Should we establish a fundraising foundation?

Should we establish a fundraising foundation?

September 14, 2009 by jga_admin

by Dan Schipp

A JGA client recently inquired about the pros and cons of establishing a foundation to do fundraising for the organization. The client is considering launching a development program and is grappling with whether to situate fundraising within the organization or to establish a separate foundation for that purpose. Convincing arguments can be made for each option. As I thought about the client’s situation, the following “positives” and “negatives” of each option came to my mind:

Situating development within the organizational structure

Pros:

• Promotes more ownership of development by the organization’s staff as a whole;
• Avoids confusion about the relationship between the organization and this “other entity” doing fundraising for the organization;
• Attracts donors who prefer to give directly to an organization rather than through a supporting organization;
• Enhances the organization’s bottom line by including gift income on its balance sheet.

Cons:

• Necessitates, most likely, making some changes in the composition of the organization’s board, evolving it into more of a fundraising board with members with influence and affluence;
• Requires a financial management system capable of segregating gift income from other sources of income.

Establishing a separate foundation to do fundraising for the organization

Pros:

• Presents an opportunity to build a board with influence and affluence and to engage board members with new or specialized skills;
• Segregates fundraising revenue and expenses, allowing for more “clean” accounting;
• Draws donors who are attracted to the “aura” of a foundation (foundation name may add legitimacy);
• Limits liability, in some cases

Cons:

• Involves significant time and expenses to set up a foundation;
• Presents potential for conflicts to arise between the organization and the foundation and their boards over such matters as programming and how the foundation is presenting the organization in its appeals for support;
• Complicates creating a clear identity for the organization since it introduces another entity to be “explained”.

What additions would you make to this listing?

I think our client is wise to be assessing both options. There is not, for all not-for-profit organizations, one correct answer to the question of whether or not to form a fundraising foundation. The response really depends on the circumstances, needs and resources of the particular organization.