Attorney General's Opinion
Attorney General, Richard Blumenthal
November 23, 1992
Dominick G. Arenziale
Robert J. Hilliard
Deputy State Auditors
State Capitol
Hartford, Connecticut 06106
Dear Messrs. Arenziale and Hilliard:
This is in reply to your request for our opinion of whether the Central Connecticut State University Alumni Association, Inc. (hereinafter "the Association") is a "foundation" as defined by Conn. Gen. Stat. § 4-37e(2). Foundation status would subject the Association to the requirements of Chapter 47 of the General Statutes (Conn. Gen. Stat. §§4-37e - 4-37i), including possibly full audits by the State Auditors. See Conn. Gen. Stat. § 4-37g(b).
Chapter 47 originated as 1989 Conn. Pub. Acts No. 89-267, An Act Concerning Private Foundations Established For the Benefit of State Agencies and Institutions: it has not been amended. it essentially regulates the relationship between a state agency and a foundation set up to give monetary support to the agency. It "...establish[es] the process of oversight for the private foundations which have a fund raising relationship with our public institutions, including those particularly in higher education." Remarks of Sen. Sullivan reporting on the bill which became 1989 Conn. Pub. Acts No. 89-267, 1989 Senate Proceedings, p. 3482. The legislation was occasioned by certain state personnel depositing improperly state moneys into private foundation accounts and then drawing directly upon those foundation accounts. Remarks of Sen. Sullivan, supra- pp. 3483-3484; Remarks of Rep. Kiner reporting on the bill which became 1989 Conn. Pub. Acts No. 89-267, 1989 House Proceedings, pp. 8630-8631; see also testimony of State Auditors Leo Donahue and Henry Becker, 1989 hearings of Joint Standing Committee on Government Administration and Elections, pp. 274-283.
Conn. Gen. Stat. § 4-37e(2) defines a foundation within the purview of Chapter 47 as:
An organization, fund or any other legal entity which is (A) exempt from taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of l986, as amended, and (B) established for the principal purpose of receiving of, using private funds for charitable, scientific, cultural, education or related purposes that support or improve a state agency.
Distilled to its simplest terms, a "foundation" is a §501(c)(3) organization whose principal purpose is to receive or use private funds to benefit a state agency. The touchstone here is the straightforward term "principle purpose." "When the words of a statute are plain and unambiguous, we need look no further for interpretive guidance because we assume that the words themselves express the intent of the legislature;" Rhodes v. Hartford, 202 Conn. 89, 93 (1986); and those words are read "according to the commonly approved usage of the language." Conn. Gen. Stat. §1-1(a). The adjective "principal" is defined as "[f]irst or highest in rank, importance, value, etc.; chief; foremost." Webster's Encyclopedic Unabridged Dictionary of the English Language (1989); see also BIack's Law Dictionary (5th ed.). A purpose is thus principal when it is dominant or exceeds all others in importance. See, e.g., Employees Ins. Of Wausau, Inc. v. Crown Cork and Seal, Inc., 942 F.2d 862, 864 (3rd. Cir. 1991); Bobsee Corp. v. United States, 411 F.2d 231, 238 (5th Cir. 1969). It follows, therefore, in the matter at hand that to be a foundation a §501(c)(3) entity must exist first or foremost to receive or use private funds for the betterment of a state agency. Yet whether a particular entity so exists is not readily discernible from its title. Each entity must be scrutinized before its Chapter 47 status can be definitively ascertained. In other words, determinations of foundation status involve case-by-case analyses.
Since you have informed us that the Association is exempt under §501(c)(3), our inquiry has focused on the second prong of the statutory definition. We have reviewed not only the Association's articles of incorporation and its bylaws but also perused the minutes of its meetings for the past three years, its publications, its reports of its fund raising activities, and its financial statements. From our review we conclude that the Association is not a Chapter 47 foundation because its "principal purpose" is not receiving or using private funds to benefit CCSU.
The Association's raisons d'être, stated in its 1970 articles of incorporation, are "to establish mutually beneficial relations between the [University] and the Alumni and to promote the aims of the [University]." The more contemporary bylaws, revised to May 16, enunciate the same dull purposes. Bylaws, §2.0. The Association operates through a number of standing committees, namely the Management Committee, the Nominating and Bylaws Committee, the Program Committee, the Student Relations Committee, the Ways and Means Committee and the Finance Committee. Bylaws, §6.0. It also has special committees created by the Association's president and board of directors. Bylaws, §7.0.
