Whether established by a family, company or a collective, private foundations are created to support social causes through financial or in-kind donations. While private foundations function differently based on various factors including their mission, means and size, it is critical to have sound processes and procedures in place to effectively direct means to mission and maintain the organization’s tax-exempt status. For this reason, the board should regularly assess the organization’s operational and governance practices.

While there is no one-size-fits-all approach that can be broadly applied across all foundations, there are standard practices to incorporate into foundation governance and operations. An organized, structured approach is essential to effectively manage the foundation, avoid legal or financial penalties, and advance your mission.

The following checklist is designed to help you identify and incorporate strong governance practices into your foundation management. While not an exhaustive list, it provides a starting point for your assessment.

Governance

Yes

No

N/A

Do you consult with legal counsel and/or a tax professional annually to confirm you are in compliance with state or federal law?

 

 

 

Does the foundation have a dedicated board of directors or trustees responsible for the oversight of the foundation?

 

 

 

Does the board review the foundation’s mission on a regular basis? If any material changes have been made, have you updated required filings and other materials to reflect this change?

 

 

 

Does the board regularly evaluate whether the foundation’s activities and grant-making align with your stated mission/charitable purpose?

 

 

 

Are the governing documents such as articles of incorporation, declaration of trust, bylaws, policies and procedures reviewed at least annually?

 

 

 

When there are amendments to the bylaws, do you notify the IRS in the 990 filing?

 

 

 

Does the board have a succession plan?

 

 

 

Are any changes in board membership in accordance with the foundation bylaws and appropriately documented?

 

 

 

Does the board meet regularly? Are important actions/decisions documented?

 

 

 

Does the board and staff participate in periodic education or training that helps them perform their duties, serve the community and/or advance your mission?

 

 

 

Are the roles, responsibilities and expectations of officers, trustees and board members defined, documented, communicated and agreed upon?

 

 

 

Does the foundation have a written conflict of interest policy? Is the conflict-of-interest policy reviewed and acknowledged by all trustees, directors, officers and employees annually?

 

 

 

Does the foundation have a strategic plan that is reviewed at least annually?

 

 

 

Does the foundation periodically review its insurance coverage, including directors’ and officers’ liability insurance, for sufficiency of coverage?

 

 

 

Does the foundation have any other contracts/agreements, such as with consultants or accountants? If so, are the contracts reviewed closely on a periodic basis?

 

 

 

Is the board aware of the IRS's limitations on private inurement and does it regularly assess whether there have been any violations? Is there a policy in place to avoid such violations?

 

 

 

 

Finance and investments

Yes

No

N/A

Is the budget approved annually by the board?

 

 

 

Is there a process in place to monitor the budget on an ongoing basis?

 

 

 

Is the organization on track to satisfy its required annual minimum distribution by year-end? Did it satisfy this requirement in the previous year?

 

 

 

Is the board aware of private foundation rules regarding investment assets, such as IRS guidelines on jeopardizing investments?

 

 

 

Does the board review and approve the investment policy statement annually?

 

 

 

Is there is a process in place to monitor investment performance on an ongoing basis?

 

 

 

Is investment performance discussed at least annually with investment managers?

 

 

 

If audited, does the board review the annual audit report?

 

 

 

 

Taxes

Yes

No

N/A

Are the applications for federal tax exemption (form 1023) and state registration on file with all attachments, schedules and IRS correspondence relating to the exemption approval?

 

 

 

Is the IRS determination letter on file and readily accessible?

 

 

 

Is any communication from the IRS and state registration agency, such as private letter rulings, on file?

 

 

 

Are all required estimated tax payments calculated and paid in a timely manner including any estimated excise tax payments, penalties due for failure to meet minimum distribution requirements or Unrelated Business Income Tax?

 

 

 

Does the board review the 990PF tax return before it is signed and filed?

 

 

 

Is the foundation tax return publicly available when requested according to IRS guidelines?

 

 

 

 

Grants

Yes

No

N/A

Does the organization have published grant guidelines that are clear, aligned with your mission and reviewed regularly?

 

 

 

Are your grant application and grant-making processes regularly assessed to determine whether appropriate due diligence is conducted in choosing grant recipients, including confirming the tax-exempt status of each intended recipient and confirming grants are not made to disqualified persons or in support of lobbying efforts or political campaigns?

 

 

 

If applicable, have you verified that IRS correspondence for grant-making programs is on file (required for some programs such as scholarships)?

 

 

 

Have you reviewed your grant application and reporting requirements to find opportunities for improvement and to ensure they request only pertinent information and do not put undue burden on your grantees?