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An institutionally related foundation can be a critical partner in advancing an institution’s mission through a variety of activities, including fundraising, donor stewardship, endowment management, public-private partnerships, real estate projects, and alumni engagement. A foundation can provide many benefits to its public institution partner, including performing functions that would be impossible or impractical for the public institution or that a private nonprofit might be better adapted to fulfill. Although foundation-institution partnerships must be based on mutual understanding, trust, and a commitment to collaboration, foundations must also maintain an appropriate arms-length relationship with their public partners, striking a balance between the independence required to fulfill their functions and the necessary degree of operational integration. This calculus varies from institution to institution and state to state.
A memorandum of understanding (MOU) is a strategic tool that facilitates this partnership: It serves as a contract between an institution and its foundation, which promotes collaboration and helps prevent misunderstandings that can arise from differing assumptions about roles, responsibilities, and operating procedures. It also documents the shared understanding about the partnership that can provide critical continuity throughout institution and foundation leadership transitions. A well-crafted MOU plays an important role in clarifying and documenting the boundaries between institution and foundation and in prescribing practices to ensure both independence and strategic and operational alignment.
The following sections describe some of the reasons why leaders of public institutions and their related foundations should consider developing and maintaining an MOU. More information about these concepts is available in Memoranda of Understanding Between Public Institutions and Affiliated Foundations, Forging Effective Partnerships with the Foundation Board and Institution President, The New Realities for Public Higher Education Foundations, and Understanding Foundation Finances: Financial Oversight and Planning for Foundation Boards.
Alignment, Accountability, and Communication
An MOU memorializes a consensus among institution and foundation leaders about the foundation’s role in supporting the institution’s mission. This alignment is crucial for integrated planning and achievement of the institution’s overall mission. An MOU affirms policies and who is responsible for a variety of operational issues, including fundraising, financial reporting, gift stewardship, and management of shared resources (such as equipment, facilities, and staff).
Regular communication and collaboration are vital for a successful partnership between an institution and its foundation. An MOU should establish a framework for regular meetings, reciprocal reporting, and shared decision-making processes. This increases transparency, fosters trust, and ensures both the institution and the foundation are aligned in their goals.
Flexibility in a Changing Environment
The higher education landscape is constantly evolving, with new challenges and opportunities emerging regularly. Leadership transitions, occurring at an accelerated pace for reasons both planned and unanticipated, are perhaps the most common source of disruption in institution-foundation partnerships. A current and comprehensive MOU provides stability and continuity during such times by documenting shared commitments and outlining expectations for new leaders.
An MOU should be a living document that institution and foundation leaders periodically review and update to reflect the changing environment. The process of updating an MOU provides a valuable opportunity to assess ways that the foundation can best support the institution as a strategic partner, reinforce strategic intent and alignment, and review and update operating policies and procedures.
Building Trust and Confidence
Public trust is essential for both the success of any higher education institution and effective fundraising. An MOU demonstrates a commitment to transparency and collaboration, clearly articulating the roles of the foundation, mutual expectations, and the services and benefits the institution receives in exchange for any state funds or resources used by the foundation. It can also foster greater trust among campus constituents and underscore the foundation’s commitment to advancing institutional priorities and its obligation to honor donor intent in its stewardship and spending of gift funds.
Conclusion
An MOU is more than a formal agreement; it is a strategic tool that can enhance the relationship between a higher education institution and its foundation. By clarifying roles, ensuring financial transparency, supporting strategic alignment, and facilitating communication, an MOU provides a framework for effective collaboration and mutual success. Institutions and their related foundations that maintain a current and comprehensive MOU are better positioned to navigate the challenges of the higher education landscape and achieve their strategic goals.
Multiple sessions at AGB’s upcoming Foundation Leadership Forum on January 29-31, 2025 in Washington, D.C., will explore the relationship between institutions and their related foundations, providing insights for foundation board members, chief executives, and other foundation and campus leaders.
David Bass is AGB’s executive director of philanthropic governance.
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