From The Ceo

Now that 2016 is well underway, you’re probably focused on new goals for your foundation. Whether you’d like to explore granting directly to individuals, discretionary funding, or simply maximizing your impact while avoiding past mistakes, we at Foundation Source would like to help. In this edition of The Source, we’ve assembled content, tools, and tips that can help your foundation succeed.

Although I hope that you enjoy this newsletter and find it useful, I’d like to remind you that there’s another valuable resource available to you: The Foundation Source Forum. Many of you have asked how you can connect with your peers, so we’re delighted to introduce this secure social media platform that makes it possible for you to converse, share ideas, and ask questions of your fellow clients.

To get started on The Forum, log in to your foundation, click on the icon that appears on The Portal, and select your user name. This user name, which will be visible to other clients on The Forum, can be your personal name or that of your private foundation, or it can be something entirely different (e.g., SkierMom118).

Whether you need ideas on how to engage the next generation in the foundation’s work or you want to compare notes with another foundation working to protect Brazil’s rainforest, your peers offer answers and inspiration. I encourage you to visit The Foundation Source Forum at your earliest opportunity and participate in ongoing conversations.

Best wishes for a healthy and happy 2016!

Robert Chartener

Scheduled System Maintenance

We will be performing maintenance on Foundation Source Online, your foundation’s web platform, on Saturday, February 6th beginning at 10:00 AM and ending on Sunday, February 7th at 10:00 AM EST. During this time, Foundation Source Online will be unavailable as will Foundation Source Requests. We hope this won’t be too much of an inconvenience as we work to perform some necessary system maintenance.

Action Items

  1. Get out in front of important tax deadlines. For foundations with a December year-end, March 1st is the deadline for completion of your Foundation Source Tax Questionnaire, and Foundation Source should receive your signed tax return by May 6th. (An extension will automatically be filed if the signed return isn’t received by this date.) To access the online tax questionnaire, log in to your foundation. You’ll find a link to the questionnaire in the Annual Tax Return Status section of your foundation’s homepage. This is also where you will be able to review the prepared return and provide comments.
  2. Let Foundation Source know if your foundation acquires new assets that do not appear on your investment statements, such as real estate or artwork, or if you conduct new business activities, such as opening an office or hosting a fundraising event.
  3. Plan a 2016 board meeting. You should meet at least annually to review your grantmaking strategy, investment performance, and governing policies. To make taking the minutes easy, use our handy Minutes Module. It’s located under the “Documents” tab on your foundation website. If you can’t locate it, please call your Private Client Advisor.


Did You Know?

did-u-know_03Private foundations are required to pay a federal excise tax of 2% on their net investment income. It is possible, however, to qualify for a reduced tax rate of 1% for any year in which the foundation pays out enough in grants and other qualifying expenses to reach a target amount.

Depending on the foundation, the difference between 1% and 2% isn’t always an enormous amount of money. However, when you consider that every penny saved means extra funds devoted to good works instead of taxes, this “found money” can make a very significant difference!

In 2015, our tax experts identified a combined total of $2,807,080 in tax savings from those clients who were eligible for the reduced rate.

Look Back to Move Forward

rear-view_01Before finalizing your foundation’s plans for 2016, consider taking a look back. By conducting a full and thoughtful review of last year’s grantmaking priorities, impact, and finances, foundation members can craft specific goals for the foundation and even for themselves. When conducting your annual review, here are some topics you might want to discuss together:

The Foundation’s Fiscal Realities and Future Forecast

  • How did last year’s distributions compare to our 5% minimum distribution requirement? This year, do we plan to exceed that distribution rate? If so, by how much?
  • What level of return did we receive on last year’s investments? Will this enable us to keep pace with our planned distributions for this year?
  • Will we have sufficient cash flow and cash reserves to meet operational needs?
  • Will we be receiving additional assets?

Anticipated Spending

  • How much of our budget did we spend on nonprofits that we have traditionally supported? What do we want to spend on these historical interests this year?
  • How much of our budget was spent on targeted programs or new opportunities? Was the budget sufficient?
  • Will we want to set aside a “rainy day” fund for serendipitous opportunities that might present themselves?

Discretionary Funding

Unless there are restrictions in the charter documents to prohibit it, the foundation can give board and/or family members a set amount of discretionary funds each year to donate as individuals.

Advantages: Fosters enthusiasm and engagement because foundation members can fund organizations of personal interest; incubates new programs and projects; expands the foundation’s footprint.

Disadvantages: Diverts resources and focus from a common mission; might confuse nonprofits and the public about the foundation’s priorities; might deter personal giving.

  • If we want to institute discretionary funding, what will be our guidelines?
  • Will discretionary grants be subject to board approval?
  • Must these grants be made in certain geographic areas?
  • Are certain types of organizations off-limits?

Impact Assessment

  • By current measures, what was our impact for last year?
  • What impact do we anticipate for this year? What realistic goals can we set?

Mission Scope

Taking all of the foregoing questions and answers into account, the foundation may want to take the opportunity presented by the review to re-examine the scope of its mission.

  • Given our current and anticipated resources, is the scope of our mission too broad? Too narrow?
  • Do developments or set-backs within our area(s) of interest necessitate a change of focus or emphasis? (For example, a foundation devoted to finding a cure for a disease might want to shift more of its focus toward prevention if a promising vaccine is on the near-term horizon.)
  • Do we feel that we’re getting traction in our areas of interest? Overall, are we satisfied with our impact?

