TAKING YOUR FOUNDATION TO THE NEXT LEVEL

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TAKING YOUR FOUNDATION

TO THE NEXT LEVEL

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Taking Your Foundation

to the Next Level

Private foundations are powerful. They change the world for the better; they engage the family in a shared mission; and establish a legacy that can burnish the family name well beyond the founder’s lifetime. Through their private foundations, donors promote the ideals and values that they wish to advance in public and imprint at home. Using the same talents, skills, contacts, and life experience that produced success in business, they can eff ect dramatic change. When a private foundation realizes its full potential for excellence, no other charitable vehicle can compare.

Of course, in philanthropy, as in most spheres of human endeavor, excellence doesn’t just happen. Although passion and vision are critical elements, our work with over 1,100 foundation clients has consistently shown us that the most successful are those who address four key components:

• Compliance

• Operational Eff ectiveness • Family Engagement • Mission and Impact

To fulﬁ ll these needs, a foundation must have expertise, skills, technology, and top-notch organizational infrastructure. The eff ort required might seem daunting, but it does not have to be. Rather than adding unnec-essary staff or relying on existing advisors who might lack the bandwidth or specialized knowledge required to administer private foundations eff ectively, many foundations rely on outsourcing. By assigning burdensome tasks to external service providers like Foundation Source, they can focus on the more compelling and important business of their foundation: philanthropy.

Offl oading operational duties to Foundation Source allows founders and families to spend their time on mission, strategy, and family priorities. The result: better-run foundations with greater social impact. This is the top beneﬁ t cited by Foundation Source clients, and the bedrock of our 98% client satisfaction rating. In the following pages, we’ll examine the components of success in detail and explain how we help private foundations achieve excellence in each.

Compliance

Private foundations provide a degree of control and latitude unmatched by other charitable vehicles. Families have full control over investment strategies, vehicles, policies, and managers, as well as all grantmaking decisions. Legal and fi nancial control can remain within the family for unlimited generations. Foundations also are empowered to grant to individuals, establish scholarships, award prizes, and even run their own charitable programs. Because they’re such powerful entities, foundations are kept on a tight regulatory leash to ensure that their activities benefi t the general welfare. Private foundations are governed by the tax code, S.E.C. regulations, fi duciary duties, governance requirements, and state-specifi c rules. Infractions could result in fi nancial or legal exposure, serious penalties, and, in rare cases, unfl attering headlines featuring your family name.

Successful foundations eliminate the risk and worry by backstopping board members and existing advisors with experts who fully understand the complex, constantly evolving tax and legal requirements philanthropies face. Foundation Source’s outstanding tax and legal staff are the experts that other professionals call when

The information provided in this document is for general information purposes only, and does not constitute legal, tax or investment advice. Information is provided by Foundation Source. The views expressed here are those of Foundation Source and do not necessarily represent or refl ect the views of Atlantic Trust.

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Taking Your Foundation to the Next Level

they have a question about private foundations. They toil tirelessly behind the curtain, minding the day-to-day transactions, and are just a phone call away to answer any questions you might have.

These are some of the compliance services we perform for our clients: • Verify grantee’s 501(c)(3) public charity status

• Provide USA PATRIOT Act due diligence • Monitor “Advance Ruling” expirations

• Monitor grants and expenses to help prevent: – Self-dealing

– Jeopardizing investments – Taxable expenditures

– Excess business holdings, etc. • Monitor donor nonproﬁ t affi liations • Track substantial contributors • Identify supporting organizations

• Provide compensation benchmarking for paid family members

Operational Eff ectiveness

Foundations are complex organizations. After all, the day-to-day operations required to run a foundation are the same as for any small business, from bookkeeping, cutting checks, and government-required ﬁ lings to anything else that pops up. Without the right help, “administrivia” can soon overwhelm the rewards of giving. To free up family members for foundation work that suits their interests and talents, Foundation Source provides a complete suite of back-offi ce solutions along with tax preparation services. We coordinate with your ﬁ nancial, tax, and legal advisors to make sure your aff airs are in synch and we provide the following services:

