A not-for-profit hospital generally raises funds. Any new not-for-profit corporation formed as part of restructuring also may be able to engage in fundraising if such entity obtains a tax exemption under the Internal Revenue Code.
Also, as part of a reorganization and despite the creation of a new entity as indicated, hospitals frequently determine that it is desirable to create an additional foundation, the sole purpose of which is fundraising for the hospital. This, therefore, may lead to as many as three organizations with both the capability and the intent to engage in fundraising to benefit the hospital. Obvious confusion may arise in the minds of the public being asked to give to these organizations. A coordinated approach to fundraising is critical to avoid such confusion.
Any organization engaged in fundraising may have local filing requirements at the state or other governmental level. Care must be taken so that the public is informed completely as to the ultimate beneficiary of such fundraising and the manner in which the monies raised will be spent. A donor to a charity may have a claim against that charity if the donor can show that he or she was misled regarding the ultimate beneficiary of the gift or the purposes for which the gift would be used. Members of the public may be reluctant to donate when capital is to be used to fund for-profit enterprises. The overall charitable purposes of the entity must be carried out, and the activities may not be so concentrated on the operation or participation in for-profit ventures that either the tax exemption is jeopardized or it is determined (usually by the state attorney general) that the funds have been raised improperly from the public.