Partners with Private Foundations

01.21.2008 -  Services for Private Foundations
Private foundations are a popular and effective way for individuals and families to achieve their charitable giving goals and leave a legacy.  Many who have established private foundations discover operational challenges, administrative requirements and expenses that they prefer to avoid. The Greater Houston Community Foundation offers donor advised funds and provides outsourcing solutions to private foundations to enhace their effectiveness and expand their flexibility.

Private foundations have two options when working with GHCF:

1. Use the outsourcing services provided by GHCF; or


2. Create a donor advised fund to complement your private foundation.

First option: Using the outsourcing services provided by GHCF
The Community Foundation offers services to increase the effectiveness and ease the administrative burden of running a private foundation. We partner with and assist private foundation staff and board members so they can focus on their most critical work. Nationally, only 23% of private foundations have paid staff, so many outsource administrative and grantmaking functions. Our fee-based services include:

Strategic Design and Focus <

• facilitating strategic planning sessions with private foundation board


• determining mission, vision, focus, grant guidelines and funding strategies


• identifying key areas of impact and ways to increase impact


• researching current trends in key areas of interest and historical grant patterns

Grant Management

• handling grant inquiries and requests


• filtering unsolicited grants


• accepting and reviewing grant proposals


• issuing grant checks


• processing denial and award letters


• following up on end-of-grant reports and presenting follow-up reports


• soliciting and reviewing Requests for Proposals


• arranging site visits to nonprofits


• convening dialogues on important community issues


• collaborating with other donors interested in same key focus areas

Accounting and Tax Preparation

• ensuring stewardship of funds


• managing day-to-day financial operations


• interfacing with existing providers such as accountants and investment professionals


• preparing financial reports and legal notices


• making sure the tax return is managed and filed

Recordkeeping and Reporting

• filing and securing management of records


• reporting on historical grants, activity and proposed giving

Board Preparation

• setting the board meeting schedule, agenda and location


• preparing the board book and meeting minutes


• preparing grant summaries and recommendations


• handling communications prior to board meetings and for the meetings

Second option: Create a donor advised fund to complement your private foundation
Below are ideas that illustrate the benefits of private foundations using a donor advised fund at the Community Foundation:

Financial Flexibility

• Enhanced Tax Benefit for Hard to Value Assets – Donors might have real estate, limited partnership interests and/or closely-held stock they wish to contribute during life, but if given to a private foundation, the deduction would be limited to the donor’s cost basis. If given to a community foundation, the deduction is based on the market value.


• 5% Payout Solution – To meet the 5% IRS payout requirement, private foundations establish a donor advised fund at the Community Foundation and then make the appropriate qualifying distribution to that fund. This provides more time and flexibility for the private foundation’s grantmaking.


• Excise Tax Planning – The private foundation must pay an excise tax on realized gains and earned investment income when it sells capital assets (up to 2% of net income subject to a reduction to 1%). To reduce the excise tax from 2% to 1%, private foundations may contribute additional qualifying distributions to their donor advised fund at the Community Foundation. Those funds are then available for future charitable use.


• Enhanced Tax Benefits – Donors with existing private foundations sometimes find they need to utilize a public charity’s beneficial adjusted gross income limitation. The charitable contribution limit is 50% for public charities vs. 30% for private foundations for cash; and 30% for public charities vs. 20% for private foundations for qualified appreciated assets. Under both limitations, there is a six-year period to use the full deduction.

Grantmaking Solutions

• Access to Grantmaking Advice – The GHCF staff has grantmaking expertise and knowledge of the nonprofit community that enables them to give objective and strategic philanthropic advice. Strategic giving requires familiarity with the local community. GHCF staff can assist with indepth research of community and national resources or nonprofits, plus provide grant evaluations and recommendations.


• Involving Family Members – Parents with existing private foundations may establish donor advised funds for their children to increase their involvement, training and ownership. This is especially helpful to increase the involvement of children living away from home. The donor advised fund can be used to pass along the values of giving and engage the next generation.


• Succession Planning – Founders of private foundations state that concerns about succession planning were eased by terminating some portion, or all, of their private foundation to a donor advised fund at the Community Foundation. GHCF staff can ensure the preservation of donor intent and the family legacy in perpetuity.


• Increased Grantmaking Flexibility – Sometimes the regulations of a private foundation restrict giving toward social events. A donor advised fund provides the flexibility to contribute the deductible portion for tickets or tables at charity events from the fund.


• Keeping Grantmaking Private – Information about private foundations is public information and readily available. When private foundations wish to make anonymous grants or grants outside their primary focus areas, many use a donor advised fund at the Community Foundation to accomplish this.


• Nonprofit Endowment Funds – For private foundations that make grants for nonprofit endowments, there are typically a number of concerns. A permanent designated fund at a community foundation generally solves issues such as retaining the option to change beneficiaries, easing investment concerns, and protecting assets.

A private foundation that uses the Greater Houston Community Foundation’s philanthropic services or a donor advised fund may solve many management concerns and, additionally, share a multi-faceted strategic relationship with GHCF.