It is no secret that many major national professional associations have allied foundations. Many of them are quite successful and raise millions through donations and grants.
An allied foundation can also work very well for small, state or local organizations, but success doesn’t come easily.
Sometimes board members see an allied foundation as a way of funneling donations into a struggling parent organization. It doesn’t work that way, and it is not that simple.
Why? Because there are legal differences. Foundations can’t accept a donation and turn around and just give it to the professional association. Money can pass between the two organizations, but it must be justified in terms of the foundation’s mission. The exchange must also be well-documented.
There are opportunities for using the foundation to support the parent organization. These include grants, sponsorships of specific activities, educational activities, awards to students or younger members to attend the association’s events. What it comes down to is mission. Any activities funded by the foundation must be in support of the foundation’s mission. Please refer any questions to your CPA.
Board leaders often talk about grant eligibility as a reason to start a foundation. While it is true that foundations can apply for and receive grants, actually getting grants is another matter. A start-up foundation lacks the track record to get most grants. Many grants are for specific events. A start-up foundation can’t guarantee they are going to have a specific event or a certain date, because without the grant they have no way to fund the event. Another thing to remember about grants is that generally grants are made to support specific activities or programs that align with their goals, not operations. Even if you get a grant, you must figure out how to fund operations.
For new foundations with under $50K there is an online IRS form that can be used to apply for 501c3 status. The new foundation must be incorporated and then get an EIN number (free) from the IRS. Registration with the state is also required. It is possible to spend many thousands of dollars on a start-up package. On the other hand, capable volunteers can do most all that is required. I would recommend using an attorney to draw up the articles of incorporation and do the rest with volunteers. That includes writing bylaws, policies, getting the EIN, handling state requisition and the 501c3 filing (online form). NWG has had experience in launching more than a dozen 501c3 organizations and can assist with many aspects of the project.
The bigger question is, “is launching a foundation a good idea?” The answer is a definite “maybe.“
Launching and growing a foundation is not easy. It takes visionary leadership, attention to details, and seed money from donations or the parent organization. Building credibility is essential. The path to credibility includes developing a brand with a website and logo, as well as building a board of trustworthy and committed individuals, and willingness to devote time and energy to make it happen. Foundations are not a way to bring in “easy money.” If the goal for the new foundation is to make good things happen and the commitment is deep, then success is much more likely.
