This post first appeared on the Foundation Center’s GrantCraft blog. GrantCraft, a service of the Foundation Center, taps the practical wisdom of funders to develop free resources for the philanthropy sector.
Folks who are new to the field often request a glossary of terms just to make sure they know the basics. Our sister site GrantSpace (geared more towards nonprofits, while GrantCraft speaks more directly to funders) has shared the below list that defines the most commonly used terms in Foundation Center materials.
501(c)(3) The section of the tax code that defines nonprofit, charitable, tax-exempt organizations. 501(c)(3) organizations are further defined as public charities, private operating foundations, and private non-operating foundations. See also: operating foundation; private foundation; public charity.
Annual report A voluntary report issued by a foundation or corporation that provides financial data and descriptions of its grantmaking activities. Annual reports vary in format from simple typewritten documents listing the year’s grants to detailed publications that provide substantial information about the grantmaker’s grantmaking programs.
Assets The amount of capital or principal — money, stocks, bonds, real estate, or other resources — controlled by a foundation or corporate giving program. Generally, assets are invested and the resulting income is used to make grants.
Beneficiary In philanthropic terms, the donee or grantee receiving funds from a foundation or corporate giving program is the beneficiary, although society may benefit as well.
Capital support Funds provided for endowment purposes, buildings, construction, or equipment.
Challenge grant A grant that is paid only if the donee organization is able to raise additional funds from other sources. Challenge grants are often used to stimulate giving from other donors. See also: matching grant.
Community foundation A 501(c)(3) organization that makes grants for charitable purposes in a specific community or region. The funds available to a community foundation are usually derived from many donors and held in an endowment that is independently administered. Income earned by the endowment is then used to make grants. Although a community foundation may be classified by the IRS as a private foundation, most are public charities and are thus eligible for maximum tax-deductible contributions from the general public.See also: 501(c)(3); public charity.
Community fund An organized community program which makes annual appeals to the general public for funds that are usually not retained in an endowment but are instead used for the ongoing operational support of local agencies. See also: federated giving program.
Company-sponsored foundation (also known as a corporate foundation) A private foundation whose assets are derived primarily from the contributions of a for-profit business. While a company-sponsored foundation may maintain close ties with its parent company, it is an independent organization with its own endowment and as such is subject to the same rules and regulations as other private foundations. See also: private foundation.
Corporate foundation See company-
Cooperative venture A joint effort between or among two or more grantmakers. Cooperative venture partners may share in funding responsibilities or contribute information and technical resources. Also known as a funder collaborative.
Corporate giving program A grantmaking program established and administered within a for-profit corporation. Because corporate giving programs do not have separate endowments, their annual granttotals generally are directly related to company profits. Corporate giving programs are not subject to the same reporting requirements as corporate foundations.
DIALOG An online database information service made available by the Thomson Corporation. The Foundation Center offers two large files on foundations and grants through DIALOG.
Distribution committee The committee responsible for making grant decisions. For community foundations, the distribution committee is intended to be broadly representative of the community served by the foundation.
Donee The recipient of a grant. Also known as a grantee or a beneficiary.
Donor An individual or organization that makes a grant or contribution to a donee. Also known as the grantor or grantmaker.
Employee matching grant A contribution to a charitable organization by an employee that is matched by a similar contribution from his or her employer. Many corporations have employee matching-gift programs in higher education that encourage their employees to give to the college or university of their choice.
Endowment Funds intended to be invested in perpetuity to provide income for continued support of a not-for-profit organization.
Expenditure responsibility In general, when a private foundation makes a grant to an organization that is not classified by the IRS as a “public charity,” the foundation is required by law to provide some assurance that the funds will be used for the intended charitable purposes. Special reports on such grants must be filed with the IRS. Most grantee organizations are public charities and many foundations do not make “expenditure responsibility” grants.
Family foundation An independent private foundation whose funds are derived from members of a single family. Family members often serve as officers or board members of family foundations and have a significant role in their grantmaking decisions.
Federated giving program A joint fundraising effort usually administered by a nonprofit “umbrella” organization that in turn distributes the contributed funds to several nonprofit agencies. United Way and community chests or funds, the United Jewish Appeal and other religious appeals, the United Negro College Fund, and joint arts councils are examples of federated giving programs. See also: community fund.
Fiscal sponsorship Affiliation with an existing nonprofit organization for the purpose of receiving grants. Grantseekers may either apply for federal tax-exempt status or affiliate with a nonprofit sponsor.
Form 990-PF The public information return that all private foundations are required by law to submit annually to the Internal Revenue Service (IRS).
Form 990 The public information return that public charities file with the Internal Revenue Service (IRS).
Funding Information Network The Foundation Center’s network of libraries, community foundations, and other nonprofit agencies that provides a core collection of Center publications in addition to a variety of supplementary materials and services in areas useful to grantseekers.
