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Foundations: A good or bad idea?

August 3, 2009
by Nelson W. Burns
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There continues to be a variety of debates on whether nonprofit organizations should have an independent nonprofit 501C-3 to raise philanthropic dollars in support of their mission. Many non-profit boards and executives believe that a separate corporation is just too much administration overhead or bureaucracy; others argue that it provides the focus and attention from the separate board members to raise money independent of the operations nonprofit.

I have always believed that an independent Foundation is also an important strategy to protect the donated or “endowed dollars” from the operations which is often times a more risky business. An alternative to this strategy would be for a nonprofit to partner with a community foundation in their area. These independent community foundations can invest the nonprofits money in a cost effective manner with very little administrative charges.

In either case, the nonprofit board and executive should look at the real reason to have another nonprofit board for fundraising. A Foundation is just another important strategy, good or bad, it is not the goal! The goal might be to protect the donated assets or to hold buildings with mortgages. Through effective planning, board members and executives can make the most effective decision for their organization’s mission and vision.

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Question: which approach would work best in helping preserve the not-for-profit's tax-exempt status? Better to keep operations "clean" and separate from fund-raising, or does fund-raising gain added cachet by close association with the mission? A serious question these days

Nelson W. Burns

Nelson W. Burns

http://www.coleman-professional.com

Nelson W. Burns has been the president and CEO of ...