LOS h: Distinguish among various types of foundations, with respect to their description, purpose, source of funds, and annual spending requirements.

Q1. Which of the following statements regarding foundations is TRUE?

A)   Independent foundations provide grants to charities, educational institutions, and social organizations.

B)   An operating foundation is generally funded to support a variety of social causes over time.

C)   A community foundation is dedicated solely to support a specific organization or some on-going research initiative.

Q2. Which of the following types of foundations do NOT have a spending requirement?

A)   Independent.

B)   Community.

C)   Operating.

Q3. Which of the following statements regarding foundations is TRUE?

A)   An operating foundation is generally funded by the organization it is intended to support.

B)   Grants from company-sponsored foundations must be made without regard to the sponsoring company’s business interest.

C)   Independent foundations receive their funds from an individual, family, or group.

LOS h: Distinguish among various types of foundations, with respect to their description, purpose, source of funds, and annual spending requirements. fficeffice" />

Q1. Which of the following statements regarding foundations is TRUE?

A)   Independent foundations provide grants to charities, educational institutions, and social organizations.

B)   An operating foundation is generally funded to support a variety of social causes over time.

C)   A community foundation is dedicated solely to support a specific organization or some on-going research initiative.

Correct answer is A)

An operating foundation is funded solely to support a specific organization or some on-going research initiative. A community foundation typically funds social, educational, or religious initiatives.

Q2. Which of the following types of foundations do NOT have a spending requirement?

A)   Independent.

B)   Community.

C)   Operating.

Correct answer is B)

Independent (or private) and company-sponsored foundations must spend five percent of their assets annually toward non-operating expenses to maintain their tax-exempt status. Operating foundations must use 85% of interest and dividend income to conduct the institution’s own program.

Q3. Which of the following statements regarding foundations is TRUE?

A)   An operating foundation is generally funded by the organization it is intended to support.

B)   Grants from company-sponsored foundations must be made without regard to the sponsoring company’s business interest.

C)   Independent foundations receive their funds from an individual, family, or group.

Correct answer is C)         

Company executives usually dominate the board of trustees for a company-sponsored foundation, which may use grants to further corporate interest. A fund owned and funded by the organization it is intended to support is called an endowment, not a foundation.