3.2.13

For any entity organized separately from the institution and formed primarily for the purpose of supporting the institution or its programs, (1) the legal authority and operating control of the institution is clearly defined with respect to that entity; (2) the relationship of that entity to the institution and the extent of any liability arising out of that relationship is clearly described in a formal, written manner; and (3) the institution demonstrates that (a) the chief executive officer controls any fund-raising activities of that entity or (b) the fund-raising activities of that entity are defined in a formal, written manner which assures that those activities further the mission of the institution. (Institution-related entities)

Compliance Judgment

X In compliance Partially compliant Non-compliant

Narrative

The Bylaws of the Board of Trustees charges the President with the authority to manage fiscal and personnel affairs and the operation of all auxiliary enterprises [1]. The President is also given the authority to represent the University in its relationships with affiliated associations, other institutions, and internal and external constituencies [2].

Currently, two foundations assist Francis Marion University in supporting its mission: the Francis Marion University Education Foundation and the Francis Marion University Development Foundation. The controlling bylaws and relationships to Francis Marion University are described below.

Education Foundation

Clearly Defined Legal Authority and Operating Control

Originally named the Francis Marion College Foundation, the Articles of Incorporation indicate the foundation was organized on October 21, 1974 “to promote the education objectives and purposes of Francis Marion College by receiving, acquiring, holding, or otherwise providing property, real or personal, for use by and in furtherance of the welfare of Francis Marion College, its faculty, and student body” [3]. Renamed the Francis Marion University Foundation in 1992 when Francis Marion gained university status and later renamed the Francis Marion University Education Foundation in 2013 [4] with tax exempt status [5], the foundation continues to be a means for soliciting and accepting substantial gifts of money or property.

The organization’s key objectives are as follows:

To promote the educational purposed and welfare of the University by obtaining, acquiring, constructing, or otherwise providing, property, real or personal, for use by the University in the accomplishment of its purposes
To acquire by gift, devise, bequest, purchase or otherwise, finds and other property, real or personal, and to hold, manage, invest, or arrange for investing all of such property for the benefit of the University
To build an endowment fund, the income from which shall be utilized by the Board of Directors in accordance with established priorities and gift restrictions for the exclusive benefit of the University
To determine appropriate projects and programs of the University to be financed in whole or in part from the net profits of the endowment fund and any annual gifts not restricted by the donor
To provide support to other organizations . . . that engage in charitable activities consistent with the charitable purposes of the Foundation and which service the communities of South Carolina or address the need for education, health, material comfort and emotional and spiritual well-being of its citizens or serve humanitarian needs anywhere in the world [6].

As per its purpose, the Francis Marion University Education Foundation is engaged in ongoing fundraising activities to provide scholarship support, program funding, and facility development in support of the University.

Liability

Operational control and responsibilities for each of these entities is outlined and clarified in the Memorandum of Agreement between Francis Marion University and the Francis Marion University Education Foundation [7], and this relationship is further defined by the Bylaws of the Francis Marion University Education Foundation. The agreement addresses the effective management of university liability associated with Francis Marion University Education Foundation’s activities as indicated in the section titled “Asset Management” which states: “The Foundation is responsible for any liabilities it incurs; the University bears no responsibility for Foundation liabilities” [8]. Furthermore, Article III, Section 10 of the bylaws states: “The Foundation shall indemnify [protect] directors, officers, employees, and agents of the Foundation from any and all liability for their acts in the respective capacities, to the extent permitted by state law. Within the boundaries of state law, the foundation may procure insurance providing greater indemnification for all such persons” [9].

Control of Fundraising Activities

Compatible with the University mission “to provide students with an excellent education, stimulate inquiry and research, and serve the Pee Dee region and the state of South Carolina” [10], the Bylaws of the Francis Marion University Education Foundation state that “the purpose of the Foundation is to promote the educational, research and other programs of Francis Marion University” [11].

