This corporate foundation awards grants of up to $5,000 to fund projects at schools located in markets where the parent company has a presence.

As many as 2,000 schools submit applications for projects annually, and last year, the foundation made over 300 grants. The foundation’s program was achieving its intended objectives, but the large volume of applications and grants was making the process extremely time-consuming and difficult for staff to manage.

COLLABORATION

Foundation Source moved the entire grantmaking cycle online with Applications, our online grants management system that makes it easy to accept, organize, track, and reply to charitable requests. Applications is available as an add-on to Impactfully, our award-winning web platform for managing a foundation.

Using Applications, we were able to set up a public-facing website for the foundation where grant-seekers can review funding criteria, fill out a customized grant application, and then submit it electronically. Through Impactfully, foundation reviewers, who are given “limited views” to see only the applications that were assigned to them, then score the application.

Because the foundation uses a blind application review process, Foundation Source manages the way information is displayed so that the school’s name and other identifying details are hidden from reviewers. To ensure that the schools are eligible to receive grants from the foundation, we also vet them and add them to our database. With Impactfully, the foundation can easily organize and manage the applications, centrally communicate about them, and generate data and reports. Automated responses make it convenient to acknowledge receipt of applications and inform grant-seekers of their status.

OUTCOME

Foundation Source has streamlined the entire application process, saving the foundation significant time and administrative effort. The foundation is very pleased with their new process, but we revisit it each year and continue to refine it based on their evolving needs.

The post Reducing a Corporate Foundation’s Workload for a High-Volume Program appeared first on Foundation Source.

• Payments to charities for tickets to events, membership benefits, discounts, etc., that will be distributed to company employees who are not both serving as directors, officers, employees or volunteers of the foundation and receiving the tickets or benefits in that capacity.
• Payments to sponsor events where the company will reap advertising benefits (more than the mere recognition permitted in connection with a qualified sponsorship payment).
  • Benefits that cross the line from mere recognition to advertising:
    – Price information or other indications of saving or value
    – Endorsements
    – Inducement to buy/sell/use a service, facility, or product
    – Logos or slogans that are qualitative or comparative
• Grants to domestic or foreign charitable or governmental organizations with which the company is seeking a business relationship.
• Grants to charities in satisfaction of the company’s own pledges.
• Matching a company employee’s grants to charities in satisfaction of the company’s matching grants program, where the company is legally obligated to do so under its own program.
• Cause-related marketing programs.
• Grants that have any element of:
  • Lobbying
  • Voter registration drive
  • Electioneering
• Grants to company employees in connection with emergencies, disasters, or hardships that are not “qualified disasters,” as defined by the IRS (this usually means a presidentially declared disaster)
• Payments for purposes that are not considered charitable per the IRS

In sum: Whether an activity or payment should be funded by the company or the foundation depends upon the nature and extent of any benefits that the company might expect to receive in return for the payment. If the benefits are more than just “incidental or tenuous” under IRS rules, then the payment must be made by the company (not by the foundation) to avoid self-dealing violations and resulting penalties, which must be paid by the self-dealer (never by the foundation).

II. Activities that maybe funded by the foundation

• Domestic and foreign grants to organizations that further charitable purposes and that provide only a “tenuous and incidental” benefit to the company, such as:
  • Grants that will result in publicity, goodwill, and enhanced employee morale for the company
  • Grants that bestow naming rights
    – For example, if the foundation were to make a grant to a hospital, which agrees to name a wing after the company rather than the foundation
  • Matching a company employee’s grants to public charities under the foundation’s—not the company’s—matching grant program
• Grants to charities for whom company employees have volunteered their services; the grants can fund the charity’s programs relating to an employee’s volunteer activities
• Grants to charities in communities in which the company’s o ices or facilities are located
• Permissible recognition of the company in connection with the foundation’s grants:
  • The credit could read as follows:
    – The foundation (most conservative if the foundation is the only contributor) – The foundation, sponsored by the company
    – The foundation and the company (in any order, especially if both contribute) – The company, through the foundation
  • Permissible acknowledgements could include:
    – Logos and slogans that do not have qualitative or comparative descriptions of the company’s products, services, or facilities
    • However, counsel may advise if a company logo or slogan containing qualitative or comparative descriptions is permissible because it is an established part of the company’s identity
  • A list of the company’s locations; website address; contact information
  • Value-neutral descriptions of the company’s product line or services
• Payments to charities for tickets to events, membership benefits, dinners, etc., that will be used by foundation officers, directors, or staff to further a foundation (not a company or personal) purpose.
  • For instance, if the foundation funds the production of an opera, it would be reasonable for foundation personnel to attend opening night to evaluate how the grant funds were deployed
  • The foundation should not provide such tickets to the spouses or other family members of the foundation’s officers and directors (or any other disqualified persons) who do not serve the foundation in an official capacity
  • If it would be helpful to the charity sponsoring an event, the foundation may provide tickets to members of the community who may be potential donors or volunteers of the charity
    • However, tickets must not be provided as a reward to those doing business (or considering doing business) with the company
• Payments in fulfillment of the foundation’s own pledges (as opposed to pledges made by the company or by its executives).
• Emergency and hardship grants to individuals who are not company employees.
• Emergency grants to company employees in connection with a “qualified disaster,” as defined by the IRS (this usually means a presidentially declared disaster).
• Scholarship grants to individuals (NOTE: IRS pre-approval of grant procedures is required, and special rules apply to scholarships established for company employees and/or their children).
• Grants to educational institutions from which the company may wish to recruit employees or at which its employees may wish to enroll, so long as the company does not receive any preferential treatment in hiring or employee admissions.

