IX - 2.00 - POLICY ON AFFILIATED FOUNDATIONS

(Approved by the Board of Regents on March 1, 1989; amended
on November 29, 1990 and amended on October 1,1999)

The Board of Regents of the University System of Maryland
recognizes the importance of voluntary private support and
encourages grants and contributions for the benefit of the
University System, its constituent institutions and
components (hereinafter collectively referred to as "the
System") or for any or all of the educational and support
activities that are operated by the System.  Accordingly,
the Board of Regents wishes to encourage a broad base of
support from many sources, particularly increased levels of
voluntary support. To achieve this goal, the System will
cooperate in every way possible with the work of affiliated
foundations.  The Board of Regents may recognize as an
affiliated foundation an organization that is created and
operated in support of the interests of the University
System of Maryland or one of its constituent institutions or
components, and has as its purpose one or more of the
following:

     1.   To facilitate fund-raising programs and contributions
       from private sources to foster and promote the general
       welfare of the System or one of its components;
       
     2.   To manage and invest private gifts and/or property for
       the benefit of  the  System or one of its components; or
       
     3.   To promote, sponsor, and implement educational,
       scientific, research, charitable or cultural activities for
       the benefit of the System or one of its components and  to
       engage in activities to enhance further the educational,
       research or service mission of the System.

A subsidiary legal entity formed or owned by an affiliated
foundation may use the name or facilities of the System
(including any of its institutions or components) only if it
is
separately recognized by the Board of Regents pursuant to
this policy.  Each organization recognized as an affiliated
foundation shall comply with the policies listed below.*
Pursuant to its statutory responsibilities, the Board of
Regents may revoke its recognition of a foundation that
fails to comply with these policies, in which case the
foundation shall no longer be entitled to use the name or
facilities of the System.

Establishing a Foundation

1.   A foundation may be affiliated with one of the
     following entities: the University System of Maryland, one
     of the 13 institutions of the System, or such other
     component of the System as the Board of Regents may
     determine.  The following official shall be the System
     official responsible for relations with foundations

                              
     affiliated with his or her institution; including
     monitoring compliance with System policies and
     agreements between the foundation and the System:

           (a) The University System of Maryland -- the
          Chancellor
          
          (b)  The 13 institutions and any component of the
               institutions - the appropriate President
               unless otherwise approved by the Board of
               Regents.

     The officials listed above shall hereinafter be
     referred to as the "Responsible Official" with respect
     to any foundations affiliated with his or her
     institution or component.

2.   In accordance with Senate Bill 296, Laws of Maryland,
     1999, the President of a constituent institution may
     establish campus-based foundations without the approval of
     the Board of Regents.  All foundations shall operate in
     accordance with policies adopted from time to time by the
     Board of Regents in consultation with the Presidents of the
     institutions and approved for form and legal sufficiency by
     the Office of the Attorney General.

3.   A President shall give the Chancellor timely
     notification of any new affiliation with a foundation.  Such
     notice shall include the name of the foundation, its mission
     statement, its initial Board members, and copies of its
     Articles of Incorporation and corporate bylaws. Any issue
     about the propriety or right to a foundation's name shall be
     resolved by the Board of Regents.  The Board of Regents
     shall be notified of any change in the purposes or scope of
     activities of an affiliated foundation occurring after its
     recognition by the Board.

4.   Each foundation shall enter into an annual written
     agreement with the System or with the component or
     institution with which the foundation is affiliated.  The
     written agreement shall establish the relationship between
     the parties, describe the purpose of the foundation, and
     acknowledge the applicability of these policies, which shall
     be incorporated by reference therein.  Written agreements
     must be signed by the Responsible Official and by the
     foundation officer authorized to sign such agreements and
     shall be approved by the Chancellor or the Chancellor's
     designee to ensure consistency with all applicable Regents'
     policies.

