Friday, June 11, 2010

Revised Penn State Right-To-Know Report 2010: Background Information Part II

I thought that while we are waiting for today's document dump , as I said below, I'd provide some context and background information  to help people analyze whatever Old Main decides to give us. (Part I is here.)

As of Wednesday, we know that Old Main will acknowledge in its revised RTK report that there are two family members of influential people at the Penn State who either received payment from the University in  a business transaction or who are employed by and received compensation from the  University in fiscal year 2007-2008. Is this list of two individuals exhaustive? This question is almost certainly unanswerable with information in the public domain, but here's some context for those who may want to ask questions of those who know the answer.

The number of family members of influential people with business income or compensation listed by Pitt and Temple are six and one, respectively.  These numbers are in line with Old Main's claim of only two family members. No red flags here.

Did Old Main make an honest effort to determine all family members of influential individuals with business income or compensation? The IRS only require an annual survey to determine if such relationships exist. From the instructions for Schedule L, page 4.
The organization is not required to provide information about a business transaction with an interested person if it is unable to secure the information regarding interested person status after making a reasonable effort to obtain it. An example of a reasonable effort for Part IV is for the organization to distribute a questionnaire annually to each current or former officer, director,trustee, and key employee listed on Form 990, Part VII, Section A, that includes the name, title, date, and signature of each person reporting information and contains the pertinent instructions and definitions for Schedule L, Part IV. The organization is not required to distribute such a questionnaire to organizations or individuals with which it does business, but who are not current or former officers, directors, trustees, or key employees of the organization, in order to have made a reasonable effort or this purpose.
It would be worth asking about the reasonable efforts Old Main made in  its attempt to fill-out Schedule L, Part IV.

If the answer is that they used a questionnaire as described above, then the follow-up should be may we see a blank copy of it.

If the answer is  that as part of their conflict-of-interest policy the Board of Trustees must report the business transactions of family members, then you should be aware that the Bylaws  of the Board of Trustees has a narrower definition of family member than does the IRS and the reporting thresholds for business relations are different and no provision is made for reporting relatives employed by the University.  You can find the IRS guidelines in the instructions for schedule L and the appendix of the  instructions for the Form 990. The Bylaws are here. The relevant part is Article 6. So if this is their answer, it is an admission of their failure to make the reasonable effort demanded by the IRS.

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