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FAU appears to gain more authority over Harbor Branch funds

STORY BY GEORGE ANDREASSI (Week of January 20, 2022)

Florida Atlantic University appears to have won greater authority over the $74 million endowment controlled by the Harbor Branch Oceanographic Institute Foundation.

State Circuit Court Judge Elizabeth Metzger ruled the HBOI Foundation’s operating budget shall be approved by both the foundation’s board of directors and FAU’s board of trustees.

Metzger found that state statutes governing the HBOI Foundation’s Direct Support Organization agreement with FAU “provided for FAU review and oversight of the Foundation’s budget.”

Metzger’s Dec. 3 ruling also determined the HBOI Foundation failed to meet its burden of proof for the allegation of anticipatory breach of contract regarding FAU’s attempts to take control of the endowment.

However, Metzger ruled all appointments made to the HBOI Foundation’s board of directors after July 1, 2018 do not require the approval of the FAU board.

Lawyers for the HBOI Foundation and FAU could not immediately be reached for comment on Metzger’s final judgment in the case the Foundation filed on March 30, 2017.

The HBOI Foundation owns $81.6 million in total assets, including an endowment of publicly traded investments totaling $74 million, as stated on its 2019 federal tax return.

The HBOI Foundation lost $843,432 in 2019, the nonprofit organization’s 2019 federal tax return shows. That marked a dramatic decline compared to 2018, when revenues exceeded expenses by $5.5 million, tax returns show.

HBOI Foundation’s lawsuit against FAU came a decade after its 2007 merger agreement with the Boca Raton-based public university.

FAU administrators started asserting greater authority over the HBOI Foundation’s endowment in 2016 and 2017, triggering the conflict.

However, the judge ruled the HBOI Foundation lost its autonomous control over its budget and endowment spending when it entered a Direct Support Agreement with the FAU board of directors in 2007 as part of the Memorandum of Understanding for the merger.

The HBOI Foundation sought the merger with FAU in 2006 because it was losing money and afraid of going out of business, Metzger determined.

“The Foundation knew it had agreed to be a DSO, perhaps not happily,” Metzger wrote. “But with the DSO designation, the Foundation knew its budget would go to FAU’s board of trustees and allowed to do so in 2015 and 2016.”

“In 2105 and 2016 the FAU board of trustees voted to approve the Foundation’s budget,” Metger wrote. “No one from the Foundation raised objections to these Foundation budget approvals by the FAU board in either 2015 or 2016.”

“Approval of the Foundation’s budget was not an issue of contention between FAU and the Foundation until 2017 when FAU’s Dr. Daniel Flynn (vice president of research) began discussing the possibility of FAU taking on certain administrative functions of the Foundation,” Metzger wrote.

Flynn had proposed asserting greater control over the HBOI Foundation’s funds so they could be used to cover the FAU Division of Research’s expenses, court records show.