A review of the minutes of the Association since 1989 reveals, among others, a Sports committee and an Awards Selection Committee. These committees reflect in toto a diverse range of Association activities. The Management Committee, in addition to reviewing the work of the other standing committees, formulates the Association's position on all policy matters including legislation affecting CCSU. Bylaws, § 6.1.1. For example, during the 1990 General Assembly session the Management Committee mounted a write-in campaign to have $6,000,000 added back to the Governor's Budget for Connecticut State University. Minutes, 5-10-90, p. 2. The Student Relations Committee works to develop a rapport between present Students and the alumni. Bylaws, § 6.5.1. It gives awards to recognize student leaders. See, e.g., Minutes, 2-5-90, p. 2 and 2-4-91, p. 1. The Program Committee plans and runs the social and non-revenue generating activities of the Association. Bylaws, § 6.6.1. Its events include homecoming activities, various awards honoring worthy alumni, forming new chapters throughout the country, student recruitment programs, Family Day and Alumni Day programs and the like. As its title reflects, the Sports committee acts as a link between CCSU's intercollegiate sports program and the alumni. The committee nominates inductees into the CCSU Sports Hall of Fame and conducts an induction banquet and speaking programs featuring CCSU coaches; it organizes trips to CCSU athletic events away from campus and alumni sporting events. The Association also publishes a periodical, The Central Alumnus, to keep the alumni in touch with their alma mater.
On the fiscal side, the Ways and Means Committee develops "programs and services which generate revenue for the Association." Bylaws, § 6.3.1. The Finance Committee prepares the Association's annual budget and invests its accounts. Bylaws, § 6.4.1. Revenue is generated from events such as homecoming, a Hall of Fame banquet, class reunions, a golf tournament; from the sale of CCSU chairs, ties and mementos; from concessions at home football and basketball games; from credit card dividends and an alumni insurance program; from various social events for alumni; and from the rental of caps and gowns to graduating students as well as from a grant from the CCSU Foundation. See Association's IRS Form 990, Parts II and III (for FY 1991). During FY 1991, the Association took in approximately $88,000.00 from its various Programs and activities. Id., Part VII, line 93. Its total revenue including interest on deposits was approximately $94,000.00. Id., Part I, line 12. Most of its income was used to cover it's own expenses for that year, which expenses totalled almost $89.000.00. A significant part of the Association's expenses for that year was for the publication of the Central Alumnus. Id., part II, line 38. According to its 1991 balance sheet, the Association's only contributions were made to the CCSU Foundation: (1) $248.30 from a dinner for the Alpha Phi Omega Scholarship Fund and (2) $3,088.37 from a golf tournament for the Detrick Athletic Scholarship Fund. Thus it appears from a review of the Association's structure and activities that receiving or using private funds for purposes which support or improve the University is only one of many of the Association's purposes and certainly is not its principal purpose.
In your letter you allude to the Association's Development Committee as a possible indicator of foundation status. That committee existed to work jointly with the Executive Dean for Institutional Advancement and with the CCSU Foundation, Inc. ("the Foundation") to "plan, implement and evaluate alumni fund-raising programs which generate voluntary contributions to the CCSU Foundation, Inc." Bylaws (7-8-89), § 6.4.1. That committee no longer exists. The present bylaws neither list nor define it is as one of the Association's standing committees. See Bylaws, § 6.0 et seq. In any case, the continued existence of that committee would not have transformed the Association into a foundation. In addition to not existing for the "principal purpose" of receiving or using private funds to support or improve CCSU, the Association has not and does not directly "receive or use" funds from fund raising campaigns. While the Association has in the past assisted in soliciting funds from the alumni (e.g., last year the association joined with the CCSU Foundation to appeal through a "phonathon" to lapsed alumni donors to renew their financial support of the University (Minutes, 12-2-91, p. 2), such funds are not actually received or used by the Association; they are received by the Foundation. As the result of a 1983 agreement between the Association and the Foundation, the latter has undertaken "alumni fund raising through the CCSU Foundation Annual Fund..." Memorandum of Understanding, par. 4(a).
The arrangement between the Association and the Foundation is clearly in keeping with the Foundation's principal purpose, which is to "solicit donations of, accept and receive properties, money, securities...and to disburse such funds...or the income therefrom in aiding, supplementing, improving, enlarging the education, cultural and research facilities and activities of Central Connecticut State [University]." The Foundation has been acknowledged as a Chapter 47 foundation by Board of Trustees of Connecticut Sate University, which has assumed responsibility for compliance with the requirements of Chapter 47. See Resolution No. 91-143 (Policy Book, Board of Trustees of Connecticut State University § 11.27).
Accordingly, we conclude that the Central Connecticut State University Alumni Association is not a "foundation" within the purview of Chapter 47 of the General Statutes.
Very truly yours,
RICHARD BLUMENTHAL
ATTORNEY GENERAL
Bernard F. McGovern, Jr.
Assistant Attorney General
RB/BFM/sad
cc: Dr. Dallas K. Beal, President, Connecticut State University
Dr. John W. Schumaker, President, Central Connecticut State University