III. Transactions to be avoided by the foundation

• Self-dealing would result if the foundation and the company were to split the cost of an event ticket by having the foundation cover the charitable portion of the ticket price and having the company cover the portion allocable to the value of goods and services received (for example, entertainment, food, and beverage at a charity dinner).
  • This prohibition against splitting the ticket cost would apply to any other disqualified person as well
  • The company may, however, purchase tickets separately, in parallel with any foundation grant, so long as the company is not paying less for the package resulting in receipt of tickets than would be required without regard to any foundation grants
• If the foundation receives a valuable perk, like ski lift tickets, in exchange for a grant, the foundation must not give the perk to a company executive or a disqualified person (such as a foundation officer or director or their family members), as a self-dealing violation might result.
• The foundation must not lease space either to the company or to any other disqualified person (even if the rates are fair or advantageous to the foundation). Note that the company will be deemed a disqualified person on account of being a “substantial contributor” to the foundation.
• The foundation must not loan funds to the company or any other disqualified person (even if the rates are advantageous to the foundation)
• Except with respect to certain qualifying redemptions of company stock, the foundation must not enter into a sale (or exchange) with the company or any other disqualified person. Accordingly, the foundation must not purchase stock from the company or any other disqualified person, and may sell stock to the company only in very limited circumstances.
• The foundation must not reimburse the corporation for its share of office supplies or equipment; however, the company may provide such supplies and equipment to the foundation at no charge
• The company must not benefit from the use of the foundation’s assets.
  • For example, the company cannot hang foundation-owned artwork in the company’s board room
• The foundation must not make grants, sponsor events, or run programs intended to market the company’s products or services, generate meaningful business opportunities, or provide the company with preferential treatment over others. For example:
  • A foundation grantee cannot be required to purchase products or services from the company
  • The foundation cannot make a grant to a company client as a reward for being a good client
• The foundation must not make a grant to a charity in satisfaction of a pledge made by the company, a company executive, or any other disqualified person.
• The foundation must not make payments to certain high-ranking government officials (with narrow exceptions)
• The foundation must not make payments for purposes that are not considered to be charitable, religious, scientific, literary or educational per the IRS.
• The company must not sign any agreement or pledge on behalf of the foundation, or commit its resources.
• Company’s executives who are not serving on the foundation must not approve the foundation’s donations and should not be able to require the foundation to make donations to a particular charity (although recommending potential grantees should be fine).
• The foundation must not reimburse the company for the wages of its employees who miss work to perform volunteer activities for the foundation.
• The foundation may not pay out-of-pocket expenses incurred by company employees when they undertake volunteer activities for the company.
  • Reimbursement of certain expenses incurred by foundation employees or volunteers may be permissible
• Self-dealing concerns are heightened if the foundation sponsors internships at the company.
  • Such programs are closely scrutinized by the IRS
  • Benefit to company vs. benefit to student interns