General/operating support A grant made to further the general purpose or work of an organization, rather than for a specific purpose or project. Also called an unrestricted grant or basic support.
General purpose foundation An independent private foundation that awards grants in many different fields of interest. See also special purpose foundation.
Grantee financial report A report detailing how grant funds were used by an organization. Many corporate grantmakers require this kind of report from grantees. A financial report generally includes a listing of all expenditures from grant funds as well as an overall organizational financial report covering revenue and expenses, assets and liabilities. Some funders may require an audited financial report.
Grassroots fundraising Efforts to raise money from individuals or groups from the local community on a broad basis. Usually an organization’s own constituents — people who live in the neighborhood served or clients of the agency’s services — are the sources of these funds. Grassroots fundraising activities include membership drives, raffles, auctions, benefits, and a range of other activities.
Guidelines Procedures set forth by a funder that grantseekers should follow when approaching a grantmaker.
Independent foundation A grantmaking organization usually classified by the IRS as a private foundation. Independent foundations may also be known as family foundations, general purpose foundations, special purpose foundations, or private non-operating foundations. See also: private foundation.
In-kind contribution A contribution of equipment, supplies, or other tangible resource, as distinguished from a monetary grant. Some corporate contributors may also donate the use of space or staff time as an in-kind contribution.
Letter of inquiry A brief letter outlining an organization’s activities and its request for funding that is sent to a prospective donor in order to determine whether it would be appropriate to submit a full grantproposal. Many grantmakers prefer to be contacted in this way before receiving a full proposal.
Operating foundation A 501(c)(3) organization classified by the IRS as a private foundation whose primary purpose is to conduct research, social welfare, or other programs determined by its governing body or establishment charter. An operating foundation may make grants, but the amount of grants awarded generally is small relative to the funds used for the foundation’s own programs. See also: 501(c)(3).
Payout requirement The minimum amount that private foundations are required to expend for charitable purposes (including grants and, within certain limits, the administrative cost of making grants). In general, a private foundation must meet or exceed an annual payout requirement of 5 percent of the average market value of its total assets.
Private foundation A nongovernmental, nonprofit organization with funds (usually from a single source, such as an individual, family, or corporation) and program managed by its own trustees or directors. Private foundations are established to maintain or aid social, educational, religious, or other charitable activities serving the common welfare, primarily through the making of grants. See also: 501(c)(3); public charity.
Program amount Funds that are used to support a particular program administered internally by a foundation or corporate giving program.
Program officer A staff member of a foundation who reviews grant proposals and processes applications for the board of trustees. Only a small percentage of foundations have program officers.
Program-related investment (PRI) A loan or other investment (as distinguished from a grant) made by a foundation to another organization for a project related to the foundation’s philanthropic purposes and interests.
Proposal A written application, often accompanied by supporting documents, submitted to a foundation or corporate giving program in requesting a grant. Most foundations and corporations do not use printed application forms but instead require written proposals; others prefer preliminary letters of inquiry prior to a formal proposal. Consult published guidelines.
Public charity A nonprofit organization that qualifies for tax-exempt status under section 501(c)(3) of the IRS code. Public charities are the recipients of most foundation and corporate grants. Some public charities also make grants. See also: 501(c)(3) private foundation.
Qualifying distributions Expenditures of a private foundation made to satisfy its annual payout requirement. These can include grants, reasonable administrative expenses, set-asides, loans and program-related investments, and amounts paid to acquire assets used directly in carrying out tax-exempt purposes.
RFP Acronym for Request for Proposal. When the government issues a new contract or grant program, it sends out RFPs to agencies that might be qualified to participate. The RFP lists project specifications and application procedures. While an increasing number of foundations use RFPs in specific fields, most still prefer to consider proposals that are initiated by applicants. For a current listing of selected RFPs, see our RFP Bulletin.
Seed money A grant or contribution used to start a new project or organization. Seed grants may cover salaries and other operating expenses of a new project.
Set-asides Funds set aside by a foundation for a specific purpose or project that are counted as qualifying distributions toward the foundation’s annual payout requirement. Amounts for the project must be paid within five years of the first set-aside.
Special purpose foundation A private foundation that focuses its grantmaking activites in one or a few areas of interest. See also: general purpose foundation.
Tax-exempt Refers to organizations that do not have to pay taxes such as federal or state corporate tax or state sales tax. Individuals who make donations to such organizations may be able to deduct these contributions from their income tax.
Technical assistance Operational or management assistance given to nonprofit organizations. This type of help can include fundraising assistance, budgeting and financial planning, program planning, legal advice, marketing, and other aids to management. Assistance may be offered directly by the staff of a foundation or corporation, or it may be provided in the form of a grant to pay for the services of an outside consultant. See also: in-kind contributions.
Trustee A foundation board member or officer who helps make decisions about how grant monies are spent. Depending on whether the foundation has paid staff, trustees may take a more or less active role in running its affairs.