The University of Pretoria is one of Africa’s – and the world’s – top universities. More Partners Ian Edwards and Nik Miller had been providing a strategic boost to their fundraising, in particular by supporting a new focus on major gift fundraising from individuals. With a newly crystallised case for support, they were keen to take their story to international prospects, specifically in the US and UK. But where should they start? And how do they make sure their fundraising in those countries is tax efficient?

The university had a US friends’ group, which is often what organisations outside the US initiate to help raise funds in the country, but weren’t sure what was happening with it, or what to do next. “Luckily,” says Ian, “we have someone in the firm who knows more about this than pretty much anyone else alive – Ken Hoffman. After nearly 40 years of supporting over 200 organisations worldwide in US non-profit activity, I really believe Ken is one of the world’s experts on 501(c)(3)s.” (For the uninitiated, this is the part of the US Internal Revenue Code that allows for federal tax exemption of non-profit organisations.)

Broadening the purpose
Ken quickly got to work. He found that the US friends’ group had been set up as a charitable endeavour, but that its purpose was limited very narrowly to supporting student exchanges between the US and South Africa, rather than allowing for broader philanthropic activity. What’s more, it had no federal tax exemption. “I realised that they had the initial entity they needed, but it wasn’t usable in its current form,” he says. Ken worked closely with the team in Pretoria and the directors of the friends’ group in the US to help turn things around.

First, he helped the team revise the internal governance of the friends’ group. Above all, this meant broadening its charitable purposes: “Its most important function has to be that it can raise money and make grants direct to the university in South Africa,” Ken explains. He also recommended that they simplify the governance structures: “It’s unnecessary to have separate bodies of members and directors; it’s needlessly complex.” Ken recommended that the group should be run entirely by a small, self-perpetuating group of directors, with an option for one appointee by the university. Then he guided them to adopt by-laws and to authorise essential administrative actions.

All of this was to equip the organisation for immediate action in raising and granting funds. “Since you are reliant on volunteers, simplicity of administration is key,” he adds. “You want your volunteers to spend as little time as possible on administration and as much as possible on fundraising and outreach.”

Securing tax exemption
Next came the (not always straightforward) practicalities of securing 501(c)(3) status, which has two key advantages. First, the group would be exempt from paying tax on any money raised; and second, gifts to the group are “tax-deductible” for the donor. “Our online application was granted by the Internal Revenue Service within seven weeks, which was an extremely good result,” says Ken. “It’s a famously random process, I’ve seen it take 18 months. You never know what will happen during the IRS’s review.”

With tax exemption secured, the group could get into the nitty gritty of running the charity. This included opening bank accounts, organising insurances, and ensuring they had the specialist administrative support they would need to run a friends’ group of a non-US university. “Through it all, Ken did an impeccable job of communicating with us, to take us through those three stages,” says Hernan Finkel, Deputy Director, University Relations and Advancement at the University of Pretoria. “He talked us through the process so we had total confidence in what he recommended.”

The impact for the university will be profound. They now have a clear way forward to create a step-change in their US fundraising, as well as confidence in their processes and structures. The friends’ group is re-energised, with a renewed sense of purpose and direction. “When we are in touch with any donors in the US, it’s amazing to say we have everything in place to do this in a tax efficient fashion,” says Hernan. “It demonstrates a long-term institutional commitment to the country.” When the pandemic subsides, the university is now in the perfect position to capitalise on this momentum. Their eyes have now turned to the UK, and their faith in Ken is such that they have sought his advice again. He is acting as an intermediary between UK lawyers and the university, helping to establish the most effective and simple fundraising structure, mirroring the work in the US.

What they say