IV. Transactions that should be approached with caution

• The company or any other disqualified person may lease space to the foundation, provided that it is leased without charge.
  • If there is a no-charge lease, the foundation may pay a third-party vendor, such as a utility company, for expenses related to the foundation’s use of the space
  • Under no circumstances may the foundation pay these expenses directly or indirectly to the company or any other disqualified person for the payment to be passed along to the vendor
• The company or any other disqualified person may share space with the foundation, and the foundation may bear its fair share of third-party expenses arising from its use of the space, provided that:
  • The foundation and the company or other disqualified person enter into a written agreement containing a set of guidelines for sharing space, facilities, expenses, etc.
  • Areas on able method is used to ensure that the foundation pays only its fair share of expenses—it must not pay any expenses properly attributable to the company or any other disqualified person
    • For example, the foundation’s share of utility expenses may be calculated by applying a percentage based on the square footage occupied by the foundation in proportion to the entire space
  • Record keeping procedures need to be instituted to track the fair allocation of third-party expenses, time diaries, etc.
  • The foundation must directly pay the third-party vendors (who must not be disqualified persons); under no circumstances may the foundation directly or indirectly pay its share of these expenses to the company or any other disqualified person to be passed along to the vendor
• The company or any other disqualified person may loan funds to the foundation, provided that the loan is without interest and for a foundation-related purpose.
• The foundation may have its company stock (if any) redeemed, provided that certain conditions are satisfied. Please contact Foundation Source for additional information if this becomes relevant, as counsel likely will be needed to ensure that no violation results.
• The foundation may provide supplies, facilities, or equipment to the company, provided that:
  • Goods/services/facilities are made available to the general public on at least as favorable of a basis
    as they are to the company
  • A substantial number of people are actually using the goods/services/facilities in question; and
  • The foundation’s furnishing of such items is related to carrying out the charitable purpose(s) that is the basis for the PF’s exempt status
• The foundation may pay the company for certain services rendered to the foundation by the company’s employees, provided that: (1) the services are “personal services” per IRS rules, meaning that the services are professional and/or managerial in nature, (2) the services are reasonable and necessary, and (3) the amount paid for the services is not excessive.
  • Employees must keep records on time spent on company and foundation matters
  • If the foundation expects to make payments to the company or any other disqualified person for such services, the foundation should contact Foundation Source beforehand for additional information to help the foundation ensure that the above conditions are satisfied
• Some foundations and their sponsoring companies have the same or similar logos, which should be fine, provided that the logo doesn’t contain qualitative or comparative descriptions of the company’s products, services, or facilities.

V. Recommendations

• If the foundation wishes to make a grant to a charity where a company executive or any other disqualified person has a personal connection (for example, serves as a board member):
  • The connection should be disclosed to the foundation’s board
  • Some foundations adopt a policy requiring the individual with the personal connection to abstain from voting on the grant
  • The grant should be general and unrestricted grant or should not be earmarked by the foundation for the salary of the related individual
• A company usually staffs its foundation with company employees who are considered volunteers of the foundation. To help insulate the company and foundation from the other’s liability and prevent accidental self-dealing, the company employee/foundation volunteer should keep their roles separate and specify the capacity in which they are acting.
  • For example, in speaking with a potential grantee, the foundation staff member should be clear that they are communicating with the grantee as either a foundation staff person or as a company employee
• The company’s accounting team should determine whether the company’s donation of its own products directly to a public charity (rather than through the foundation) would provide better tax results for the company than the donation of such products to the foundation for distribution to other charitable organizations.
• Some foundations adopt a policy of disclaiming token gifts of nominal value that are provided in return for a grant. However, if token gifts are kept and given to disqualified persons, they may not present a problem if the gifts have no more than nominal value.
• The foundation should convene Board meetings at least annually and should maintain records of its meeting Minutes (or unanimous consents adopted in lieu of meetings). Foundation Source can provide a Minutes workbook, which contains an agenda and can be taken to Board meetings for completion.
• The foundation should consider authorizing certain individuals to enter grants and expenses and authorizing other individuals approve the same.
• If an executive of the company (or any other donor) makes a donation to the foundation, the donor may recommend that the donated funds be granted to a particular charity but should not require the foundation to do so. Requiring the foundation to grant the donated funds to a particular charity can lead to many complications that may impact the donor’s ability to claim a deduction and may prevent the foundation from counting its expenditure of the funds towards meeting its annual 5% minimum payout requirement.

The post Corporate Foundation Guidelines appeared first on Foundation Source.

One of the unique benefits of starting a private foundation—whether it’s happening within a family or a company—is getting family members, close colleagues, insiders and professional teams involved and engaged. Imagine building a lasting legacy and forging deeper relationships as you rally around favorite causes and projects. But without an easy way to interact with each other, this can often feel like a pipedream.

#2: Increasing Efficiency

Making grants, tracking qualifying expenses, searching for eligible IRS tax-exempt organizations and other administrative responsibilities can be time consuming. And many foundations have limited or no professional staff who can support these types of routine foundation management activities. Without simple, intuitive workflows, the efficiency of a foundation suffers.

#3: Improving Organization

Running a foundation means accessing key information and activities. This may include meeting minutes, board books, grant documentation, tax filings—the list goes on and on. Without a single, centralized platform in place, a foundation will find it challenging to pull the important information they need and measure impact quickly and consistently.

The Solution? Meet Impactfully.

Foundation Source has supported thousands of private foundations and their professional teams for more than 20 years and we continue to implement the latest technology to better support philanthropists. That’s why we built Impactfully—a new application that has everything you need to engage with your internal and external teams, streamline routine foundation management activities, and centralize foundation information and activities in a single platform.

Want to See How It Works?

Check out a demo to learn more about how Impactfully is putting philanthropists in the pilot’s seat.

Ready to talk to a philanthropic specialist?

Schedule a call with us here or reach us at 800-839-0054. Together, let’s #begiving.

The post How to Avoid the 3 Challenges Funders Face appeared first on Foundation Source.