By Thomas Blaney, Partner in Charge, Private Foundations at PKF O’Connor Davies and Tania Miranda, Director, Private Foundations at PKF O’Connor Davies
Private foundations operate within a unique and highly regulated landscape, where even small oversights can have significant implications. Staying informed on key rules and best practices is essential to maintaining compliance and maximizing impact. To help simplify the complexities, we’ve compiled 10 practical tidbits that highlight important areas every private foundation should adhere to.
- Self-Dealing Rules Foundation Managers Unknowingly Violate
Transactions between the foundation and disqualified persons are highly restricted. Even seemingly minor interactions can trigger significant penalties, making it important to clearly understand and avoid self-dealing situations. When in doubt, conduct thorough research or seek professional guidance to ensure compliance, especially where transactions could raise concerns in appearance as well as in practice. - Transparency and Compliance Go Hand in Hand
Compliance is not optional, and neither is accountability. Maintaining accurate records, filings and thorough documentation, and adherence to statutory requirements helps avoid penalties and protect the foundation’s reputation. At the same time, Form 990-PF is publicly available and often reviewed by journalists, current and future employees, peers and watchdog groups. As a result, decisions should be made with the understanding they may ultimately be subject to public scrutiny. - 5% Minimum Distribution Is the Floor, Not the Goal
Meeting the minimum distribution requirement is key, but it should not be the sole focus.
Foundations should plan distributions in advance, align them with their mission and avoid year end rushes that can result in hurried or insufficiently vetted grants. Strategies such as granting to a donor-advised fund should be considered. - Grants Should Require Due Diligence
Not all grants are treated equally. Foundations must ensure recipients are qualified and funds are used appropriately. This is particularly true when making grants to individuals, non-public charities or foreign entities. - Support Compensation with Data
Paying trustees, family members or key employees is not prohibited, but it must be reasonable and well-supported. Independent benchmarking, formal approval processes and documentation are critical to demonstrating that compensation is appropriate. Simply stating that “everyone agreed it was fair” is not a sufficient defense. - Investment Oversight Is Essential
Foundation assets should be managed thoughtfully, balancing risk and return while supporting long-term sustainability. Investment expenses should be reasonable. Oversight and documentation of investment decisions and investment expenses are essential to meeting fiduciary responsibilities. - Excise Tax Surprises
Understanding how these taxes are calculated and incorporating them into financial projections and budgets can help avoid unexpected liabilities. Strategies such as donating highly appreciated investments, rather than liquidating them, may help reduce taxable gains. In addition, making timely estimated tax payments can prevent underpayment penalties and support smoother financial management throughout the year. - Strong Governance Starts with the Board
An engaged and informed board plays a critical role in oversight and strategic direction. Regular meetings, clear policies and thorough documentation help ensure strong governance practices. Board minutes, in particular, should clearly reflect oversight, key discussions and decision-making processes. This will serve as a powerful risk management tool by evidencing diligence, supporting compliance and providing a clear record in the event of regulatory review or outside scrutiny. - Stay Aligned with Your Mission
Periodic review of the foundation’s mission and grantmaking strategy is essential to maintaining long-term alignment and focus. Donor intent, if applicable, should be reviewed. Without regular reassessment, foundations risk drifting away from their core purpose. - Good Professionals Should Help You Stay Out of Trouble
The best advisors do more than solve problems, they help prevent them. Regular check-ins with tax, legal and investment professionals who understand private foundation rules can identify risks early and keep foundations on track,. This helps avoid small missteps that could otherwise become costly mistakes.
Final Thoughts
Most private foundation challenges don’t stem from bad intentions, they arise from a lack of attention to fundamental requirements. Maintaining discipline, thorough documentation and a deliberate approach enables foundations to stay compliant and focused on what matters most: creating meaningful, lasting impact.
Thomas F. Blaney is the Leader of the Private Foundations Practice at PKF O’Connor Davies. He has spent approximately 30 years specializing in the accounting and tax aspects of exempt organizations.
A member of the Firm’s Executive Committee, Tom is a recognized thought leader and frequent speaker, author and contributor to events and articles related to private foundations and not-for-profit topics. His work has appeared in The Wall Street Journal, Barron’s and other leading business publications. Tom is a Certified Fraud Examiner, licensed CPA in the states of Florida, New York and Pennsylvania, and was also appointed to the Panel on the Nonprofit Sector’s “990 PF Reform Advisory Committee.”
Tania Miranda has more than 10 years of experience in public accounting and specializes in auditing and tax consulting. She leads the execution of audit approaches and oversees on-site staff to support the timeliness and accuracy of financial reporting.
Tania works with a range of not-for-profit organizations, including private foundations, charitable foundations, arts and cultural organizations as well as membership organizations. She is a frequent contributor to the organization’s monthly Private Foundations Bulletin and regularly presents continuing professional education courses to colleagues. In 2025, Tania was recognized by the American Institute of Certified Public Accountants as a Global Women to Watch honoree in the Emerging Leaders category.
