The memorandum of understanding (MOU) between a public institution and its affiliated foundation documents how the foundation and institution work together, enumerating respective responsibilities, describing financial and operational relationships, and identifying practices for accountability and transparency. All too often, however, foundation-institution MOUs are allowed to molder despite changes in the relationship. In rare cases, conflicts between institution and foundation leaders may drive changes to the MOU that are more focused on ensuring leverage rather than fostering collaboration.
In recent years, the roles of many foundations have undergone significant changes. 86 percent of respondents to a recent AGB survey reported changes in the role of their foundation in the past five years, with over a quarter reporting that responsibility for some development functions had been transferred from the institution to the foundation. In this context, both institution and foundation boards should be asking if their MOUs accurately reflect the current foundation-institution relationship.
Is it time to consider undertaking a formal process to review and update the agreement? In January, AGB published a revised and updated Illustrative Memorandum of Understanding that outlines elements to be addressed in MOUs and recommended principles and practices for the MOU process.
While changes in the way foundations and institutions work together obviously necessitate changed operating agreements, a thoughtful MOU process is a valuable opportunity to explore ways the foundation might more effectively support evolving institution priorities.
Review of the MOU might be undertaken in conjunction with or in the wake of strategic or campaign planning.
Even in cases where the essential elements of the foundation-institution relationship remain unchanged, periodic review of the MOU helps ensure that the agreement remains current, fosters communication, and can identify ways to enhance accountability and risk management. While MOUs function as a contract between the institution and foundation, they also memorialize shared understandings about the foundation-institution relationship.