Attorney General's Opinion
Attorney General, Richard Blumenthal
March 1, 1991
James E. Mulvihill, D.M.D.
V.P. & Provost for Health Affairs
University of Connecticut Health Center
Farmington, CT 06030
Dear Dr. Mulvihill:
This is in response to your request for opinion wherein you raise the following issues:
In response to a recommendation contained in the most recent report of the Auditors of Public Accounts on the University of Connecticut Health Center, we are examining available options relative to the Health Center's Academic Enhancement Fund. This fund consists of monies deposited from outside speaking or consulting activities of our faculty and administrators. These monies are used to support a wide variety of academic and educational activities in support of the Health Center's missions of teaching, research, patient care and community service. Were these funds not available, additional general fund appropriations would most likely be necessary.
We request your opinion as to the legality of two options currently under consideration:
1. Establish the Academic Enhancement Fund as an activity fund in accordance with § 4-52 of the Connecticut General Statutes.
2. Incorporate the Academic Enhancement Fund into the University of Connecticut Research Foundation in accordance with § 10a-110a of the Connecticut General Statutes.
If neither of these options are legally permissible, can you please advise as the existence of any other options short of petitioning the Governor or introducing legislation.
You are advised for the reasons discussed below that (1) as it is currently structured and used the Academic Enhancement Fund does not qualify as an activity fund within the meaning of Conn. Gen. Stat. § 4-52, and, (2) the Academic Enhancement Fund may be incorporated into the University of Connecticut Research Foundation, subject to the statutory restrictions applicable thereto.
By way of background, the Academic Enhancement Fund is a "local fund" operated by the Health Center. A "local fund" is one which is operated by agency personnel entirely. Thus, monies in a local fund are managed in checking/savings accounts separate from those controlled by the State Treasurer or Comptroller. Although the fund has been regularly audited by the Auditors of Public Accounts over the years, the normal restrictions applicable to operation of state funds have not been applied to the Academic Enhancement Fund. Thus, for example, checks have been drawn on this fund without the approval of the Comptroller. Because of that, the Auditors, in their report, recommended as follows:
1. Financial activity currently accounted for in the Health Center Local Fund should be accounted for in a State fund and subject to State Administrative controls.
The Health Center Local Fund was operated without legal authority as a State fund. As such, the activities accounted for in it were administered outside of the State's centralized system of accounting administrative control, in violation of statutory requirements. Within the academic enhancement portion of the local fund, the expenditure of State revenues was considered to be discretionary within department or to individuals and we noted expenditures made for such purposes as employees' parties and gifts.
In your initial question, you inquire as to whether the Academic Enhancement Fund can be established as an activity fund in accordance with Conn. Gen. Stat. § 4-52 et seq. Activity Fund is defined therein as meaning,
"...any fund, operated in any state educational, welfare, medical or correctional institution for the benefit of the employees, inmates or students of such institutions, including so-called patients' funds in hospitals, the revenue of which is derived from the operation of canteens, vending machines, dramatics, recitals, student activity fees, membership fees, deposits or any other legal source compatible with the good government of such institutions."
In addition, Conn. Gen. Stat. § 4-53 provides,
The administrative head of such institution may, with the approval of the comptroller and in accordance with procedures prescribed by the comptroller, establish one or more activity funds. The governor may allot from the funds appropriated to any such institution any amount needed in his judgment for the establishment of any such activity fund, and the comptroller shall provide in such appropriation. The use of such state facilities as space, fixtures, heat and light to obtain revenue from the sources designated in § 4-52 is authorized. At the end of each fiscal year any cash balance in such fund not needed for the maintenance and continuance of its activities may, with the approval of the comptroller, be transferred to the "Institutional General Welfare Fund" of such institution if such a fund has been established and, if not, shall remain in such activity fund.
