Attorney General's Opinion
Attorney General, Richard Blumenthal
April 3, 1995
Harry J. Hartley
University of Connecticut
352 Mansfield Road, U-48
Storrs, CT 06269-2048
Dear President Hartley:
In your letter of November 7, 1995, you asked several questions concerning the relationship between the University of Connecticut and the University of Connecticut Foundation. You have informed us that the University of Connecticut (the "University") and the University of Connecticut Foundation (the "Foundation") currently have an agreement that was executed pursuant to Conn. Gen. Stat. § 4-37f(9). You have further informed us that the parties suggest that the agreement be substantially revised. Under this revision, as proposed, the University's Vice President for Institutional Advancement would become the Foundation's president and chief executive officer, and the Foundation would provide fund-raising services to the University. You have asked three specific questions.
First: May University employees work under the direction of the Foundation, with the Foundation reimbursing the University for the salary and fringe benefits of these employees?
Second: May the Foundation utilize money received from the University for fund-raising services to repay its obligations (including salaries) to the University?
Third: May the University provide services, such as computer support services, to the Foundation at no cost?
A "foundation" is "an organization, fund or other legal entity ... established for the principal purpose of receiving or using private funds for charitable, scientific, cultural, educational or related purposes that support or improve a state agency." Conn. Gen. Stat. § 4-37e(2). A "foundation" is not a state agency. Conn. Gen. Stat. § 4-37e(2). The University of Connecticut Foundation is a "foundation" within the meaning of Conn. Gen. Stat. § 4-37e(2).
Conn. Gen. Stat. § 10a-104(a)(1) provides: "Subject to state-wide policy and guidelines established by the board of governors of higher education, the board of trustees of the University of Connecticut shall: (1) Make rules of the government of the University and shall determine the general policies of the university, including those concerning the admission of students and the establishment of schools, colleges, divisions and departments, and shall direct the expenditure of the university's funds within the amounts available." This statute has been interpreted as granting the board "the authority to exercise complete direction and restraint over the actions of those connected with the University, including the teaching staff, employees and students." Connecticut State Employees Association v. Board of Trustees, 165 Conn. 757, 761, 345 A.2d 36 (1974).
1991 Conn. Public Act 91-174, §11 expanded the Board's responsibility under Conn. Gen. Stat. § 10a-104(a) by adding subsection (8), which now provides that the Board of Trustees of the University shall "promote fund-raising at the university." The Board of Trustees, however, has determined to contract with the Foundation to carry out the University's fund-raising duties. Pursuant to Conn. Gen. Stat. § 4-37f(9), the Board's assignment of the University's fund-raising responsibilities to the Foundation must be embodied in "a written agreement between the state agency and the foundation." That agreement must address "any use by the foundation of the agency's facilities and resources including, but not limited to, office space, storage space, office furniture and equipment, utilities, photocopying services,[and] computer systems...." Id. Additionally, the Foundation must "reimburse the state agency for expenses the agency incurs as a result of foundation operations, if the agency would not have otherwise incurred such expenses." Id. (emphasis added).
In response to your first question, we have learned that three employees, who were hired by the University's Development Office, are affected by the proposed transfer of fund-raising responsibility to the Foundation. According to the information you have supplied us, these individuals will work at the Foundation and continue their duties, formerly performed for the University, but under the direction of the Foundation. Our inquiries have also revealed that other fund-raising employees will be employed directly by the Foundation, under the proposed agreement with the University. Although employees are not expressly listed as a resource which may be utilized by a foundation in Conn. Gen. Stat. § 4-37f(9), the statutory itemization is not exclusive. Bridgeport Hospital v. Commission on Human Rights and Opportunities, 231 Conn. 91, 101, (1995). The list of resources contained in Conn. Gen. Stat. § 4-37f(a) was specifically made non-exclusive through the use of the phrase "including but not limited to:" University employees, therefore, may be utilized by the Foundation for fundraising.
