Year of Publication

2004

College

Martin School of Public Policy and Administration

Degree Name

Master of Public Administration

Executive Summary

Statement of Issue

The question of whether or not the University of Kentucky should create a legally independent, institutionally related foundation to receive, hold, invest, and administer the private gift support of the University has been an ongoing debate between UK administrators for many years. This study seeks to identify the potential advantages and disadvantages of creating such a foundation by: (1) conducting a qualitative analysis consisting of personal interviews with officials from the University of Kentucky, the University of Louisville, Western Kentucky University, and Murray State University; and (2) conducting a quantitative regression analysis to determine whether or not there is a significant statistical relationship between the presence of such a foundation and (a) total dollars raised, and (b) endowment investment performance.

Key Findings from Qualitative Analysis

  • Without a separate foundation, UK is able protect private gift funds from state budget cuts.

  • Without a separate foundation, UK is able to legally offer and protect donor confidentiality.

  • UK is no less flexible in its ability to invest private gift funds than other state universities that manage their endowments through separate foundations.

  • A separate foundation would allow UK to bypass time-consuming state regulations associated with accepting and selling real property donations.

  • Although such occurrences are rare, separate foundations pose the risk of creating accountability problems for public universities.

Key Findings from Quantitative Analysis

  • No significant statistical relationship exists between the Presence or Absence of a Separate Foundation and the dependent variable Total Dollars Raised—3-Year Average at public research/doctoral universities.

  • No significant statistical relationship exists between the Presence or Absence of a Separate Foundation and the dependent variable Percent Increase/Decrease in Total Endowment from 2002-2003 at public research/doctoral universities.

Conclusion

The absence of a separate foundation at UK is not related to its fundraising performance as measured by 1) total dollars raised and 2) percent growth in endowment. UK has most of the flexibility that separate foundations have in receiving, investing, and administering private gift support. Only one potential advantage was identified regarding the creation of a separate foundation at UK: the ability to accept and sell real property gifts more expeditiously. Because this advantage involves bypassing state laws that are grounded in the need for oversight of public resources, it raises numerous practical and ethical concerns. I therefore recommend that UK abstain from creating a separate foundation.

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