TYPES OF FOUNDATIONS
Foundations are organizations that donate funds and support to other organizations. Some foundations may also provide funding to support their own charitable programs. For grant making purposes, the business of a foundation is to make grants to support charitable programs. Each foundation has its own interests and supports projects that are within those interests.
There are five types of foundations:
- Operating foundations
- Independent foundations
- Community foundations
- Corporate foundations
- Public Charities
Operating foundations are established as separate entities by a parent organization to raise money for the programs and services of the parent organization. Operating foundations are commonly found in universities and hospitals, and it has become a growing trend in social service agencies and public and private schools. Public school districts have established operating foundations as a method of increasing private donations and to keep private funds separate from public funds.
Most independent foundations are foundations established by an individual or family so they are commonly referred to as family foundations. Some independent foundations may be linked to businesses, but they represent private giving. Family foundations may be administered by family members and some are administered through bank trust officers.
Community Foundations serve specific geographic areas. A Community Foundation may serve several counties, a single county, several cities, or an entire metropolitan area. Community Foundations administer pools of money from private donors and other foundations. An applicant applying to a Community Foundation could have access to multiple donor-advised funds.
A Corporate Foundation is established as a separate legal entity by a parent company. The parent company passes along a percentage of its profits to the foundation for distribution to charitable organizations.
A Public Charity receives a substantial amount of money from a governmental unit or the general public and distributes it via grants to support community programs and services. Local Arts Councils are an example of Public Charities.
HOW TO IDENTIFY PROSPECTS
Foundations have particular interests and may choose to limit their grant making to certain geographic areas. It is the applicant’s responsibility to identify foundations with interests that align with the applicant organization’s programs and services.
Before an organization begins researching to identify foundation grant makers to support its programs and services, it is important to identify specific projects and services. Further, it will be helpful to assign costs to the projects and services. While some foundations will be capable of funding the total cost of a project, many will contribute a portion of the total cost. Locating the foundation’s giving history to determine how much each foundation is capable of giving is part of the prospect research process. It is common to ask several foundations to contribute to the same project to make up the total cost of the project or service.
To begin identifying foundation grant makers, it is recommended the organization make a list of connections that any of the staff, board, or agency volunteers have with foundation representatives, especially corporate foundations:
- List vendors and individuals with whom the organization conducts business (i.e., banks and financial institutions, insurance companies, office suppliers, etc.)
- List area businesses that may be linked to corporations with charitable giving programs (i.e., McDonald’s restaurants, Office Depot, Proctor and Gamble, Lowe’s, Home Depot, Target, Best Buy, etc.)
Once the lists are completed, check to see if the business has a website and begin searching for information about the interests, limitations, restrictions, and application guidelines of each foundation. If the information about the foundation aligns with the applicant organization and project, it is a match to be pursued by submitting a Letter of Intent or grant proposal. Click here for Letter of Intent. Click here for Grant Writing Basics.
An organization’s best prospects are those foundations (1) located in the same geographic area; (2) that are known to fund similar projects for other organizations; and, (3) where the organization has existing relationships and contacts. It is recommended that an organization begin its search for grant makers by looking first for local grant makers, and then expand the search statewide, regionally, and nationally.
Resources in addition to foundation websites for helping to identify foundation grant makers include (1) The Foundation Center @ www.foundationcenter.org, which provides databases containing information about thousands of foundations throughout the nation and is searchable using key terms and geographic areas; (2) Guidestar @ www.guidestar.org, which provides free information about a foundation’s grant making based upon tax reports; and, (3) other search engines such as Yahoo or Google.
These Readiness Questions may help an organization determine whether it is ready to begin applying for foundation grants:
- Are the basics in place?
A. Does the organization have a governing board of directors?Foundations will look at the organization’s leadership—who they are as well as how actively engaged they are in the organization.
B. Does the organization have a not-for-profit tax status?Foundations will ask organizations to prove their not-for-profit tax status as part of the application process.
C. Does the organization have a written mission statement?It is important to have a written mission statement to guide the grants program and prevent applicants from “chasing” grants that could lead the organization away from its mission.
D. Does the organization have a diversified funding base?Foundations do not like to be the only funder. A diversified funding base takes away an organization’s reliance on a single foundation and promotes sustainability.
- Are the organization’s expectations about grants realistic?
A. What is the fund raising goal?How much of the goal does the organization want to raise in grant funds?
B. What is the timeline for raising the money?Applicants will submit grant proposals according to the requirements and deadlines of each foundation. The foundations’ calendars may or may not align with the applicant organization’s fund raising timeline.
C. How does the fund raising goal compare to the organization’s current budget?Is the organization being too aggressive, trying, for example, to double its budget through the acquisition of grants?
D. How large must the grant be in order to make it worthwhile to apply?It takes as much time to write a grant for $500 as it does for $100,000. An organization may want to determine a minimum grant amount for its grant writing program to pursue. (For example, the organization will only pursue foundation grants $5,000 or more.)
- Is the organization prepared to accept a grant?
A. Does the organization have an acknowledgement program in place?It is important to continue cultivating the foundation so an organization can submit future grant requests. Thanking the foundation for the grant is an important tool for cultivation.
B. Is the organization prepared to do the required reporting?Some foundations require fiscal and programmatic reporting.
C. Are the grant funds in an audit traceable account?It is important to be able to tell the foundation how their grant money is being spent.
D. Is the organization prepared to abide by the restrictions and requirements of the grant maker?United Way, for example, does not allow funded agencies to conduct fund raising activities during United Way’s campaign period.
- Is the organization committed to a grants development program?
A. Who will write the grants?Does the organization have a grant writer? Full-time? Part-time? Paid staff? Volunteer? Consultant?
B. Does the board of directors have a role?Board members can help the organization’s efforts by making contact and building relationships with foundation representatives.
C. Is the organization prepared to make other investments in the grants program?Is the organization prepared to provide matching or start-up funds? What are its plans for sustaining programs beyond the grant period?
HOW TO APPLY
Organizations request support from foundations via grant proposals and grant applications. Some foundations provide specific guidelines for submitting grant proposals; some have online application processes; and some request the applicant to send a proposal without offering guidelines. When a foundation does not provide guidelines or have application forms, it is recommended the applicant develop a Standard Proposal.
Click here for information about the Standard Proposal in Proposal Basics.