June 9, 2005 in Idaho

Schools may face new fund-raising rules

By The Spokesman-Review
 

The Idaho Board of Education is proposing changes to the way universities and their fund-raising foundations operate in the wake of the multimillion-dollar collapse of the University of Idaho’s attempted expansion into Boise.

The rules would prohibit or limit many activities that were a part of the University Place deal, which cost the UI and its foundation more than $25 million and put the university into a deep financial hole, as well as prompting federal and state criminal investigations.

The new rules would require the state Board of Education to approve any real estate purchases by foundations or any loans of university money to foundations – actions that were part of the complex series of events surrounding University Place. The rules also give responsibility for the oversight of many foundation functions to the state board, rather than university presidents.

The Board of Education unanimously approved the proposed changes in a first reading of the rules Wednesday. The rules may still be revised before a final vote is taken in August. Once they’re final, each university in Idaho will create a more detailed agreement with the board regarding its relationship with nonprofit foundations.

Former UI President Robert Hoover and former financial vice president Jerry Wallace resigned in 2003, after unauthorized loans from the university to the foundation came to light.

A $900,000 state report on the deal criticized UI officials for failing to keep the state board informed of the various dealings on University Place. The UI itself, in a lawsuit against its insurer over University Place, describes Hoover and other UI employees as having committed “various dishonest acts and/or omissions” in the course of attempting to finance the project.

Under new Board of Education rules, the board would take on the oversight of several foundation functions: annual reports, operating agreements, contract work done for foundations by universities, and approval of foundation auditors.

The new rules would also require foundations to hire independent executive directors. Some university representatives said at the board’s Wednesday meeting that some foundations, especially the smaller ones, would struggle to afford a full-time executive. The board and university officials will continue to discuss the policy and possible revisions until its final vote, expected in August.

The University Place project initially was planned as a four-building center in downtown Boise, but a single building was eventually all that was built. The foundation wound up more than $25 million in debt on the project, though it has repaid about half of that.

The deal exacerbated financial problems at the university, which was forced to cut more than $4 million from its budget and eliminate 67 positions. UI is also cutting some programs and merging others in an effort to get out of debt.

According to the state report of the deal, university officials took “improvident risks,” violated Board of Education policies and possibly state law, hired attorneys whose relationships among the university, foundation and developer constituted conflicts of interest, and provided misleading information to state officials.

The report says that when problems on the project arose, officials wanted to solve the problem “Vandal to Vandal,” – “At times when a problem was encountered with the Project, the response was not to address the issue directly but to instead determine who could be ‘talked to.’ ”

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