FAQ

Institutionally related foundations are separate 501(c) (3) nonprofit organizations dedicated to the advancement and support of a college or university. Although foundations may perform a wide range of functions, their primary purpose is to raise and/or manage private support for the institution with which they are affiliated.

Institutionally related foundations are “public charities” as defined by the Internal Revenue Code. As such, they receive funds from many different donors in the form of charitable contributions. Institutionally related foundations typically manage investments, but typically they do not establish funding or usage priorities. The governing board of the college or university defines its mission and priorities while the related foundation then provides the educational institution with guidance on which projects or purposes are most likely to appeal to donors and cultivates private support to help the institution achieve its goals.

Donors typically specify how their gift funds should be used and managed by institutionally related foundations. The majority of assets held by foundations are restricted for particular uses by donors, within reasonable standards to ensure tax deductibility in accordance with IRS requirements. For example, donors may direct that their gift be held as an endowment to fund a scholarship, chair or other program in perpetuity, or simply designate that their gift be used for a particular present purpose.

There are a variety of reasons why public colleges and universities establish institutionally related foundations. Typically, as tax-exempt organizations, they have more flexibility to raise and/or manage private support than state offices or government subdivisions. Many states mandate that public funds be invested according to low-risk, low-return strategies. Institutionally related foundations, however, can invest private gift funds in a more diversified manner, providing greater investment return and increased support for the educational institution with less risk of loss of real value.

Additionally, institutionally related foundations are not subject to regulations governing the sale or purchase of property by the state and can perform these and other business transactions in a more competitive and expeditious manner. They can also develop and establish subsidiaries such as research parks or real estate foundations that contribute to the mission and resources of the college or university while minimizing the risks associated with such investments.

Many donors prefer to make a gift to a private rather than a state or other public entity. By giving to an institutionally related foundation, many donors feel assured that their gift will be responsibly invested, distributed for the intended purposes, and not become confused with state appropriations or other funds. Additionally, a foundation provides an opportunity for a college or university to involve prominent business leaders, alumni and other successful individuals who are willing to commit their time, resources and talent in order to support the educational institution. While many college or university trustees must be state residents, foundation board members can extend the educational institution’s sphere of influence well beyond state borders.

Foundation boards also provide a long-term perspective on the needs and priorities of the related educational institution, which extend beyond the outlook and tenure of institutional staff and trustees who may be subject to a wide range of circumstantial pressures and influences. Clearly, the sole mission of institutionally related foundations is irrevocably linked to the educational institution the foundation serves, but the independence and long-term nature of the foundation are steadying forces that can benefit the institution in difficult times. Foundation financial resources can provide a stable and secure source of funding for the institution, free of any governmental influences that can shift over time, sometimes erratically, depending on the political climate in place at the time.

It is the responsibility of the board of the foundation to ensure that gifts are used in strict accordance with donors’ wishes. Foundations are held to a fiduciary responsibility to represent the donors’ interest. This responsibility of using the gifts of other persons as they have directed is an extremely high standard for which the foundations are accountable to the IRS, various other regulatory agencies, donors and the media. This can be a critical role when political or budgetary pressures are present at the educational institution.

Institutionally related foundations are accountable to their donors and to the students, faculty, staff and trustees of the institutions they serve. They are also legally accountable to the Internal Revenue Service and state agencies that oversee charitable organizations. Foundations must file an annual IRS Form 990, which is a public document. In addition, foundation annual reports, gift and endowment reports, investment performance summaries and audit summaries are routinely made available upon request.

Yes. CHF is a 501c3 organization and gifts may be considered tax deductible to the extent allowed by law and your own individual tax situation. Please consult with your financial advisor.