This handbook provides public and private school administrators with guidelines for developing a nonprofit educational foundation. Following an introduction, a statement of rationale describes fundamental approaches and activities. The foundation's primary purpose is aiding schools with additional funding and community service support. Section 2 presents a suggested statement of mission. Ways the foundation benefits a local school district are discussed in section 3, including the following: provides new sources of funding; increases community involvement in fundraising and schooling; helps with fund investments; and provides a new form of political independence. Section 4 recommends goals that emphasize methods of developing public education through improvement strategies and community participation. Short and long-term foundation activities are proposed in section 5. Funds are used for such purposes as grants to teachers and projects, scholarships, sabbaticals, and staff development. Section 6 reviews legal issues involving incorporation as a nonprofit organization. Section 7 suggests sources for initial funding. Local sources include corporate aid projects and endowments. Names and addresses of state and national foundations offering grants to school districts are provided. Do's and don'ts for a new foundation considered in section 8 cover funding operations, legal areas, and scope. Examples of a nonprofit educational foundation bylaws and of a charter for an educational foundation (using Tennessee code statutes) conclude the document. A 50-item bibliography is appended. (CJH)