As you have noted in your letter, monies deposited in the Academic Enhancement Fund are generated by faculty and administrators through outside consulting, speaking engagements or the like. Under the Health Center's consulting policy, faculty and administrators may engage in outside consulting activities only after appropriate administrative approvals are obtained. Income from consulting activities must by deposited in a appropriate Health Center account - most commonly the Academic Enhancement Fund. Discussions with your staff describe the working of the fund as follows. Monies are deposited in the fund to the credit of the department in which the faculty member has his/her appointment. Rules governing the disbursement of funds vary by department. In some departments, the funds are split, with a portion "credited" for future professional; use by the faculty member who generated the income, with the remainder available for use by the department head. In other departments, all funds are co-mingled for general departmental use. In all cases, however, no money can be spent from this fund without prior approval of the department head ( or his designee), the Dean (or his designee), and Health Center financial administration.
We advise that the Health Center's Academic Enhancement Fund does not qualify as an activity fund for purposes of Conn. Gen. Stat. § 4-32 et seq. Activity funds, as defined therein, are intended for general , institutional-wide benefit, as reflected by the broad based nature of the activities and enterprises which provide the income to those funds.
Your staff has further informed us that an earlier request to the Comptroller that the Academic Enhancement Fund be established as an activity fund was denied. Specifically Mr. Caldwell, in his letter to Dr. Mulvihill dated October 26, 1988, stated,
We have determined that the Academic Enhancement Fund does not fall within the statutory guidelines for an Activity Fund. The fact that the dollars do not benefit the employees, students or faculty as a whole but specific groups of faculty member in unequal terms prohibits this type of classification. These consulting fees paid to faculty members within the context of their employer-employee relationship with the UConn Medical Center are more suited to being classified as General Fund or University Health Center Research Foundation Revenue.
Under § 4-53, activity funds may only be established with the approval of the Comptroller. It is an established rule of statutory construction that the practical interpretation of the statutes by governmental agencies responsible for their administration is entitled to great weight. Local 1186 v. Board of Education, 182 Conn. 93, 105 (1980). In this case, we find the Comptroller's interpretation to be a reasoned one. For this additional reason, therefore, the Academic Enhancement Fund does not qualify as an activity fund.
In the alternative, you inquire as to the appropriateness of maintaining these funds in the University of Connecticut Research Foundation. As you know, the Research Foundation is a statutorily created entity, which provides flexibility for the University in carrying out its research mission. Toward that end, Conn. Gen. Stat. § 10a-110a provides, in relevant part:
The board is authorized to establish and manage the foundation as provided herein. The foundation may, subject to direction, regulation and authorization or ratification by the board: (1) Receive, solicit, contract for and collect, and hold in separate custody for purposes herein expressed or implied, endowments, donations, compensation and reimbursement, in the form of money paid or promised, services, materials, equipment or any other things tangible or intangible that may be acceptable to the foundation; (2) disburse funds acquired by the foundation from any source, for purposes of instruction, research, invention, discovery, development of engineering, for the dissemination of information related to such activities, and for other purposes approved by the board and consistent with § 10a-110g, inclusive;
The statute vests in the Board of Trustees broad authority relative to both the deposit of funds in, and disbursement of funds from the Research Foundation. Section (2), which articulates the purposes for which funds may be spent, also helps identify those monies which the legislature contemplated would be housed in the Research Foundation.
We conclude that you are authorized to receive and spend funds, currently hosed in the Academic Enhancement Fund, through the University of Connecticut Research Foundation. We should also note that the Comptroller viewed the research foundation as an appropriate repository for the monies at issue.
Therefore, to the extent that monies currently deposited in the Academic Enhancement Fund are being spent for the purposes outlined in Conn. Gen. Stat. § 10a-110a, we advise that, subject to approval by the Board of Trustees, said funds may legally be deposited in and disbursed from the University of Connecticut Research Foundation.
We trust this answers your questions.
Very truly yours,
RICHARD BLUMENTHAL
ATTORNEY GENERAL
William N. Kleinman
Assistant Attorney General
RB/WNK/gmr
cc: Auditors of Pubic Accounts
The Honorable William Curry, Comptroller