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Administrative Checklist: What’s Required for Operating a Private Foundation

by Michael Boulton
August 11, 2020

Whether you’re just starting the process of forming a private foundation, or you’ve been at it awhile and are experiencing some growing pains, you’ve likely gotten a glimpse into the often-overwhelming administrative tasks that come with keeping your foundation functioning.

To help you break this all down and keep it straight, here’s a checklist of what’s required from legal, compliance and tax standpoints.


Legal

  • Have you set up your articles of incorporation?
  • Are you registered as a 501(c)(3)?
  • Have you established a board of directors and/or a grants committee?
  • Are you holding regular board meetings and keeping minutes at each?

Compliance

  • Are you distributing at least 5% of your assets each year in grants, as required by the IRS?
  • Are you conducting financial due diligence on your grantees and ensuring they are actively registered charities that are aligned with your mission?
  • Do you have an internal control process, such as a grants committee, set up to ensure there are multiple people making distribution decisions?
  • Are your grantees set up to receive grants electronically, which facilitates tracking?
  • Are you tracking and scheduling current and multi-year grant payments?
  • Are you keeping, maintaining and reviewing all financial records on a regular basis?
  • Are you steering clear of “self-dealing transactions” (loans to founders/employees, personal use of foundation assets, transactions with founders/employees, etc.)?
  • Have you received over $2 million in contribution revenue or investment income? If so, the foundation must be audited!

Tax

  • Have you filed an annual IRS Form 990-PF tax return?
  • Do you have unrelated business income from your investments?
  • Are you paying all relevant excise taxes?
  • Do you have written policy statements on how investments are managed?

While there are many more details around each of these areas, we hope this quick list provides a good reference point as you launch or grow your foundation.

Keeping up with the many moving parts of a foundation takes time that you could be spending on your mission. But you don’t have to do it all on your own. For more information on how we can help, visit our Private Foundation Management page.

August 11, 2020

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