CSU Auxiliaries 101. CSU 101 October 25-28, 2015 Pismo Beach, CA. Auxiliary Organizations Association. John Griffin

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CSU Auxiliaries 101 CSU 101 October 25-28, 2015 Pismo Beach, CA Auxiliary Organizations Association John Griffin 2015 AOA President (Chief Financial Officer, The University Corporation, CSU Northridge) Christina Brown 2014 AOA President-Elect (Executive Director, Associated Students, San Diego State University)

What Are They? Overview What Aren t They? Why Were They Created? What Are Their Authorized Roles? 2

Types of Auxiliary Organizations and Activities How Do They Operate? Advantages of Auxiliary Organizations Auxiliary Organizations Association Resources 3

Mission Statement We are a consortium of diverse, entrepreneurial, service-oriented California State University auxiliary organizations whose purpose is to assist in exemplary services, programs, and facilities that further the educational mission of each campus. 4

What Are They? Separately organized legal entities (currently 86) created to perform services and authorized support functions of benefit to the campuses 501 (c)(3) nonprofit public benefit corporations Separate Legal Entities First auxiliary established in 1922 the Fresno State College Association 5

6

Typical Auxiliary Organizations & Revenue Sources Associated Student Body Organization Programs Revenues from student body fees Student Unions, rec centers and children s centers Revenues from student union fees and operations in the facility Sponsored Programs, Research & Special Education Projects Externally funded grant and contract activity conducted by faculty and staff 7

(Typical Auxiliary Organizations continued) Commercial Services Revenue from bookstore sales, dining services, child care centers, and other commercial activities Gifts, Endowments, Trusts, and Fundraising Funds come from external entities intended to support specific activity and other university operations, and typically 90% of donations are restricted as to use Real and Personal Property Auxiliaries can incur debt to purchase property and/or engage in partnership projects to develop property 8

1. An Auxiliary Organization Structure Authorized under the provisions of the California Education Code and TITLE 5 delegating authority to the CSU Trustees, CSU Chancellor, and University Presidents Authorized under Internal Revenue Code and California Corporations Code as 501(c)(3) nonprofit organizations and 509(a)(3) supporting organizations, operated for exempt purposes as a public charity under California and federal law 9

Must have an Operating Agreement with the CSU defining approved activities for each auxiliary Need a written MOU with the campus to establish scope of operations and address other contractual issues Must be fiscally viable (with adequate reserves) Commercial services must be self-supporting Advantage: Provides additional operational flexibility and support to the university 10

Even though auxiliary organizations may be organized as corporations, they are first and foremost auxiliary organizations of the CSU and must therefore operate pursuant to the specific statutes and regulations applicable to auxiliary organizations. 11

The Ladder: Tier One Statutory: Corporations Code Education Code Revenue and Taxation Code Tier Two Regulations: California Code of Regulations (Title 5) Tier Three CSU Policy/Practices: Trustee Resolutions Chancellor s Executive Orders Coded Memoranda ICSUAM Tier Four Campus Policy/Practices Tier Five Auxiliary Governance & Management Policy/Practices 12

What Aren t They? Auxiliary Enterprises or Services Auxiliary organizations are NOT auxiliary enterprises or auxiliary services which are functions or operations that are departments of the university not separate legal organizations. Examples are: Housing Dormitory Revenue Fund Parking Fund Continuing Education Fund (CERF) Student Health Center 13

How a function is organized determines whether it is an Auxiliary Organization or an Auxiliary Enterprise Auxiliary organizations are self-supporting entities, while auxiliary enterprises are self-supporting activities 14

Activity CSU Trustees/Chancellor s Office/Campus Auxiliary Organization Separate Legal Entity Auxiliary Enterprise Operates as Department - Ed Code - Ed Code - Title 5 - Title 5 - Operating Agreement - State rules for - Cal. Corporations Code funds, employees - Nonprofit Public Benefit Corp. Law - Articles of Incorporation & Bylaws - Oversight of Governing Board 15

Why Were They Created? The purpose of CSU auxiliary organizations is: To provide instructional and service aids not normally furnished by the State budget and: Facilitate essential services and activities Enhance budgetary flexibility Manage risk and exposure, shield against liability Increase investment opportunities Purchase and sell real estate 16

