When we advise clients with private foundations, we have to remember that one size does not fit all. The nearly 100,000 private non-operating foundations in the U.S. vary widely, from the amount of their assets to their charitable missions to their management. If you want to give them sound advice and partner with them effectively, you must consider their many different needs.

That means their operational needs in particular. It’s critical to know how they are going to adapt, grow and thrive. Foundation Source has worked with private foundations over more than 20 years, and there are three things we’ve learned that help us provide our clients with the best support.

1. Size And Complexity Are Not Correlated
The amount in assets a foundation holds does not determine whether its activities are more advanced. Foundations can be small and sophisticated, large and simple, and anywhere in between. To put it in perspective, 90% of U.S. foundations have assets of $10 million or less. Those in the midsize category have $10 million to $50 million, and they contribute only about 6% of the entire foundation field. Finally, those entities with more than $50 million make up less than 3% of all foundations (this category includes the Bill & Melinda Gates Foundation and the Lilly Endowment).

One of our most intriguing clients is in the category of small foundations, yet in many ways this organization is run in a notably unique and elaborate way. While many foundations offer traditional grants, this client uses a wide range of charitable giving tools. For example, in addition to making grants, the foundation conducts direct charitable activities—hands-on service with robust communications to promote its mission, the causes it supports and the accomplishments of its grantees.

Given the amount this foundation client has in assets, one might assume it is mostly self-sufficient and requires minimal assistance. But given the intricacy of its activities, it requires sophisticated legal, tax and compliance support as well as strategic philanthropic guidance. 

To gauge a foundation’s degree of complexity (and need for expert support), consider the following:

• Does it have ambitious goals and aspirations?
• Does it pursue a variety of charitable endeavors beyond traditional grant-making?
• Are the relationships among its founders, family members, management and board harmonious?
• Are its financials in order and do its members fully understand IRS compliance issues?
• How integrated are its grant, tax, investment, compliance and administrative activities? Is there a consolidated view of foundation activities to easily gauge progress or problems?

These questions will help you determine how much you need to give a foundation in resources and counsel to help it meet its objectives.

2. Growing Foundations Need Support That Can Be Scaled
Foundations might start out with simple and straightforward needs, but they become more complex as they mature and start using more sophisticated philanthropy tools, which require more support from advisors.

We have another client foundation that grew like this. Since the organization began working with us more than 15 years ago, its assets have increased steadily, as has its grant-making sophistication and the support we provide it. The foundation now has more than $100 million in assets. It partners with us, but it also has an internal staff, and they use multiple grant-making tools. The foundation is deeply engaged with its grantees and it makes multiyear grants as well as program-related investments.

As a foundation client grows, keep the following in mind:

• It may be time for an audit: What is the foundation’s current operational framework? What are its internal strengths? Available resources?
• What resources, in terms of service or staff, does the foundation need to move to the next level?
• Should the foundation increase the range and geographical distribution of the public charities it supports?
• What is the tech stack and can it scale as philanthropic activities increase in volume and complexity?

Some foundations don’t actually intend to grow. Instead, they expect to maintain their current size and scope and operate in perpetuity for future generations. So their needs are static and will remain consistent over time. Effective support for them is determined by how much they want to insource their work by hiring programmatic and operational teams or outsource some of those activities by partnering with various professional service providers.

First « 1 2 » Next