5.   The written agreement between the institution and the
     foundation shall condition the organization's use of the
     institution's name or any other name, emblem, or mark to
     which the University has any legal right, upon the
     foundation's continuing compliance with the agreement and
     all System policies on affiliated foundations.


                              
6.   Ensuring foundation compliance with Regents' policies
     and reasonably prudent business practices shall be included
     in the President's and, if different than the President, the
     Responsible Official's annual evaluation.


Structure and Independence

7.   Each foundation shall operate as a Maryland not for
     profit non-stock corporation that is legally separate
     from the System and is recognized as a 501 (c) (3)
     public charity by the Internal Revenue Service. The
     management and control of a foundation shall rest with
     a board of directors.  Officers and staff members of a
     foundation and system staff assigned to carry out
     functions of a foundation shall be bonded and liability
     insurance for directors and officers shall be obtained
     by the foundation, in amounts to be determined by the
     board of directors.

8.   Presidents may only be ex-officio and non-voting
     members of the foundation's board of directors. System
     employees may serve as voting members of the board of
     directors of any affiliated foundation, provided that
     System employees do not constitute more than 20% of the
     foundation's board of directors.

9.   With the approval of the Responsible Official, an
     officer or employee of the System may also serve as an
     officer or employee of an affiliated foundation.  An
     employee or officer of a foundation who is also an
     employee or officer of the System may not represent
     both parties in any negotiation between the foundation
     and the System.

     a.   The executive director and support staff of an
          affiliated foundation should be paid employees of
          the foundation and not of the institution. Support
          staff are defined to be those individuals who
          provide direct services to the foundation, such as
          clerks, secretaries, and accountants and does not
          include fundraisers. Should this not be practical
          (e.g. an institution employee provides only part-
          time services to the foundation), the foundation
          shall make a direct reimbursement to the
          institution for its share of the employee's
          salaries and fringe benefits. The foundation shall
          reimburse the institution for at least 33% of
          these costs beginning July 1, 1999, 66% beginning
          July 1, 2000 and 100% beginning July 1, 2001.
                                      
          If a foundation requires a 100% level of effort
          from an individual, that individual shall be a
          paid employee of the foundation and not of the
          institution.  If an institution employee currently
          provides that level of effort and would lose
          benefits if transferred to the foundation, then
          the foundation shall hire and pay for that support
          when the current employee no longer provides that
          support.
     
     
                              
     b.   Alternatively, institution staff may be assigned
          to carry out functions of an affiliated
          foundation, including serving as administrative
          officers and support staff of the foundation
          without reimbursement to the institution.  In any
          such case, the University resources so used shall
          be quantified, included in the written agreements,
          and measured against funds transferred from the
          foundation to the institution.  Also, the written
          agreement shall require that the foundation's
          funds may be expended only by transfer to
          appropriate institution accounts from which they
          may be paid out only in accordance with donor's
          wishes and applicable system and institutional
          policies and procedures. Any exception to that
          requirement must be approved in advance by a
          member of the foundation's board of directors who
          shall not be a university employee and shall be
          reported annually to the Chancellor.

10.  A foundation may use non-staff resources (e.g. space,
     equipment, facilities) of its affiliated institution
     without direct, dollar for dollar reimbursement to the
     institution.  The resources shall be quantified,
     included in an annual agreement, and measured against
     funds transferred from the foundation to the
     institution, or paid by the foundation on behalf of the
     institution.

Activities

11.  Foundations may not engage in activities that conflict
     with federal or state laws, rules and regulations,
     System policies, or the role and mission of the System.
     Foundations shall comply with applicable Internal
     Revenue Code provisions and regulations and all other
     applicable policies and guidelines.

