Institutional improvement and innovation are the key approaches if we want to make the foundations in China develop more quickly，whether in quantity or in quality. It is convinced that various kinds of foundations will play a more important role in the area of public service and philanthropy，and therefore make a major contribution to the social harmony and progress when foundations have a suitable external environment and a better internal governance framework. This article is comprised of five parts：（a） Brief description of the current situation and development of the foundations in Shanghai.（b） Analysis of the functions of foundations. （c） The roles of foundations in public service. （d） Problems and challenges facing foundations in Shanghai. And （e） Institutional improvement and innovation：a key approach to promote the function of foundation in public service and philanthropy.