The governance structure at Francis Marion University further ensures that fundraising activities advance the mission of the institution. The Francis Marion University Education Foundation is governed by an independent, voluntary board of directors, with additional honorary and ex-officio directors, including the President of the University and other key administrators with the goal of offering an avenue for friends and alumni to contribute to the fund raising and asset management program [12]. The Executive Director of the Francis Marion University Education Foundation also serves as the Vice President for Development at Francis Marion University and plans, directs, and administers a comprehensive University development program, coordinates all fundraising activities, and effectively manages Development/Foundation programs, administration, financial affairs, and budget in a way that effectively benefits the University [13]. The Vice President for Development reports directly to the university President [14].

Both the Bylaws of the Francis Marion University Education Foundation and Memorandum of Agreement between Francis Marion University and the Francis Marion University Education Foundation clearly indicate that the role of the Foundation is to support the University through fundraising, asset management, and operational & logistical support for programs. This role is to further the mission of the University.

Development Foundation

Clearly Defined Legal Authority and Operating Control

In 2014, the Francis Marion University Real Estate Foundation was renamed the Francis Marion University Development Foundation [15]. The Bylaws of the Francis Marion University Development Foundation specifies its relationship as a supporting agency to the University. The Francis Marion University Development Foundation, through operation of its wholly owned subsidiary and disregarded entity (for tax purposes) the FMU Student Housing, LLC [16], manages the residence life and residence buildings for the University under which the Francis Marion University Development Foundation receives all net proceeds of student housing and in return provides gifts and rental revenues to the University annually from such proceeds. Since the corporation is not organized for profit, it is “operated exclusively for charitable and educational purposes within the meaning of Section 501 (c) (3) of the Internal Revenue Code of 1986 (or the corresponding section of any future federal tax code)” [17, 18, 19]

Liability

Liability for all debts and operations of the Francis Marion University Development Foundation as well as its wholly owned subsidiary, the FMU Student Housing, LLC, is the sole responsibility of the Francis Marion University Development Foundation and the LLC with no recourse to the University. Both organizations were established in this manner for the sole purpose of minimizing all and any exposures of financial liability to the University. The relationship between the University and Francis Marion University Development Foundation is outlined in the Section 1.4 of the Bylaws of the Francis Marion University Development Foundation and is recognized as a supporting agency of the University under its IRS non-profit code section status.

There are two main documents that guide the relationships and liability of Student Housing Operations at Francis Marion University:

The Land Lease Agreement [20] between the University (Lessor) and the FMU Student Housing, LLC (Lessee).
The Management Agreement [21] between the FMU Student Housing, LLC (Project Manager) and the University (Agent for the Project Manager).

These documents were created to support and remove liability for all bonded debt for housing facilities as well as limit liability for the operation of these facilities for the University.

Control of Fundraising Activities

The Francis Marion University Development Foundation is operated “exclusively for the benefit of Francis Marion University,” and “specifically to acquire, construct, finance, pledge, improve, maintain, operate, manage, and lease” student and faculty housing facilities and other real estate “for the benefit and support of the University”; the foundation may receive “contributions and gifts as deemed necessary,” and it “shall have no power to engage in activities not in furtherance of such purpose” [22].

The governance structure at Francis Marion University further ensures that the Francis Marion University Development Foundation remains consistent with the mission of the institution. The University has active membership on the Foundation’s Board of Directors as the University holds an option to appoint nearly half of the board, consisting of five to eleven members. The University can designate the number of “directors equal to the largest whole number that is less than 50% of the number of directors” [23]. This representation of members therefore has a large input in upholding the University mission.

To summarize, both of these organizations, the Francis Marion University Education Foundation and the Francis Marion University Development Foundation, exist exclusively to support the mission of Francis Marion. The relationship between these organizations and the University, including issues linked to liability, are clearly defined in written, formal documents.

3.2.13 Institution-Related Entities

3.2.13

Compliance Judgment

Narrative

Education Foundation

Clearly Defined Legal Authority and Operating Control

Liability

Control of Fundraising Activities

Development Foundation

Clearly Defined Legal Authority and Operating Control

Liability

Control of Fundraising Activities

Documentation

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