Authorized Functions of Auxiliary Organizations Student body organizations (Title 5, Section 42500) 17

Bookstores, dining services, and campus services Housing (e.g., faculty and staff for-sale housing) 18

Gifts, bequests, endowments, trusts Public relations, fundraising, fund management and development Acquisition, development, sale and transfer of real and personal property, including financing transactions 19

Student Unions, Recreation Centers and Children s Centers Supplementary health services Loans, scholarships, grants-in-aids, stipends and related financial assistance 20

(Authorized Functions continued) Externally funded projects including research, workshops, conferences and institutes Instructionally-related programs (e.g., radio, athletics, etc.) Alumni programs (not alumni associations) 21

(Authorized Functions continued) Many of these activities can be performed by either the university or an auxiliary, as long as authorized and with an operating agreement in place Most campuses have traditionally provided these functions through auxiliaries for the following reasons: Limit Risk Exposure Lack of Campus Resources Support to the University Flexibility 22

How Do They Operate? No CSU allocations (General Fund appropriations) Good private sector business practices (an alternative to governmental standards and state procedures), which enhance university capabilities Flexibility and adaptability make auxiliaries useful to their universities Subject to different laws and regulations e.g., different Wage & Hour provisions, different Open Meeting laws, different Records Disclosure requirements 23

Ownership of a Program: Authority to sign related contracts Risk of business loss Legal responsibility and liability exposure Fiduciary duty Policies that will govern the conduct of the program Administrative control over expenditures 24

Financial Reporting for Auxiliaries Auxiliary organizations follow either Financial Accounting Standards Board (FASB) guidelines or Government Accounting Standards Board (GASB) guidelines Auxiliary organizations are required to produce independently audited financial statements and file federal and state tax returns annually Auxiliary organizations with gross revenues of $2 million or more are required by the California Nonprofit Integrity Act of 2004 to present and review the audited financials with an Audit Committee appointed by the auxiliary board of directors 25

(Financial Reporting for Auxiliaries continued) As part of the required audited financial statements, a supplementary information section is completed that presents the financial information in a GASB format The supplementary information is used by the campus and Chancellor s Office for consolidation reporting Auxiliary audited financial information, tax returns, and annual budgets are part of the information posted on each auxiliary website for public viewing as suggested by the Chancellor s Office Auxiliaries are subject to compliance audits from the Chancellor s Office Audit and Advisory Services every three years 26

Advantages of Auxiliary Organization Activities A General Perspective Operate on a self-support basis Diversify resources by generating net revenues from commercial enterprises, contract and grant management, and gift administration Offer private-sector efficiency and flexibility Offer reduced operating costs and alternative employment relationships Accept entrepreneurial and special program risk exposures not appropriate for the public entity 27

(Advantages of Auxiliary Organization Activities continued) Manage endowment funds outside State investment restrictions (e.g., invest in equities to maximize returns) Purchase and dispose of property; provide seed money or loans for development of university projects Enter into public/private partnerships that support the university (shift of project risk and debt issuance) Facilitate certain types of financing, and add debt capacity Engage in statewide education bond campaigns Manage risk exposure 28

AOA Resources Website Resources (www.csuaoa.org) Information sharing Membership directory Legislative and legal updates Library of resource materials Sample policies, procedures and forms 29

(Resources continued) AOA Annual Conference AORMA - Group insurance and pooled benefit programs (cost savings, and millions returned in dividends) Standing Committee resources and programs (e.g., AS/SU, Research, Financial Services, Information Technology, Human Resources) 30

Resources (Continued) Assist in creation of resources for member auxiliaries: Multi-employer VEBA Trust Act as a forum/resource for resolution of common issues Represent interests of auxiliaries to policy-making groups Point of contact with Chancellor s Office, CABO, FOA a partnership with the intent to seek joint solutions to common issues 31

Contact Info John Griffin 2015 AOA President (Chief Financial Officer, The University Corporation, CSU Northridge) john.griffin@csun.edu Christina Brown 2015 AOA President-Elect (Executive Director, Associated Students, San Diego State University) cbrown4@mail.sdsu.edu 32