12.  All activities of affiliated foundations shall be in
     conformance with Section 501 (c) (3) of the United
     States Code.  In particular, "No substantial part of
     the activities (of an affiliated foundation shall be)
     carrying on propaganda, or otherwise attempting to
     influence legislation."  Furthermore, no affiliated
     foundation shall directly or indirectly "participate
     in, or intervene in (including the publishing or
     distributing of statements) any political campaign on
     behalf of (or in opposition to) any candidate for
     public office."  In particular, an affiliated
     foundation may not make any contribution, whether in
     money or in kind, to any candidate for public office.
     The purchase of tickets to an event intended to raise
     money for use by a candidate in a political campaign is
     a violation of this policy.

13.  Except with the express, prior approval of the
     Responsible Official, no foundation shall conduct
     educational or research activities (including administration
     of a research grant or contract) that would be considered
     within the normal scope of the mission of the System or any
     of its components.  If approved, the Responsible Official
     must justify in a letter to the Chancellor the reasons for a
     federal or state contract or grant to be managed by the
     foundations.

                              

14.  Pursuant to State law, a foundation may not offer an
     educational program (i.e., an organized course of study
     that leads to the award of a certificate, diploma or
     degree) unless it has obtained a certificate of
     approval from the Maryland Higher Education Commission
     to operate as an institution of postsecondary
     education.  A foundation shall not apply for a
     certificate of approval without first obtaining written
     approval from the Responsible Official.

Business Operations

15.  All correspondence, solicitations, activities, and
     advertisements on behalf of a foundation shall use the
     name of the foundation and shall be clearly identified
     as an activity of that foundation to ensure that the
     public is aware that the activities undertaken by the
     foundation are separate and distinct from those of the
     System.  The letterhead of a foundation shall carry the
     complete legal name of the foundation (e.g., The
     University of Maryland Foundation, Inc.).  Trademarks,
     service marks, logos, seals, or the name of the System
     or any of its constituent institutions or components
     may be used by a foundation only with the prior written
     approval of the Responsible Official.

16.  In all negotiations and transactions with third
     parties, for fund raising, enterprise activities and
     all other activities, foundation officers and employees
     shall take care to ensure that all parties involved are
     aware that the foundation is an independently
     established and separately operated legal entity from
     the System.  Obligations of affiliated foundations
     shall not be obligations of the System or the State of
     Maryland.

17.  Foundation funds shall be kept separate from System
     funds. System trust funds shall not be transferred to
     foundations for any purpose except, when appropriate,
     by action of the Board of Regents after approval by the
     Attorney General's Office.  Funds or gifts payable to
     the Regents, the University System of Maryland, one of
     its constituent institutions, or to any other system
     component shall not be deposited with a foundation.

18.  Acceptance of gifts by the System or a foundation is
     subject to applicable University System of Maryland policies
     on gifts.  Fund-raising campaigns and solicitations of major
     gifts for the benefit of the System by foundation personnel
     shall be approved in advance by appropriate System officials
     and should be compatible with the plans and needs of the
     System.  Before accepting contributions or grants for
     restricted or designated purposes that may require
     administration or direct expenditure by a constituent
     institution or other component of the System, a foundation
     must obtain the prior approval of the



                              
     Responsible Official. The foundation shall assure that
     each gift shall be used in accordance with the legally
     enforceable terms and conditions attached to such gift.
     
19.  Financial activities of a foundation shall be
     administered in accordance with prudent business practices.
     Each foundation's board of directors shall adopt an expense
     authorization and reporting process.  The process shall
     define the dollar threshold and nature of expenses requiring
     approval of a member of the board of directors, who shall
     not be a USM employee, and it shall define the type and
     frequency of expense reporting to the board of directors.

20.  Should an affiliated foundation's investments
     underperform appropriate market indices for three
     consecutive years, the Regents may request from the
     foundation an independent review of its investment
     strategies along with plans for corrective action.

21.  All USM affiliated foundations shall be assessed an
     annual overhead charge that shall be determined by the Board
     of Regents in consultation with the Presidents.  The charge
     shall be transferred to the University of Maryland
     Foundation, Inc. (UMF) to cover certain costs incurred by
     UMF on behalf of the Board of Regents and the Chancellor.