In regard to whether the salaries and benefits of the University employees who will work under the direction of the Foundation may be paid by the Foundation, Conn. Gen. Stat. § 4-37i provides in pertinent part: "No officer or employee of a state agency shall receive a salary, fee or loan, or any compensation or other thing of value from the foundation or withdraw funds from a foundation account for any purpose, without the written approval of the executive authority ...." That statute makes it clear that a state employee may receive a salary from a foundation, if that arrangement is approved by the state agency's executive authority.1
In order to respond completely to your question, we have scrutinized the most recent collective bargaining agreement between the University of Connecticut and the union that represents the three employees: The University of Connecticut Professional Employees Association (UCPEA). Although the UCPEA contract expired on June 30, 1992, the parties have agreed that the terms of the expired agreement will remain in effect during the arbitration process, which has recently concluded with an arbitrator's award now pending before the General Assembly. We have found no provision that prevents supervision of UCPEA employees by an outside entity, nor are we aware of any authority that would prohibit a state employee from working under the supervision of a contractor, engaged by a state agency to fulfill its mission. Further, under the Board Prerogatives clause of the UCPEA contract (Article 3.2), both parties have recognized the Board's authority "to determine whether the whole or any part of the operation [the University] shall continue." That provision is continued, without change, in the arbitrator's proposed award. The University's proposal to contract with the Foundation for fund-raising services, while retaining three existing employees in their current status, is well within the Board's discretion under that clause.
Although you have not specifically requested our opinion on the propriety of the role of the University's Vice President for Institutional Advancement as an officer of the Foundation, it is critical that this issue be resolved. Conn. Gen. Stat. § 4-37f(6) provides that "[T]he salaries, benefits and expenses of officers and employees of the foundation shall be paid solely by the foundation." We examine this issue in the context of the proposed agreements between the University and the Foundation. Paragraph 6 of the Memorandum of Understanding requires the Foundation to reimburse the University for the time and effort of the Vice President, for carrying out his Foundation responsibilities. We have ascertained that the Foundation will transfer a sum to the University for an agreed-upon time and effort (during the initial period, twenty-five (25) percent), for inclusion in the Vice President's salary. In other words, twenty-five percent of the Vice President's salary will emanate from the Foundation. Thus, the Vice President's salary, as it pertains to his Foundation assignment, will be paid by the Foundation, as the law requires. Conn. Gen. Stat. § 4-37i, discussed ante, at p.3, is also relevant here. In this instance, a state employee (the Vice President) would be receiving a portion of his salary from the Foundation which is directly related to the portion of his time dedicated to work for the Foundation. This is clearly permissible under that statute, if it is approved by the University's executive authority.
Your second inquiry is whether the Foundation may utilize funds received by the Foundation under its fund-raising agreement with the University to repay the Foundation's obligations back to the University.
The University's Board of Trustees has the authority to enter into contracts to aid the performance of its mission. In Connecticut State Employees Ass'n v Board of Trustee, 165 Conn. 757 (1974), the Supreme Court held that the University's Board could, in the exercise of its authority to direct expenditures, hire a private contractor to provide food service for its students. It is equally clear that the University's Board may retain a contractor (in this instance, the Foundation) to provide fund-raising services and the University may pay the Foundation for its fund-raising services. Conn. Gen. Stat. § 4-37f. To the extent the Foundation utilizes the resources of the University in its fund-raising efforts, Conn. Gen. Stat. §4-37f(9) expressly "requires the foundation to reimburse the state agency for expenses the agency incurs as a result of foundation operations." There is nothing in the statutes which would prohibit the Foundation from making its reimbursement to the University from funds received from the University under the agreement.
In your final question, you have asked whether it is permissible for the University to provide certain services, including computer support, to the Foundation at no cost. According to Conn. Gen. Stat. § 4-37f(9), the use of agency facilities and equipment is a contractual matter between the foundation and agency. Furthermore, a foundation is required to reimburse an agency for state agency expenses incurred as a result of foundation operations only if the "agency would not have otherwise incurred such expenses." Conn. Gen. Stat. § 4-37f(9)(c). As we have already discussed, the Board of Trustees is required by statute to promote fund-raising at the University, whether a foundation exists or not. Accordingly, the contract between the University and the Foundation may specify that certain services provided by the University to its Foundation that support fund-raising need not be reimbursed by the Foundation because such fund-raising expenses would otherwise have been incurred by the University as part of its statutory duties. However, the agreement should specify the type and manner of use of such equipment which must be limited only to fund-raising for the University. Additionally, there should be safeguards in place to prevent the misuse or abuse of state equipment including safeguards to prevent use of state equipment for personal purposes.
A common thread that runs through all of your questions is the statutory requirement that there be an agreement in place between a state agency and foundation. Care must be taken to ensure that the agreement spelling out the respective responsibilities of both entities satisfies all statutory requirements.
We trust that this is responsive to your questions.
Very truly yours,
Paul M. Shapiro
Assistant Attorney General
1 The proposal to reimburse the University by the Foundation for the salaries and benefits of the three University employees who will work for the Foundation, which reimbursement would presumably be made from funds provided by the University under its contract, is unnecessarily circuitous. According to the provisions of Conn. Gen. Stat. § 4-37f(9), discussed infra, the three University employees may be paid directly by the University.