• Track 5% minimum distribution

• Prepare grant checks and transmittal letters • Pay fees and expenses

• Set up budgeting and any multi-year obligations • Provide foundation recordkeeping

– Funding and income – Expenses and fees – Assets and valuations – Grant history

– Track substantial contributors

• Archive corporate, tax, and other foundation documents • Track donations to the foundation

• Provide payroll services (if applicable) • Provide transaction accounting

Of course, we also take care of tax preparation and ﬁ ling, some of the most onerous aspects of private foundation administration. Our clients may rely on us to:

• Prepare and ﬁ le federal 990-PF return • Prepare and make state ﬁ lings

• Calculate and pay quarterly excise taxes

• Prepare Forms 1099 and 1042 for independent contractors • Provide donor substantiation receipts

• Maintain tax records in foundation archive • Prepare and ﬁ le 990-T (UBIT) return

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3 Taking Your Foundation to the Next Level

• Prepare and ﬁ le transition-year tax returns and amended tax returns • Furnish audit support

• Provide tax support for limited partnership, trust, and S corporation investments • Prepare and ﬁ le foundation DBA (doing business as) paperwork

Family Engagement

Getting family and other board members involved is often the number one reason for establishing a founda-tion—just as important as having an impact on the external world. Successful family foundations strengthen family bonds and help members discover their values and their organizational talents. Foundations serve as training grounds for building practical competencies in the next generation such as leadership, teamwork, investment management, and social awareness.

Yet, despite the best of intentions, enlisting the family in the foundation presents a range of challenges: ﬁ erce competition from other obligations, careers, young children, social and community life, and having family members geographically dispersed—sometimes, even in diff erent time zones. Teenagers and young adults often prefer to spend time with their friends than to sit around a conference table with family. And of course, college and graduate school mean time spent away from home.

Beyond practical considerations, it must be acknowledged that family dynamics can make working together stressful. Some family members will have conﬂ icting interests and political viewpoints. “Strong” or “diffi cult” personalities on the family foundation’s board can make it diffi cult to achieve consensus and can hamper pro-ductivity. And in many families, marriage, divorce, and remarriage can bring questions of board membership eligibility to the fore. Eventually, the passage of time may reveal concerns about succession. If the foundation is to exist in perpetuity, who will succeed the current board and how will the mission evolve?

Foundation Source off ers a two-pronged approach to enhancing family engagement. The ﬁ rst prong, technol-ogy, eliminates practical hurdles and provides instant access and transparency into foundation activities. Using our customized, online console, families scattered around the globe can connect and collaborate through their philanthropy, and viewing rights can be customized for each foundation member. Email notiﬁ cations keep the entire family aware of foundation activities so no one is “out of the loop.”

The online console lets everyone see precisely what is happening at the operational level in real time, reducing miscommunications and petty squabbles—even when it comes to disagreements over responsibilities, authority, and control. The online system makes it easy to:

• Research charities using a database of more than one million IRS-approved charities • Make grants online to any IRS-approved nonproﬁ t

• View progress towards 5% minimum distribution requirement • Access grant history by date, donor, or program area

• Monitor foundation expenses

• Run reports using over 25 customizable templates • View archived foundation documents

Using our optional enhanced services, Foundation Source Requests and Foundation Source Results, we can even provide foundations with a customized grants management platform. Everyone on the foundation with access rights will be able to view proposals that are electronically submitted to the foundation and review the results of previous grants. Foundation Source Requests streamlines the grantmaking process with:

• An online eligibility quiz to pre-screen applicants • Online applications for potential grantees

• Communication and collaboration tools to track the status of each proposal

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Taking Your Foundation to the Next Level

Foundation Source Results lets foundations gauge the impact of their grants. Exclusive to Foundation Source, Foundation Source Results collects grantee progress reports and tracks performance—all from a single, powerful, online console.

