Canadian educational institutions are increasingly involved in the use of foundations in both the US and Canada. Public and private schools, and universities and community colleges across Canada are making use of this concept. At the 1994 CCAE Conference, Jim Daly, recently-retired Director of Planned Giving, University of Manitoba, said that his university's US foundation, University of Manitoba Foundation USA Inc., was formed directly as a result of the offer of a million-dollar gift from an American, whose gift would not have been made without the special tax advantages available only through the foundation.
"Most Canadian universities," Daly said, "use their US foundations for utilization of matching gifts from US corporations." The University of Manitoba uses a newsletter to inform its alumni, and accepts gifts in the USA on behalf of other Canadian institutions such as Brandon University. Daly warns, however, don't set one up unless you have 5,000 or more US-based alumni. Give the foundation time to grow.
The (relatively) new US foundation gives the university access to a new group of committed, well-connected foundation board members that it hopes to capitalize on in future. Non-graduates can donate to the institution through its US foundation. A pool of money in the US foundation could help stimulate cross-border joint research activities involving the university.
Why set up an institutional foundation?
Randi Duke, Capilano College, BC, reminded the CCAE delegates that many community colleges are established as crown corporations. They have had some gifting taxation advantages not available directly to universities. College governors for community colleges are government appointed. This is often not an ideal choice from a fundraising standpoint. As a result, she pointed out, "an institutional foundation can offer some important benefits:"
- Using a foundation instead of a department can be especially beneficial to educational fundraising. The foundation has a single focus on fundraising while the institution's first priority is education.
- The institution's board of governors are ideally appointed for their administrative abilities. However, the foundation's board of directors will likely be appointed for their community contacts and fundraising abilities. Because the foundation is made up of community leaders, their appeal for funds can carry more credibility with a potential donor than a request from an official of the institution.
- Control of the foundation by the institution can be managed in many ways. One method is to have membership in the foundation determined by the institution's governors. Articles of incorporation can also stipulate the foundation's purpose as financially aiding and supporting educational programs approved and conducted by the institution.
- People can easily distinguish between the separate identities of the foundation and the institution. This can be important to a donor organization or government agency that cannot make grants directly to a public educational institution. This distinction also encourages employees to donate to an independent foundation without feeling that they are "kicking back" some of their salary.
- The foundation has much more freedom and maneuverability to negotiate deals with potential donors, since as a separate legal and accounting entity from the institution, it is not restricted to the same limitations as the institution. The funds it raises are more flexible, and are independent of the rules and guidelines set for a government body.
- The foundation's accounts are separate from the institution, so it can allow funds not used in one fiscal year to be applied to the next. Any surplus resulting from successful fundraising does not come under the scrutiny of the provincial treasurer or departments of higher education, as do those of the institution.
- The independent nature of the foundation's board and staff speeds up activity and improves productivity. It does not get bogged down in the administrative red tape and never-ending committee meetings as do regular educational departments. The foundation's board and staff have easy accessibility to the institution's board of governors, executive officers, faculty, staff, advisory committees, administrators, alumni, corporate leaders, etc. They are not held back by the restrictive reporting structures of institutional departments.
- The success of the foundation can easily be evaluated based on its own audited financial statements.
- The foundation is not limited to any special geographical area. It can operate and promote the institution's name throughout the province and the country as it raises funds. Also it does not fall within the preconceived political boundaries assumed by the institution.
- The foundation offers continuity and permanency to the institution's fundraising activities. Its self-perpetuating board, whose members are not government appointments, operates on its own initiative and preserves the fundraising know-how necessary or continuing success.
- A foundation is a good tool for recruiting influential community leaders. Offering them a directorship in a prestigious public foundation may interest them more than membership on just another advisory committee.
In some provinces, community colleges can set up institutional governing board representatives on the foundation board, says Duke. The president can sit on the board, and can help recruit directors. Capilano, she points out, works hard at building relationships between the governing and foundation boards. Fundraising priorities are set and programs and budgets are approved by the institution.
Legislation and regulations vary from province to province, but Agent of the Crown University Foundations now exist in a growing number of provinces, primarily to provide income tax-advantaged ways to make gifts. Instead of a 20% limitation on the annual income tax credit, these foundations can give a credit for up to 100% of the gift in the year it is made. In addition, the donor can make additional gifts to other organizations where the 20% limit does apply.
In times of financial restraint, this is an ideal way for universities to help themselves, said John McConnell, Vice President, University of Alberta. Provincial governments, however, may recognize this as a loss of tax revenue, and as yet another way to benefit the higher-income sector of society. An important goal is thus to convince both governments and influential groups that this concept is highly beneficial.