Q: I just started working for a foundation after spending my career on the charity side. The board could use some basic information about its roles and responsibilities and I want to be sure it’s getting the right information. I found some material on foundation boards, but it’s wordy and I know I’ll never get anyone to read it. I need some “Terrie plain-speak” to share.

 

A: First, thank you for implying that I provide user-friendly information. That’s always my intent. Thank you – NOT – however, for piling on the pressure!

Your experience on the charity side will stand you in good stead. Like directors on charity boards, foundation trustees are responsible for making informed decisions to further the mission while protecting the organization through strong fiscal and ethical management. This includes such things as understanding the issues, avoiding conflicts of interest, ensuring compliance with tax, recordkeeping, and employment law, and managing the organization’s finances and investments.

There are several unique aspects to foundation boards, however. The most obvious is that they are responsible for making and monitoring grants. This means setting grantmaking policy consistent with both the law and donor intent. For instance, the law allows foundations to make distributions to individuals, overseas charities and non-charitable organizations as long as certain rules are followed and records kept. The law also states that foundations must ensure that minimally 5% of their net investment assets are distributed annually. These laws can change. Up until now the 5% qualifying distribution has included overhead and similar expenses. There is talk of requiring that the 5% be limited to grants. Foundation trustees must stay abreast of such rulings in order to keep their policies and practice current.

Maintaining a commitment to donor intent is one of the primary aspects unique to foundation boards. On the charity side, directors should chafe at donors who wish to control the direction the organization takes. On the foundation side, they are entrusted with precisely the opposite responsibility – staying true to the direction and values of the donor. This can become tricky if as the world moves and changes at warp speed traditional interests become untenable or obsolete and the founder is no longer around to express his/her wishes in the face of this new reality. The trustees must determine how best to respect donor intent while meeting their duty of care, that is making the best possible decisions for the foundation.

Trustee commitment to donor intent extends to both the control and lifespan of the foundation. Some founders wish control to remain within the family or with specific trusted advisors. Some limit the life of the foundation to a specific number of years, generations or expenditure of dollars. These desires limit options but not responsibilities for current trustees. Sometimes, these factors are not specified and trustees are expected, along with all their other responsibilities, to recognize when the organization would benefit from opening the board to previously unimagined diversity or when symptoms necessitate splitting the foundation into splinter organizations with different foci or closing it down altogether.

The requirements of board service are more complex than most people imagine. This is particularly true in the case of foundations. I applaud you for seeking information you can share to make your trustees’ job a little clearer.