Indiana University Foundation

Doing the Right Thing,
the Right Way

How the IU Foundation Earns Your Trust

With public trust in American institutions at its lowest point in years—megabanks and Wall Street come to mind—it seems a good time to remind Imagine readers that the IU Foundation goes to great lengths to be both professional and trustworthy. We recently asked IUF President Gene Tempel and Internal Auditor Jeff Lambright a few questions about accountability.

Accountability is an important word at the IU Foundation. What does it mean to you?

GT: It means the IU Foundation has a fiduciary responsibility, not just to IU, but also to IU’s donors. When someone sends us a check or leaves an estate gift, it’s our job to make sure the money is used the way the donor wants it used. In that sense, we act as trustee on behalf of donors. One way we do that is through our audit process, which Jeff oversees.

JL: Right. Most people think audits are just about finances. While the finances are a big part, at IUF we also focus on donor intent. A lot of my job involves working with IU to make sure that gift money is deposited, invested, and administered according to the donor’s wishes. That’s why we always like to have a gift agreement, signed by the donor, for any sizable gift.

How does a gift agreement work?

JL: A gift agreement is like a contract that specifies the purpose of the gift and outlines the ways IU can use the money. It gives IUF, and the university, a road map for the future.

GT: With a gift agreement in place, both the university and the Foundation will know how a gift is to be used, even when the original parties are long gone. Consider a donor-funded endowment. It doesn’t matter who is sitting in my chair or Jeff’s: That person will still be accountable to the donor, to ensure that the endowment still benefits IU as he or she intended.

So gift agreements are safeguards, to reassure donors that their gifts won’t be repurposed?

JL: Exactly. It works the other way, too: The agreements also reassure the university that there won’t be any confusion if the donor isn’t around to ask. The Foundation invests endowment funds for perpetuity, so we likewise have mechanisms to comply with donor intent for perpetuity.

GT: Woody Allen once said, “Eternity is a really long time—especially near the end.” But for us it’s no joke. The university has been here almost 200 years, and presumably for another 200. Donors have to know we’ll still honor their wishes.

What else does IUF do to ensure accountability?

GT: One thing we do is sitting right here: We have an internal auditor. All large organizations have outside auditors. Ours is Deloitte & Touche. They’re most interested in verifying that our financial records are accurate. But Jeff makes sure that all our internal controls function as intended, not just the financials.

JL: It is pretty unusual for a university foundation to have an internal auditor. IUF was the first; now there are two others I know of. That goes to show how seriously the IUF board takes the issue. While the testing performed by Deloitte is comprehensive, it is primarily an annual review. I’ve implemented a continuous model. To date, we’ve audited more than 10,000 transactions from the financial, operational, and compliance perspectives.

Doesn’t that make everyone nervous, having you checking up on them all the time?

JL: Not at all. Our agreement with IU gives me the authority to look at each academic unit’s records. That’s unusual too, and it says that IU is just as serious about compliance as we are. We have a really close relationship with the university’s audit department—it’s really a partnership.

GT: Another thing we should note is that IUF has adopted Independent Sector’s “Principles of Good Governance.” I was on the committee that drafted them (before I came to IUF), and we developed 33 benchmarks that nonprofits can use as goals. When Jeff and the board evaluated how we stood at IUF, they discovered we already met most of them.

JL: I was really struck by how forward-thinking this organization has been for years. We’re not playing catch-up; we’re ahead of the curve.

This is really all about transparency and donor trust, isn’t it?

JL: Absolutely. People love and support Indiana University, and they need to know that we’re never going to betray their trust, even unwittingly.

GT: That works on two levels. Philanthropy is a private activity, but people do it for the public good. So on the one hand, we have to be transparent with how the money is used—the public accountability—but also sensitive to our donors’ privacy. They have to trust us not to reveal their financial situation to the world, for instance, or even not to sell their contact information. To earn that trust, you have to hold yourself to a higher standard.

JL: We have to make sure that we’re not only doing the right thing, but also doing it the right way.

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