Cal U told program's funds cannot go into foundation

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The State System of Higher Education has informed California University of Pennsylvania that tuition paid for executive leadership training on its campus can no longer go directly to Cal U's foundation but instead must be deposited with the university.

The directive will require adjustments to a program under which training in the principles of the late leadership expert Stephen R. Covey is delivered to executives of area businesses through Cal U's Character Education Institute.

The State System appears to take no issue with net revenue from the instruction ultimately being used by the Foundation for California University of Pennsylvania to create scholarships. But system officials say Cal U is a public asset, and, as such, its instructional programs and income derived from them must be accounted for on the university's books.

Last month, the Pittsburgh Post-Gazette reported on the non-credit Covey training and concerns by some open government advocates that payments made directly to the foundation -- and the lack of university records regarding that income -- effectively took hundreds of thousands of dollars off the state-owned university's books.

At the time, State System spokeswoman Karen Ball said she knew of no system rules governing the practice. But Cal U now says the system has weighed in on where those funds must go.

"We cannot and should not be depositing funds directly with the foundation," said Christine Kindl, a Cal U spokeswoman. "The system has been very clear about that, and we are working as fast as we can to unravel any of those kinds of activities."

Barry Kauffman, executive director of Pennsylvania Common Cause, was heartened by the directive, saying taxpayer-supported institutions like Cal U must have books that fully reflect the school's income and overall financial health.

"I think it's a sensible decision and one that's probably long overdue," he said.

Similar questions about how the 14 State System universities should -- and should not -- use their foundations may move to the forefront now that the State System's board of governors has directed chancellor John Cavanuagh to develop procedures, standards and guidelines regarding relationships between the universities and their affiliated organization, including foundations.

All 14 State System schools have foundations, some dating to the 1960s. In addition to raising gifts for scholarships and other endeavors, these affiliated groups spearhead projects like residence hall construction, floating hundreds of millions of dollars in privatized debt the State System could be called upon to back.

Yet foundation activities over the years generally have been conducted without public scrutiny because the universities have argued that those foundations -- generally 501(c)(3) charities -- are legally separate organizations exempt from open records laws.

Recent court decisions have undermined that argument, prying open some foundation records. Meanwhile, questions have arisen at a number of State System schools as to whether the universities and their affiliated organizations are in fact as separate as they are required to be by law.

Speaking after this month's board of governors meeting, at which the directive to develop guidelines was approved, Mr. Cavanuagh said one goal will be to standardize agreements that the 14 schools have with their affiliated organizations. The resolution requires that he consult with campus leadership in developing the new rules.

"This is going to help clarify and make sure that those separations are put into effect in the way that they are supposed to be," Mr. Cavanaugh said. "By standardizing those relationships, it will make it much easier for us to make sure that's the case."

Cal U's Covey training, delivered in cooperation with FranklinCovey Co., dates to 2006. Employers pay $1,000 per each executive attending sessions, which range from four hours to three days, including a signature workshop based on Mr. Covey's best-seller, "The 7 Habits of Highly Effective People." Revenue after expenses goes to creating scholarships for Cal U students.

In response to a state Right-to-Know Law request from the Post-Gazette, Cal U initially said it had no record of any tuition or scholarship income from the Covey training, nor any records showing how the money was spent. When pressed, the school said those records were kept by the foundation.

Ultimately, Cal U sought the records from the foundation and released them. They put total Covey executive training revenue since 2006 at $849,223 before expenses and a remaining fund balance of $557,149.

To date, a total of $27,495 in scholarships for needy students has been awarded since the program began.

Mr. Kauffman said the more that transparent state-owned universities are in conducting business the more confident taxpayers can be that the best use is being made of public resources. He said that as the State System develops new rules, "They may even want to ask the auditor general for guidance."

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Bill Schackner: or 412- 263-1977.


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