Common Types of Foundations

Foundations, similar to charities, are governed by a board of directors or trustees. Some foundations, usually larger ones have paid staff who manage grants and the grantmaking process.

There are three common types of foundations that grant writers should be familiar with:

Community Foundations
Community Foundations share the resources of many donors in order to award grants. They usually focus on their grantmaking in a specific region, county or city. The IRS classifies this type of foundation as a public charity and therefore it is not subject to the excise taxes and distribution requirements. Donations to community foundations ARE tax deductible. One of my favorites, with a great website is the Community Foundation of Greater Fort Wayne http://www.cfgfw.org/.

Corporate Giving Programs
Corporate giving programs are connected to businesses. The money that they give to charities comes from the corporation’s profits. With our current economy, corporate giving is taking a big hit and thus, charities are feeling the pinch of losing funding they usually received.

Corporations that don’t have a foundation are not legally required to make their contributions public are aren't bound by "foundation rules". Unfortunately, it can be challenging to get this information and determine if they are good fit.

Examples of corporate giving programs reflect all types of business including Target, Best Buy, Kohl's Department Stores, and 3M. Look into your favorite business, you might be surprised!

Employee involvement is a big factor when decided where corporations with put their dollars. They like to support communities where their employees live, work and play. Funding usually comes in the form of sponsorships, which is allocated from their marketing budget. Other companies have match-gift programs and volunteer incentives outside of the “grant making” realm. We'll discuss this at a later date.

Private Foundations
Private foundations make up the largest number of grant makers. They are founded by individuals, families or like minded groups of people. A family foundation usually has a family that is involved in grant making decisions and perhaps the daily operations. Sometimes the family is simply involved it the decision process and leaves the operations end to a trustee or management staff. An independent foundation is normally run by professional staff and/or program officers and the family or donors are not actively involved in the management process.

Private foundations invest their money or at least the majority of the endowment, earning dividends, and interest on its investments. The IRS requires private foundations to make grants equal to at least 5% of its investments assets. This is important to know when researching 990s and foundation profiles. Private foundations pay a 2% excise tax on net investment earnings. Keep your ear to the ground to see if any of the new tax law and charitable giving tax will creep into this category. For now, it looks safe.

Information adapted from: Handbook for Nonprofit Success, Minnesota Council of Nonprofits (2008) and Webster’s New World Grant Writing Handbook by Sara Deming Wason. www.mncn.org

Wednesday, April 15: Fundraising Humor

Thursday, April 16: What Motivates Foundations and Corporations to Give? (in a nutshell!)

~Cheers!