State Bd. of Accounts v. Indiana University Foundation

• Decision Date: 24 February 1995
• Docket Number: No. 28A01-9402-CV-52,28A01-9402-CV-52
• Citation: 647 N.E.2d 342
• Parties: 98 Ed. Law Rep. 343 STATE BOARD OF ACCOUNTS, Appellant-Defendant, v. INDIANA UNIVERSITY FOUNDATION, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 342

647 N.E.2d 342

98 Ed. Law Rep. 343

STATE BOARD OF ACCOUNTS, Appellant-Defendant, v. INDIANA UNIVERSITY FOUNDATION, Appellee-Plaintiff.

No. 28A01-9402-CV-52.

Court of Appeals of Indiana First District.

Feb. 24, 1995.

Pamela Carter, Atty. Gen., Jon Laramore, Deputy Atty. Gen. Indianapolis, for appellant.

Lynn H. Coyne, Lance W. Wonderlin, Andrews, Harrell, Mann, Chapman & Coyne, Bloomington, for appellee.

NAJAM, Judge.

STATEMENT OF THE CASE

We are asked to decide whether Indiana University Foundation (the "Foundation") is subject to examination by the State Board of Accounts (the "Board"). The Foundation solicits and manages funds from private sources for the use or benefit of Indiana University. In 1990, the Attorney General of Indiana issued an opinion that the Foundation was subject to examination by the Board and, therefore, that its records were open to inspection under the Public Records Act. When a journalist then sought access to its records, the Foundation refused and filed a declaratory judgment action against the Board seeking a determination that the Board does not have audit authority over its accounts. The parties filed cross-motions for summary judgment. The trial court entered judgment for the Foundation, and the Board appeals. ¹

We affirm.

FACTS

The Foundation was established in 1936 to further the educational goals of Indiana University. The Foundation is a private, Indiana not-for-profit corporation exempt from federal income taxation under Internal Revenue Code § 501(c)(3). Its purpose is to "receive, hold, own, manage, use, purchase, mortgage, pledge and dispose of property of all kinds, real, personal and intangible, whether held absolutely or in trust, or by way of agency or otherwise, for the benefit of Indiana University...." Record at 155 (Amended Articles of Incorporation).

The Foundation's articles of incorporation require that the President of Indiana University and at least three members of The Trustees of Indiana University (the "Trustees") shall sit on its board of directors. A majority of the Foundation's board must be graduates of the University. In addition, its board of directors has included, or presently includes, the University Chancellor, a President Emeritus of the University, the University's Athletic Director and former Trustees.

Indiana University's financial relationship with the Foundation is governed principally by two contracts under which the Foundation performs fundraising and investment management services for the University. Under a 1989 "Development Services Contract," the parties agree that:

1. The Foundation will provide to and for the benefit of [the] University development services including but not limited to fundraising programs for individuals, corporations and foundations, associations and others; administration of gifts, gift funds, and trusts; stewardship and donor relations programs; and other services which may be requested by the University from time to time.

2. The Foundation may also serve as the contracting organization or grantee for certain grants or contracts with external funding sources as mutually agreed between the parties from time to time.

Record at 31. This agreement anticipates that the Foundation will provide fundraising and other development services to the University indefinitely but that the "service fee paid by the University shall be negotiated on an annual basis." Record at 32.

In addition, Indiana University has appointed the Foundation as its agent for the management of the University's Endowment Fund pursuant to an "Investment Agency Agreement" also executed in 1989. Under this agreement, the Foundation "is authorized to receive and collect the income, issues, dividends, and profits on the property placed in its charge," agrees to distribute money from the fund to the University upon request and:

shall have full power to buy, sell, invest and reinvest assets of the account. In the buying, selling, investing, and reinvesting, Foundation shall, at all times, exercise its best judgment based on a careful review of all factors deemed pertinent by the Foundation....

Record at 35. The Foundation's fee for these services is based on the value of the Endowment Fund, applying one percentage to the value of the Fund's "equity" assets and another percentage to the value of its "fixed income" assets, calculated quarterly. See Record at 87.

The Foundation is responsible for some 4,500 separate accounts which hold private donations made for the benefit of various programs at Indiana University. These accounts support such programs as University grants, student scholarships and financial aid, and the use of funds in the accounts is often restricted at the request of donors.

