We have been "around this tree" once or twice, but I believe I have
not offered my thoughts, so -

 There are multiple issues here that need to be dealt with separately.

1.  Funds from foundations, etc. often are paid in advance so there is
interest to be gained.  Often, the provider desires that interest accrue to
support the designated purpose for the funds and should be a consideration.
This may be easier to accomplish within a foundation.

2.  Expenditures from both sources should be considered as institutional
expenditures, and at least for public institutions, I can envision no
situation where it would be better to spend directly from the foundation.
At least for us, the University has better and more effective accounting
systems and controls so we require all expenditures from a University
account.  We essentially "invoice" the foundation as expenses are incurred
on a regular basis as for any other sponsored project.  By doing this, it
is less likely that "games" will be played using alternative funding
sources.  This also helps to insure that University policies such as
charging of IDC will be implemented more uniformly.

3.  Aside from matters of financial management, the issue seems to me to be
largely one of determining "credit".  I generally feel that research
administrators come down more on the side of "management & control" and
development offices struggle for more "credit".  Either way, the funds are
restricted to a particular purpose & risks of abuse need to be evaluated in
relation to the requirements or specifications of the sponsor/donor.  We
all generally work to support the scholarship of faculty and students.  I
believe everyone wants to support winners.  Therefore, we need to be
sensitive to faculty/student perceptions to whether or not funds are
provided to honor their accomplishments or their ideas.  If they are to
honor accomplishments and promote future excellence, then it may be
entirely appropriate to consider it a gift.  On the other hand, if it is to
honor an idea and credit the faculty, then it should be considered a grant.

 As for most other great things in life - there are no absolutes!

Terry A. May, Ph.D.                       Voice:    520-523-6788
  Director of Research Administration     FAX:      520-523-1075
  Office of Grant & Contract Services     INTERNET: xxxxxx@nau.edu
  100 Babbitt Admin. Ctr., Box 4130
  Northern Arizona University
  Flagstaff, AZ  86011-4130