide diligent stewardship of philanthropic contributions Advocate for the institution in keeping with its public purpose and the state’s or county’s public agenda Support the foundation chief executive and provide oversight as appropriate, given the position’s reporting relationships Conduct the board’s business in an exemplary fashion and periodically assess the performance of the board, its committees, and its membe rs 17www.agb.org

18. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Expectations of Foundation Board Members I 1.Articulate and support the foundation’s mission and purpose 2.Develop a thorough knowledge of the institution’s mission, strategic priorities, challenges, and opportunities 3.Understand and respect the distinct roles of the foundation and institution boards 4.Accept the fiduciary responsibilities of foundation board members and adhere to foundation policies and practices 5.Scrupulously avoid conflicts of interest and adhere to foundation policy 18www.agb.org

19. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Expectations of Foundation Board Members II 6.Prepare for and participate conscientiously in board and committee meetings, and other foundation activities 7.Exercise independent judgment, ask good questions, and willingly share your time and expertise 8.Work collaboratively with the foundation chief executive, other board members, and institution leaders 9.Advocate for the foundation and the host institution at every opportunity 10. Set an example by personal giving and active participation in the fund-raising process 19www.agb.org

20. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Foundations’ Role in Fundraising (4-Year/2-Year) 34% / 43% are wholly responsible for fundraising for their institutions 10% / 31% direct fundraising with support from institution staff 44% / 23% support fundraising that is directed by institution staff 8% / 2% play little or no role 2015: 27% report that some responsibility for some development functions has been transferred from the institution to the foundation in past 5 years 20www.agb.org

21. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Boards’ Participation in Fundraising Foundation Boards’ contribute an average of 14% of total support raised by public institutions Foundation board members contributed 21% of funds raised during the quiet phase of campaigns vs. 4% contributed by governing board members 88% of foundation boards participate in the cultivation and solicitation of gifts, 80% in campaign leadership 2014: 54% report that board has become more active in fundraising leadership in the past 5 years. AGB: 2010 21www.agb.org

22. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Advocacy Greater numbers of foundation board members now advocate on behalf of the institution with legislators 1995 AGB Foundation Survey: 42.7% serve as advocates 2011 AGB Policies, Practices and Composition of Foundation Boards: 65.9% serve as advocates 2015 AGB Poll: 57% report that the foundation board has assumed greater importance as an ambassador and advocate since 2010 22www.agb.org

23. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Other Changes in Foundation Roles since 2010 42% Foundation board has assumed increased responsibility for real property projects and/or other entrepreneurial ventures 32% Foundation board is more actively engaged in an advisory capacity to institution administrators 27% Responsibility for some development functions has been transferred from the institution to the foundation 14% Responsibility for some development functions has been transferred from the foundation to the institution 14% No major changes in foundation role in the last 5 years 23www.agb.org

24. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Operational Independence Is operational independence important? Changed legal context and public climate Some functional independence can enhance accountability May be important to safeguard donor privacy and strategic business information May be necessary to preserve ability to operate as a private (non-state) entity Foundations with the capacity to self-fund can fire-wall development investment and enhance staff recruitment and retention Board independence is important. As a fiduciary must be invested with authority commensurate with responsibilities Can provide an important control 24www.agb.org

25. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Integration Degree of Integration2-Year4-year Dependent44%24% (Effectively functions as a unit of the institution which provides office space, staff, other support) Interdependent49%49% (Receives some free in-kind benefits, such as office space, service of university employees) Independent7%28% (Operates with a high level of autonomy and reimburses the university of the use of institutional resources) AGB 2011 25www.agb.org

26. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Foundation Board Independence As a fiduciary body it must be invested with authority commensurate with its responsibilities Can provide an important control An independent board is still bound by its mission, the fundamental duties of care, loyalty, and obedience, and the obligation to fulfill its public purposes Rogue foundation boards are rare Benign neglect and a failure to clearly define expectations and reinforce them through orientation, ongoing education, and assessment are all too common 26www.agb.org

27. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Foundation Chief Executive 52% of foundation CEOs also serve as officers of the university Compensation & Reporting Paid by foundation/reports to board27% Paid by foundation/ dual report9% Paid by both/dual report13% Paid by institution/ reports to president17% Paid by institution/ dual report 34% AGB 2011 27www.agb.org

28. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Staffing Truly independent staffing and infrastructure requires a significant endowment (less if the foundation is primarily an asset manager) University staffing ensures clear reporting lines and seamless alignment of institution priorities and the work of the foundation Lack of dedicated staff may undermine the effectiveness and leadership potential of the board Dual reporting relationships are the most common model but can, at times, pose challenges for the incumbent If a board is charged with meaningful responsibilities they must be provided with the resources required to fulfill those responsibilities C 28www.agb.org

29. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Common Revenue Sources—Percentage Utilizing – from 2010 CASE Survey Funding SourcesPercent 1.Institutional support50.6% 2.Unrestricted gift funds63.1% 3.Gift funds restricted for foundation operations18.8% 4.Investment income on unrestricted gifts45.6% 5.Investment earnings or cash float on non-endowed restricted gifts 50.6% 6.Management fee on endowed funds72.5% 7.Gift fee(s)33.1% 8.Revenue from real estate under management20.6%

30. Association of Governing Boards of Universities and Colleges. All Rights Reserved. As a Percentage of Foundation Funding (mean) – from 2010 CASE Survey Funding SourcesPercent 1.Institutional support19.8% 2.Unrestricted gift funds20.1% 3.Gift funds restricted for foundation operations3.3% 4.Investment income on unrestricted gifts6.6% 5.Investment earnings or cash float on non-endowed restricted gifts 9.2% 6.Management fee on endowed funds27.4% 7.Gift fee(s)3.9% 8.Revenue from real estate under management3.7%

31. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Hallmarks of Effective Partnerships Clarity and consensus about the role of the foundation –MOU Integrated planning and the alignment of strategic priorities –Financial, annual development priorities, campaigns Trust, candor, and regular communication Formal and transparent business practices Flexibility 31www.agb.org

32. Association of Governing Boards of Universities and Colleges. All Rights Reserved. The Impact of Foundations “… by and large, what we’re working on today is going to have the greatest benefit to the university 15, 20, 25 years from now.” Gary Bloom, founding chair, Cal Poly Foundation “Working Toward a Working Foundation Board” 32www.agb.org

33. Association of Governing Boards of Universities and Colleges. All Rights Reserved. AGB Member Resources AGB Knowledge Center, sample documents, and policies Regional meetings Online discussion lists for foundation executives, attorneys, and board professionals Trusteeship Magazine, research reports, books, and other publications Foundation consulting service and consultant on call If you have a question please just give us a call David Bass, (202) 776-0850 DavidB@AGB.orgDavidB@AGB.org 33www.agb.org