DISCUSSION AND DECISION

Standard of Review

In reviewing a ruling on a motion for summary judgment, this court applies the same standard applied by the trial court. Walling v. Appel Service Co. (1994), Ind.App., 641 N.E.2d 647, 648-49. Summary judgment is appropriate only "if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Ind. Trial Rule 56(C). All facts and inferences from the designated evidentiary matter must be liberally

                construed in favor of the non-moving party.  Walling, 641 N.E.2d at 649.   In the instant case, the meaning of several statutes is at issue, and because the parties agree that the relevant facts are not in dispute, the construction of those statutes presents a pure question of law for which disposition by summary judgment is appropriate.  See Robinson v. Zeedyk (1993), Ind.App., 625 N.E.2d 1249, 1251, trans. denied; Wolf v. Kajima Int'l, Inc.  (1993), Ind.App., 621 N.E.2d 1128, 1130, adopted (1994), Ind., 629 N.E.2d 1237;  Faris Mailing, Inc. v. Indiana Dept. of State Revenue (1990), Ind.  Tax, 557 N.E.2d 713, 715
                

Examination by the State Board of Accounts

The central issue in this case is whether the Foundation is subject to the statutory requirement that "[t]he state examiner, personally or through the deputy examiners, field examiners, or private examiners, shall examine all accounts and all financial affairs of every public office and officer, state office, state institution, and entity." IND.CODE § 5-11-1-9(a) (emphasis added) ("State Board of Accounts statute"). The Board does not allege that the Foundation has mismanaged either the monies from private sources entrusted to it by Indiana University or the gifts which the Foundation has received directly from private donors. Rather, it contends that the Foundation's account records should be subject to routine Board examination and, therefore, also open to inspection under the Public Records Act, because the Foundation qualifies as either a "public office" or public "entity" under the State Board of Accounts statute.

I. Public Office

We first address the Board's contention that the Foundation is a public office under the State Board of Accounts statute. For purposes of the statute, a "public office" is defined as "the office of any and every individual who for or on behalf of the state or any municipality or any public hospital holds, receives, disburses, or keeps the accounts of the receipts and disbursements of any public funds." IND.CODE § 5-11-1-16(c). Thus, a "public office" must: (1) hold, receive, disburse or keep; (2) public funds; (3) for or on behalf of the state. The Foundation does not satisfy two of these three criteria.

A. Public Funds

The Board asserts that the Foundation's accounts are comprised of "public funds" because Indiana University is a public institution and the funds the Foundation holds for the use or benefit of the University are "impressed with a public interest," even if received from private sources. The parties agreed at oral argument that the funds the Foundation holds and manages in trust are in fact derived exclusively from private sources. Thus, the dispositive question becomes whether gifts and grants from private sources made to Indiana University, or to the Foundation for the University, retain their private character once they have been dedicated for public use.

The term "public funds" used in Indiana Code § 5-11-1-16(c) is not defined. It is a general rule of statutory construction that undefined words and phrases in a statute are given their plain, ordinary and usual meaning. IND.CODE § 1-1-4-1(1). Courts may consult English language dictionaries to ascertain the plain and ordinary meaning of a statutory term. Walling, 641 N.E.2d at 649. According to its plain and ordinary meaning, funds are "public" if they relate to or affect all the people of a nation or state, or relate to community interests as opposed to private affairs. Merriam Webster's Collegiate Dictionary at 944 (10th ed. 1993). Here, such a generic definition is inadequate because "public funds" is a technical term which has a peculiar and appropriate meaning in law. See I.C. § 1-1-4-1(1).

The technical nature of the term "public funds" for purposes of the State Board of Accounts statute is apparent from the fact that this term is defined elsewhere in Title 5 in the article concerning the deposit and investment of public funds. Statutes relating to the same general subject matter are in pari materia and should be construed together. See Community Hospital of Anderson & Madison County v. McKnight (1986), Ind., 493 N.E.2d 775, 777. The legislative definition of certain words in one statute For purposes of Article 13 of Title 5, " '[p]ublic funds' means all fees and funds of whatever kind or character coming into the possession of any public officer by virtue of that office." IND.CODE § 5-13-4-20. This definition indicates that funds are public only when they are in the possession of, or are entrusted to, a public officer. The funds in question in the present case would not qualify as "public funds" while held by a not-for-profit...