I think your guy is off base, but I can't give you a specific IRS reference.  We have a fairly definitive policy and so no longer have difficulties (see our website).  When we wrote this policy, we looked lots of others that said the same thing--depends on terms and conditions and requirements, not the type of donor/organization.  At our (public) institution, even if money is given to our foundation with few strings attached and can be called a "gift" rather than "grant," if it
eventually pays someone's salary, we must flow it down (via letter agreement) to the university through our sponsored programs office and put it in a university grant account.. Our Foundation doesn't do payroll--the university handles payroll for the foundation staff who are actually "development officers" in our institutional advancement office (state employees)--and such payments are subject to all the state HR regs (including limits on additional compensation).  Since we made
this extremely clear, much of the agitation to put funds in the Foundation has evaporated.  You might want to think about the motivations of your party--sometimes there are attempts to use the foundation as the funds repository to circumvent state regulations (including travel and procurement).  BG

"Baumann, John" wrote:

> We are currently in the midst of a grant-gifts controversy with regard to funds provided by private foundations and/or associations for the performance of proposed research projects....  One party on our campus, not Sponsored Programs, has claimed that regardless of the purpose of the funds, regardless of

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