Nonprofit Board Relationships

[Mike Burns]

The following is not a case unfamiliar to my work. On too many occasions I have been called upon to help resolve the "relationship" between a nonprofit organization and it's "arm" designed to raise money on its behalf. The issues are as relational as they are transactional although most frequently stimulated by one or another transaction that just didn't sit well with the other party. The question at its core: where does the fiduciary duty lie most: with the "parent' institution or with the "child" institution. Clearly, some steps might have been taken when establishing the "arm". But once the damage and more importantly, the relationship sours, it generally falls upon the "parent' to reel the "child" back-in and doing so without damaging what are likely important relationships as well as the donors. Not a great situation all the way around but not so isolated and clearly one that offers lessons.

Here's the Philadelphia Inquirer article about Mansfield University and its fundraising arm.


Fight over fund-raising fractures relationships at Mansfield U.
Updated: JULY 31, 2016 — 1:08 AM EDT

Mansfield University and its nonprofit fund-raising foundation are in a dispute that has led university leaders to ask for the donor list so they can raise money independently of the organization. The foundation staff has been forced out of its campus office.
by Susan Snyder, Staff Writer

The 14 universities in the Pennsylvania State System of Higher Education have separate nonprofit foundations that act on their behalf to raise money from donors.

Mansfield University and its nonprofit fund-raising foundation are in a dispute that has led university leaders to ask for the donor list so
they can raise money independently of the organization. The foundation staff has been forced out of its campus office. Slideshow icon SLIDESHOW
Fight over fund-raising fractures relationships at Mansfield U.
But that relationship at Mansfield University in north-central Pennsylvania - the second-smallest school in the system - has soured in a big way.

The dispute between the Mansfield University Foundation and university leaders became so acrimonious earlier this year that the foundation's three-person staff was forced out of its campus office with just four days' notice. The foundation alleges the university confiscated some of its records, withheld its mail, and forced it to change its name - all after the foundation refused to release donors' names and records to university leaders. The sides agree on little. The university says it didn't confiscate foundation records or keep its mail.

At the heart of the dispute is control over fund-raising for a university that has been running a deficit and losing enrollment. Unhappy with the foundation's performance, the university wanted the donor records so it could begin cultivating donations on its own. Foundation officials refused, saying they promised donors confidentiality and have been supporting the university quite well.

The university has begun its own fund-raising, putting it in direct competition with the foundation and creating confusion among donors. The foundation, now in a rented office just off campus, has hired a lawyer and is mulling legal action to protect its rights as an independent nonprofit.

Both sides have talked to the Attorney General's Office, which declined comment.


Welcome to the Kramer vs. Kramer of university fund-raising.

As more universities in the state system struggle with enrollment loss and less state funding, the battle over fund-raising at Mansfield could serve as a cautionary tale.

"At the end of the day, it is in the best interest of both parties to work closely together," said Mindy Engel, executive director of the renamed Mansfield Foundation. "The foundation stands ready to work out our differences."

Rita Dibble, vice president for institutional advancement, said the university would like to resolve the conflict, too.

"I have not given up hope, hope that they will turn around and partner with us," she said. "It would be beneficial for us, but also for them."

The foundation has existed for more than 40 years and for much of that time worked cooperatively with the university, which is 25 miles from Pennsylvania's "grand canyon" in Wellsboro. At one time, a university employee oversaw the foundation.


The foundation currently administers $18 million in endowments, much of it restricted by donors for specific scholarships and programs.

The relationship between the foundation and the university became increasingly strained after the arrival in 2013 of president Francis L. Hendricks, a retired brigadier general, who has wanted the foundation to raise more money, foundation officials said. Financial pressures also contributed to the friction.

The 2,376-student university faced a $7.8 million deficit in its $45 million budget last school year, which it covered by drawing on reserves and making cuts. In May, the university said it would close a projected $5.1 million deficit for 2016-17 through furloughs, the use of reserves, and other cuts.

The memorandum of understanding between the university and the foundation expired last July. After six months of negotiations failed to produce a new agreement, the university moved to cut ties with the foundation.

The foundation, Dibble said, didn't raise enough money for projects the university wanted. She said of 11 requests she made, only one was honored.

"What they have been doing is hopelessly inadequate," said Dibble, who joined Mansfield last July.

Engel acknowledged there have been times when the foundation declined to fund-raise for projects deemed not feasible by the board. She cited a former president's request to build a movie theater in town.

Other times, she said, the foundation has embraced projects. More recently, the foundation contributed funds for an international walkway on campus.

During the last fiscal year, the foundation received approximately $1 million in directed gifts from donors and disbursed more than $600,000 in scholarships and other support to the university, Engel said. (Dibble disputed the $600,000 figure as too high and said she believed it's about $230,000).

Engel said the foundation has given the president information on donors he wanted to cultivate. Where it drew the line, she said, was on turning over all records.

"They were asking for unfettered access to the foundation's database. That's not something our board found acceptable," she said.

Dibble said she asked the foundation to share information with her, the president, and the alumni director, all of whom would have kept confidentiality, so they could work together on fund-raising.

John Mansfield, president of the faculty union, said university retirees who have donated to the foundation are confused and concerned.

"They trust the foundation," he said. "And now the message [from the university] is 'don't trust them. Just give directly to the university.' "

He said he hopes the conflict can be resolved before the university is harmed.

"We have people here who would never have a chance to go to college if the school closed its doors," he said.

At West Chester University - the largest in the state system - the relationship between the foundation and university leadership stands in stark contrast.

Their officials collaborate and set goals each year and meet monthly.


"It's important for universities and foundations to work well together because that's in the best interest of the students," said Richard Przywara, the foundation's executive director.

All university fund-raising is done through the foundation, which raised more than $5.6 million in cash and in-kind gifts and $5.2 million in planned gifts for 2015-16, much of it from donors who want to remain anonymous, he said.

For that reason, the donor database is maintained at the foundation. If West Chester - a state university - had donor data, some of it could become a public record, said Mark Pavlovich, West Chester's vice president for advancement and sponsored research.

Dibble pointed out that the right-to-know law includes an exemption for donor information.

Erik Arneson, executive director of Pennsylvania's Office of Open Records, said it appears that universities could keep most donor information confidential, perhaps with the exception of amounts. But he said the issue hasn't really been tested in court or before his office.

"We don't want to test it," Przywara said. "It's too critical."

Pavlovich said amounts could point to a donor.

"At an institution where a large gift is pretty noticeable, it can be figured out pretty quickly," he said.

That's what concerns Engel - that donor confidentiality could be compromised. The foundation is continuing to raise money for Mansfield and donors are giving, Engel said.

"But as you can imagine," she said, "donors are cautious and a little concerned about an active dispute between the university and the foundation."

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