Structure is an important consideration in school fundraising — and it can be a big issue for the board — but it is not usually the most important factor for donors when making a gift decision. In our experience, structure really doesn’t rate anywhere near the top of the list for donors and yet many schools feel that they need to have an entity like a foundation to undertake a major fundraising campaign.
It may seem like a good idea to have a foundation: it sounds like something that should impress donors, because a legally separate entity might somehow convey credibility. In reality, however, this is not really the case.
The term foundation has no definitive legal meaning or standing. Further, donors are not automatically impressed with a foundation. In many cases, the time and money required to create and then run the separate foundation entity becomes a sinkhole that swallows resources and effort that would be better directed to straightforward fundraising and better engagement of donors.
School foundations tend to form for a few reasons.
In the 1970s and 1980s, the model for government funding of non-government schools (the Education Resource Index or ERI) sometimes produced situations where schools were effectively penalised for being good managers of their finances and building up cash surpluses from good budget management or other activities such as canteens, uniform shops, and so on. If the school built up too much in cash reserves, then the government model might reduce funding for the next year. To counter this, schools started establishing separate entities (foundations) to move this surplus activity off their operating accounts and balance sheets.
Key people have heard part of a story about the success of another school foundation and believe that they can replicate that success at their school.
A school has a bad experience with fundraising monies being appropriated for purposes other than what it was raised for (sometimes due to interference from a larger parent organisation). To avoid this happening again, a separate entity is established to keep future fundraising monies out of reach of further bad behaviour.
There was a point in time where school foundations were increasingly common; however, over the last 10 years it seems that more schools have been folding up their foundations and bringing their fundraising work back into a board committee.
The critical lesson to learn about foundations is that donors are far more impressed by the outcomes achieved with their support rather than the structure of the entities involved. Importantly, there have been many successful fundraising appeals and campaigns that have run in schools without any foundation at all.
Take a second look at your school foundation and, if you are in a situation where it is acting more like a hand brake rather than an accelerator, consider taking action to wind it up like many others have.