Audits and Reports

22.  Each foundation shall be audited annually by an
     independent certified public accountant who is not a
     director or officer of the foundation and who is approved by
     the Responsible Official.  Each foundation should conduct
     its fiscal operations to conform to the University System's
     fiscal year.  Each foundation shall prepare its annual
     financial statements in accordance with generally accepted
     accounting principles.  The independent audit shall be a
     full scope review, performed in accordance with generally
     accepted auditing standards.  As part of the audit, the
     auditor shall verify a summary annual report of transfers of
     funds made to the System.  Additionally, each foundation
     shall have a management letter prepared annually by its
     independent certified public accountant and submitted to the
     foundation's board of directors.

23   To ensure compliance with Paragraphs 11 and 12 of this
     policy, each year each affiliated foundation shall provide a
     separate audit of all unrestricted funds available to the
     Chancellor and/or the President(s).

24   Foundations shall make use of an internal auditor to
     strengthen their ongoing commitment to continuously improve
     internal operations and processes



                              
     Foundation internal auditors shall possess sufficient
     experience and training to be able to carry out their
     duties in a professional manner.  They must adhere to
     the Standards for Internal Audit published by the
     Institute for Internal Auditors, Inc.

25.  From time to time, the directors and chief officers of
     each foundation should review their responsibilities
     and the business and operational risks facing the
     foundation.  The Director of Internal Audit of the USM
     shall coordinate meetings with the presidents,
     foundation boards, directors and principal managers of
     each foundation to discuss these risks and the
     potential impact on the foundation.  These meetings may
     also take place at the request of the Chancellor,
     president, or the foundations' board of directors, but
     shall occur at least every three years. Such reviews
     shall include such topics as engagement letters from
     outside auditors, review of tax laws as they impact
     foundations, best business practices, internal control
     structures, and the experiences of similar foundations
     throughout the country.

26.  A foundation shall permit the Responsible Official or
     his or her designee to inspect, at reasonable times,
     the following documents:  the foundation's books and
     records; its most recent federal and state tax returns;
     and a list of employees, consultants, and legal counsel
     for the fiscal year.

27.  Within 120 days after the close of the System's fiscal
     year, each foundation shall provide the Responsible
     Official with copies of the following:

         annual financial audit report;
         annual audit report of transfers made to the system;
         annual audit report of unrestricted funds available to
       the Chancellor and/or the President(s);
         a list of foundation officers and directors;
         a list of System employees who received compensation or
       other payments from the foundation during the fiscal year
       and the amount of that compensation or payment;
         a list of all state and federal contracts and grants
       managed by the foundation; and
         an annual report of the foundation's major activities.

28.  Should the foundation not submit the required reports
     within the required time period, the Chancellor and the
     responsible official shall issue a joint warning to the
     foundation.  Should the foundation not demonstrate
     satisfactory progress toward immediate compliance, the Board
     of Regents may revoke its affiliated status or take other
     appropriate action.




                              
29.  The Chancellor may request from the Responsible
     Official information on affiliated foundations
     according to the schedule and format specified by the
     Chancellor.

30.  At the request of the Chancellor or the Chairperson of
     the Board of Regents, the foundation shall permit the
     internal auditors of the Board of Regents access to all
     books and records of the foundation.

31.  The Chancellor shall annually send any revised Regents'
     policies, foundation audits and other reports required
     by the Board of Regents in this policy to the
     Legislative Reference Office within 180 days of the end
     of the USM fiscal year.

32.  The Board of Regents shall issue an annual report to
     the Legislative Joint Audit Committee regarding the
     operations of the affiliated foundations.  The report
     shall be available no later than 180 days after the end
     of the System's fiscal year.

    Note: Clinical practice plans and alumni associations
  are not covered by this policy, but shall be governed by a
  separate policy.  The following provisions of this policy do
  not apply to the University Research Corporation
  International: 1) second sentence of #8; 2) #9a and b; and
  3) #13.