Family Foundations

Hi Ryan,

At OCPAC we historically booked these gifts directly to the individuals record.  In the last year, however, we've been changing that.  Now, we book to the family foundation and credit to the individual.  There are some cases where this normally wouldn't be an issue (for instance, donors who only gift via their foundations), but in the cases where an individual gifts their own money as well as money from their foundation, this has helped immensely with financial tracking. 

As far as the donor's response is concerned, many of our donors require separate tax letters addressed specifically to the foundation, and/or request financial contribution statements at the end of the year for the foundation specifically.  These donors typically support the two record model.  For the donors who are unaware of this process, they either don't care when they find out, or are content once we explain our processes.  I have yet to encounter someone who reacted negatively.

I hope this helps answer your question.  I don't know of the specific IRS document, but last summer we spoke to our auditors regarding this issue and they highly recommended having one record for the family foundation and one record for the individual.

Feel free to contact me directly if you have additional questions.

Amber Albert
Orange County Performing Arts Center

We also use the two account model.  The real trick is to follow the tax credit.  Does the individual take a tax credit when they put money into the charitable gift fund (i.e. you wouldn't send them a personal tax receipt) or do they just keep a separate account for giving and take a tax credit only when gifts are made (i.e. they would need a tax receipt to claim the credit.) 

Since you don't always know how a donor's account is set up, another best practice is to always acknowledge that the gift was made thru "XYZ Family Foundation."  This provides them adequate documentation under either senario.

We are in the position where we currently credit all DAF gifts to the individual account.  While I'm interested in moving to the "two account model" for the sake of reporting and acknowledgment clarity, the rest of our Development staff isn't so sure how they feel about the change.  They want, of course, to maintain the integrity of the donation history on the individuals' records.

I realize these aren't mutually exclusive goals, but for the sake of due diligence, is there anybody out there that uses the "one account model" (i.e. credits DAF and Family Foundation gifts to the individual donors' records, not to a seperate Fund or Foundation record) and is happy with it?  If so, how do you get around tax-receipting issues, and the other issues reported above?

For those that use the "two account method", do you have a seperate constituency type for DAFs, as opposed to full-fledged Foundations?

Thanks!

Kirk Mortensen, TheatreWorks

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We set up an entirely seperate constituent type for Family Foundations and set-up the account in the same way a Corporate record looks.

I've attached a screenshot of what it looks like, but in case it doesn't work, just click on the link below: http://i40.tinypic.com/e9dk3r.jpg 

We add the second name of the record to the account under the Alias tab so that it's searchable &  add the name to the general tab. We treat Family Foundation records as individuals. Any other addresses (if default is a buisness address) is recorded under the addresses tab.

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Hi there,

I have found that keeping separate records only makes sense if the donations are voted by a foundation board and don't represent the donation of the donor him/herself. In other words, if the foundation has a life of its own and does its own thing, regardless of the donor in question.

I think that the answer to one of two records question may be more philosophical than practical. Do we want the Tessitura development functionality's PRIMARY role to be that of a device to track donor history, donor behavior, trends and "who-to-ask for a repeat-gift" OR do we want its PRIMARY role to be the tracking of payment instruments, namely foundation check vs. personal check vs. DAF check or "paying entity"?

We are already unable to tell the difference on credit card transactions as it is. When someone pays with a credit card online, do we stop them from choosing a their individual record if the guy tries to use a corporate credit card? The answer is: We will never even know the difference.

If they make a donation, that way, can we produce a different acknowledgment letter?

On the other hand, I do understand that a DAF is a separate legal entity and that telling what came from a DAF vs what came from a personal account has its importance. My take on it though is that, as a development piece of software, Tessitura's role in tracking the latter is its SECONDRY role. Not its primary role.

A great idea from this discussion I believe, is using payment methods to tag DAF checks, Foundation Checks, etc. in the same donor’s account. This also helps with (manually) being able to tweak acknowledgment letters.

When development software is designed, certain assumptions are made. For instance: that we are tracking "a donor". And for all intents and purposes that's what the primary role of the program will excel at. Yes, you can have associations, and other afterthoughts that will cover questions like “well DAFs are separate entities”, “the guy can pay with his newest corporate venture”, etc.  but when you make the decision of splitting a person's giving in a DAF account one year, his dot com commercial venture the following year,  his real estate one the following, and his personal account this year, you will necessarily have him in every LYBUNT list, year, after year, after year. When your basic development questions arise, like who has been supporting us for at least x number of years, “his giving” will be one year in each account. So he won't be considered "he", “the donor” as the premise of the program's design was. You will have four entities with one year each that may or may not show an association (or a hundred associations for that matter). This will never really let you track and re-solicit the same guy who has really been behind all this giving all along...

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I believe the IRS rules of tracking separate entities with regard to giving for one thing are not Tessitura’s primary role. (It can do it though). They can be the accounting software’s role, for instance. Auditors will eventually want to see Tessitura records, but what they really audit is the financials in the accounting department; so I don’t see that we are breaking any rules. I asked for these rules in writing by the way and could never get a copy and no one was able to show me that this has to be split in the development side of the tracking.(Yes, I visited IRS.gov). I would love to see these rules. For another thing, I believe the rules of telling these payments apart can be complied with by using an approach like the DAF-check payment method approach. We can report on it but not at the cost of losing out big development picture.