The best way to create a foundation is have it set up with an arm’s-length relationship. Foundations set up as a completely separate entity from the library is best or the foundation will be subject to the same laws and regulations that the library must follow. Beginning steps for creating this type of foundation include:
- A community leader will take charge of locating donations to set it up so that library funds are not used.
- The community leader will be in charge of setting up the foundation as a public charity with 501(c)(3) status with the assistance of an attorney.
- The mission of the foundation and bylaws are set up and officers appointed. If formed correctly the bylaws will state that the foundation can only use funds for the purpose for which it was collected, so that all funds will benefit the library.
- The foundation will need to be set up as an operational or a grant-making public charity which spends its funds to purchase goods and services for the library.
• If the foundation is a separate entity and not an arm of the library and is set up as an operational public charity, it will prevent the foundation from being subject to the same purchasing and bidding restrictions that the library must follow.
• If the foundation is a grant-making public charity, it will give funds to the library to spend as needed. Any funds given to the library are subject to the purchasing and bidding restrictions that the library must follow.
• If the foundation is set up as an arm of the library with library trustees serving as officers of the foundation, any funds spent are subject to the same restrictions the library must follow.
- The library can have a contractual relationship with the foundation to allow it to use the library's name and stipulate that they have to use the money for the library's purposes. This would also ensure that funds are not directed to other organizations or purposes.
- Library staff can be members of the foundation but it is best if library trustees are not members of the foundation to help maintain the distance between the library and the foundation.
- The foundation cannot participate in partisan politics or support a political candidate or be involved in a political campaign or it will lose its tax-exempt status.
- Providing advertising to support the library would not be considered as being involved in partisan politics.
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