Financial partnerships are developing between local communities and schools based on the desire to improve public education by raising private sector funds to offset shrinking tax dollars. Those who develop education foundations for a school system must know the basics: defining the school system's role, determining what the fund can and cannot do, and ensuring that the school's goals and priorities are not undermined. Although there are no firm rules to follow, there is agreement that foundations should be separate entities from the school system and that the school board and administration should be involved. Once a foundation is established, it must operate according to bylaws, have a board of directors, and, if possible, a staff and office. The most critical aspect of a foundation, after raising funds, is the allocation of funds. This area should be addressed before the foundation is established, because it has the most potential for controversy. Mutual trust must be established between the foundation board and the school system. Educators should review their policy manual and administrative procedures to be sure they can support a mutually beneficial relationship with a local foundation. Each community must determine its own goals and establish the mechanisms for reaching them. A list of education foundation sources is provided. (MD)