The second prong of our family engagement strategy, Foundation Source Advisory Services, leverages our experience and expertise as private foundation specialists. We’ve learned, for example, how to create age-appropriate opportunities for the next generation to participate in the foundation. Younger children can be given “grant certiﬁ cates” to introduce them to the family’s philanthropic activities; older children may be invited to serve on junior boards to get a sense of their future duties as well as an appreciation for the foundation’s mission; and young adults may be paired with mature family members who will serve as their mentors, cultivating and training the next generation of leaders.

Should your family desire additional assistance, we off er the services of our Philanthropic Directors, experienced advisors who can help your foundation work eff ectively towards a common goal. Their services around family engagement include:

• Designing and implementing age-appropriate opportunities for engaging the next generation • Planning and/or facilitating board meetings and retreats

• Establishing eligibility requirements for board membership

• Sharing best practices drawn from our clients and the wider philanthropic sector

• Providing coaching and training for family members who wish to be employed by the foundation

Mission and Impact

People create foundations for many reasons, but seeing their eff orts result in positive change on the issues and causes that matter most to them is what keeps successful foundation members engaged over time. To make traction on the issues that are important to them, foundation members need to exploit the full arsenal of grantmaking tools available to them. And while writing grant checks to nonproﬁ ts will always be the cornerstone of foundation giving, inspired philanthropists go beyond the simple transfer of funds to 501(c)(3) organizations. Foundation Source helps foundations take advantage of these creative giving strategies. By understanding what your foundation is trying to accomplish, our Philanthropic Directors can recommend approaches that not only can deliver greater impact, but frankly, are more enjoyable and rewarding. Our experts can help you take advantage of the following techniques:

• Emergency and hardship grants to individuals

• Program-Related Investments (loans and equity investments) and recoverable grants • Scholarship and fellowship programs

• Set-Asides

• Awards and prize programs • Direct charitable activities • International grantmaking

Whatever your philanthropic vision, Foundation Source can help make it a reality. Our Philanthropic Directors are available to off er practical advice drawn from the best practices and experience of the hundreds of private foundations we work with on a daily basis. Their support can range from a quick phone call to answer a ques-tion in real time, to periodic visits to review the foundaques-tion’s activities and address strategic or governance issues. They can help your foundation deliver results by:

• Deﬁ ning—or revisiting—the foundation’s mission and priorities • Translating a general interest into a concrete grantmaking strategy • Redesigning board meetings or other foundation operations • Exploring ways to increase impact or assess results

• Reinvigorating the foundation through new ideas or approaches to philanthropy • Planning for major change, such as leadership succession or a major change in assets

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5 Taking Your Foundation to the Next Level

Making a Good Foundation into an Excellent Foundation

What does it mean for a private foundation to be excellent? Although some might measure excellence by the foundation’s philanthropic results and others by how well the foundation unites the family in common purpose, we think excellence is measured in joy. If your foundation isn’t generating suffi cient joy for you, for your family, and for the lives you touch, please give us a call. As private foundation experts, we specialize in joy.

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Foundation Source

55 Walls Drive, Fairfi eld CT 06824 P 800.839.0054

F 800.839.1764

www.foundationsource.com

CONTACT ATLANTIC TRUST

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Atlantic Trust has partnered with Foundation Source, the nation’s largest provider of comprehensive support services for private foundations, bringing unparalleled knowledge and expertise to clients across the country. The result: better-run, more eff ective foundations and more enjoyable philanthropy.

Foundation Source provides its services to more than 1,100 family, corporate, and professionally staff ed foun-dations nationwide, ranging in size from $500,000 to $500 million. The company’s administrative services, online foundation management tools, and philanthropic advisory services provide a total outsourced solution for private foundations, while Atlantic Trust manages the foundation’s assets. This combined approach frees donors and families to enjoy their philanthropy with total ease and conﬁ dence while we handle the details.