Personal Satisfaction

The foundation was established to do good work, but that doesn’t mean it shouldn’t be fun for everyone involved. As the foundation commences its work for the year, take stock of the following:

  • How much time have we devoted to administration? Is it the right amount? Too much?
  • Is the distribution of responsibility and workload fair and proportional? Is anyone resentful?
  • Is each one of us engaged and committed to our work?
  • Have we fully leveraged everyone’s talents and skills?

What were the hits/misses of 2015?

    • What accomplishment are we most proud of from the previous year?
    • What were the challenges that went unmet?
    • What do we want to do differently this year?
        When this assessment is complete, your foundation can use its insights to decide the next steps.

Responding to Emergency and Hardship

Written by Page Snow

Although many clients express interest in granting directly to individuals in times of natural disaster or economic hardship, they often don’t. Some aren’t aware that a foundation can do so, while others are stymied by confusing IRS regulations. If your foundation would like to make these kinds of grants, you should know that we can help. We’ve created Emergency and Hardship Assistance applications, available from your Private Client Advisor, that are designed to satisfy IRS requirements.

Emergency Assistance

Donations of up to $5,000 per individual or household may be given in any 12 month period to those unable to meet their basic needs due to a life-altering catastrophe, tragedy, or natural disaster, such as hurricanes, floods, fires, earthquakes, storms, or riots. Recipients, regardless of their financial status, can use emergency assistance for food, clothing, housing, transportation, medical treatment, and professional counseling. However, the foundation cannot stipulate precisely how these funds are used.

Hardship Assistance

Up to $5,000 per individual or household can be awarded over each twelve-month period to economically disadvantaged individuals and household suffering a transitory hardship, such as job loss, illness, or temporary displacement. Hardship victims must meet certain income and asset criteria, and the need for support must be validated by a trusted third party, such as a clergyman, healthcare provider, social worker, or guidance counselor.

Seeking Qualified Recipients

Emergency and hardship assistance can be given to individuals known to the foundation. To ensure that close acquaintances don’t have an unfair advantage, however, foundations should provide assistance to those outside their immediate sphere of social contacts. To level the playing field, many foundations broadly advertise the availability of this assistance.

Keep in mind that suffering an emergency or hardship does not automatically entitle a victim to foundation assistance. The decision to provide funding must be based on an objective evaluation of the factors that influenced you to select this person over another. Obtaining referrals from clergymen, local charities, community organizations, and social workers reinforces that the foundation used an objective selection process.

Case Study

Foundation Source clients, Barbara (“Barb”) and Stephen Miller of Illinois, have put the ability of private foundations to make emergency and hardship grants to individuals to inspired use, tapping their foundation as an emergency fund to prevent individuals and families from becoming homeless.

Barb discovered that even discrete, one-time problems have the potential to plunge even stable, working families into crisis, often resulting in homelessness. She explains: “Our typical client is a single mother who has a job, some sort of assistance for housing or subsidized housing, and perhaps receives food stamps. Then something happens—the car breaks, or a child gets sick and the mom has to miss work for a couple of days —and then she falls behind on her rent.” What ought to be a temporary setback can quickly snowball into a full-fledged disaster. “If she can’t pay the rent, then pretty soon she’s looking at a five-day eviction notice,” Barb says. To prevent the downward spiral, the Millers put their foundation to use: With a one-time grant of less than $1,000, The Barbara and Stephen Miller Foundation intervenes at the crisis point, enabling families to stay in their homes. “If we fix the car or pay the rent, they’re not up against a five-day eviction notice,” Barb says.

The foundation’s work has produced astounding success rates. In the past four years, the foundation has helped 251 individuals and achieved lasting impact. Follow-up reports indicate that after one year, over 90 percent of grant recipients were still stable.

Foundation Source helped the Millers structure the fund, set up the application process, and dispersed the payments. With the basic structure and administration in place, Barb was able to work with community-based partners including legal aid societies, Illinois township governments, and a few social agencies such as Catholic Charities to identify grantees and approve the applications.

“…We want to collaborate with other people using emergency funds, aggregate our data, and take it to funding sources …”

Perhaps not surprisingly, Barb Miller intends to take her work to the next level through even more extensive use of partnerships: “We’ve expanded to the entire state of Illinois and portions of Wisconsin and Missouri,” Barb says, “But we need other people to do this work. We want to collaborate with other people using emergency funds, aggregate our data, and take it to funding sources like the federal government to show them that this approach works. Our average grant is $530 and it keeps people in their homes while saving taxpayers thousands of dollars that would otherwise need to be spent to house people in shelters. It’s the smartest possible use of funds.” 

Chief Philanthropic Officer Page Snow helps our clients get the most from their foundations by providing educational articles, workshops, coaching, webinars, and other resources. She has expertise in strategic planning, program design, and measuring results. She also supervises our staff of Philanthropic Directors.

Latest Podcasts

We have two new podcasts for you! The White House on Racial Inequality & Philanthropy, features a conversation with Michael Smith, Special Assistant to the President and Senior Director of Cabinet Affairs for My Brother’s Keeper, the organization launched by President Obama to address opportunity gaps faced by young men of color. Junior Board Helps Young Philanthropist Soar, features Sarina Dayal of California’s Tarsadia Foundation. Now 20, Sarina reflects on her experiences on her family foundation’s junior board and discusses how it helped her learn about philanthropy while gaining leadership skills.

Listen to The White House on Racial Inequality & Philanthropy
Listen to Junior Board Helps Young Philanthropist Soar