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| Philanthropy |
Laying a Foundation
Jan Alexander
07/01/2004
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Equally
daunting, families often find themselves bogged down in swamps of paperwork,
navigating tedious IRS compliance filings and monitoring grant recipients to
make sure that their accounting is accurate and transparent. Currently, 12 state
legislatures are considering acts that would apply Sarbanes-Oxley-style
corporate governance laws to charities.
Whether or not states enact this legislation, the entire nonprofit sector is
feeling pressure to better monitor itself in the wake of accounting and conflict
of interest scandals. Moreover, bond-rating agencies and lending institutions
have increased scrutiny of foundations’ financial information.
 | “A NUMBER of folks we have
known with family foundations are trying to
get out.” |
“A number of
folks we have known with family foundations are trying to get out,” admits Jane
Williams, CEO of Sand Hill Advisors, a Silicon Valley wealth management firm
that specializes in family foundations. Wealth managers say we may find it far
easier to give money through a donor-advised fund. Community foundations or
financial services sponsors manage these funds for us by accepting any sum of
our capital, large or small, along with our instructions as to which charities
we wish to support. The managers invest the sweat equity on our behalf,
administering the funds, preparing financial statements, filing tax reports,
ensuring IRS compliance and arranging recipient audits.
They also allow us to
avoid shouldering the cost of running our own foundation, which typically
consumes 15 percent of our annual payouts to charity (which themselves must
comprise a minimum of 5 percent of our endowment each year). Because of these
costs, experts advise that it makes little sense to start a family foundation
with less than $10 million; it begins to make sense when we plan to endow it
with about $20 million.
Despite myriad obstacles, many of us continue to find
the idea of launching a family foundation attractive, especially if we want to
attach our family name to our vision. Before we do, we must ask ourselves an
often-uncomfortable question: Does our family get along well enough to carry out
this vision?
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