What are Foundations?

Grantwriters need to have a clear idea of what foundations are, since many proposals will be sent to foundations. Let’s cover what philanthropic foundations are and the types that exist.

According to the Minnesota Council on Foundations (MCF), “A foundation is a nonprofit organization that supports charitable activities in order to serve the common good.”

There are several different types of foundations that exist under the law. The first, Independent Foundations, are the most common and typically are created by individuals or families that want to promote attention to a certain problem or approach to a problem.

Independent foundations can be either family foundations or other independent foundations, although there is no precise legal definition of the term “family foundation”, as they are part of the larger category of independent foundation.

Perhaps the world’s largest foundation is an independent family foundation, the Bill and Melinda Gates Foundation, which gave away $3.4 billion dollars in both 2011 and 2012.

The key elements demarcating family foundations, according to the Council on Foundations, are that the funding comes from members of a single family, and at least one member of the family continues to provide strong leadership for the foundation.

Other independent foundations do not start off with or continue with a strong family identify.

Corporate foundations are set up by corporations as legally separate entities, overseen by a board of directors often made up of corporate directors and employees. Funding for corporate foundations varies, but can include an endowment, contributions from current corporate profits, or even donations from employees.

Some corporate foundations provide grants only to locales or states where the parent company has a strong presence; others have broader eligibility criteria.

Corporate foundations are not the same as corporate giving programs, which often donate goods and services rather than cash, or provide only small amounts of direct funding for nonprofit projects.

Another difference is that corporate foundations are governed by Internal Revenue Service rulings and law, while corporate giving programs are entirely in the hands of the corporation that they are a part of.

Community foundations are the third major type of foundation. These are tied very closely to a particular geographic area and are usually funded by pooling smaller amounts of donations from people in the community. Donation decisions are made by a board of directors that is supposed to be representative of the community at large.

All private foundations are required to follow at least three very important regulations in order to maintain their standing as foundations according to the Minnesota Council on Foundations.

First, they must pay out (donate) no less than five percent of the value of their investment assets. Second, they pay taxes of one or two percent of their earnings. Third, with rare exceptions, they can only donate to other organizations that are 501c3 (charitable) organizations.

\Not all organizations with the word “foundation” in their name provide grants to applicants. The Henry J. Kaiser Family Foundation, for example, uses its resources to develop non-partisan information on health care issues (information from www.kff.org ) so it is important when searching for foundation funding, to carefully look up information on each prospective foundation.

9 Important Differences Between Foundation and Government Grants, Part 3

Two more differences between foundation and government grants are included in this post.

Once an award is made, foundations provide varying amounts of oversight. Some foundations require quarterly reports and clear financial reporting, while others request only an annual report.

Government agencies provide a very high level of oversight, including progress and fiscal reports after six months and annually, and sometimes site visits by program officers to check up on the grant recipients.

The final area of differences relates to connections with other grantees. With foundation grants, it is unusual for recipients to have formal connections with other grantees.

With government grants, agencies often have considerable interaction with other grantees at annual meetings, phone conference calls, website discussions and in other ways.

Grantwriters need to understand these nine differences between government and foundation grants so that they can ensure excellent submissions, taking into account these differences.

9 Important Differences Between Foundation and Government Grants, Part 2

Let’s look at 3 more areas of difference between foundation and government grants.

When the funding opportunities are described, foundations usually stick with the general aims of the foundation and ask applicants to match those aims.

Government funding opportunities are usually quite detailed in providing a clear framework for what is required of applicants, while at the same time providing room for creativity on the part of applicants in how to place their ideas within that framework.

A government grant is almost always going to be longer and more prescribed in what is required than is a foundation grant.

The decision-making process within a foundation can vary significantly. Sometimes the decision is made through negotiations between an agency and the foundation even before the proposal is submitted.

Usually, however, all proposals are first screened for a match between the proposal and the foundation’s criteria for funding. If the proposal passes this stage, additional information may be asked for to flesh out a letter of inquiry or short proposal.

Final decisions tend to be made by the foundation’s board of directors. Sometimes the Foundation’s Chief operating officers may be able to award some grants on their own.

Government grants follow a structured review process in order to assure as much impartiality as possible. Independent reviewers are selected to review and score applications. The applications with the highest scores receive further scrutiny and are possibly funded, depending on the amount of money available and other factors, such as geographic dispersion of the awards.

Foundation awards tend to be one year in length, although this can vary from time to time and foundation to foundation. Government grants are frequently three to five years in length, but with the necessity of re-applying each year in order to demonstrate adequate progress and sound financial practices.

9 Important Differences Between Foundation and Government Grants, Part 1

In many ways foundation grants and government grants are similar in nature, in that they require you to provide them with an application containing requested information. But the two types of funders are quite different in other ways.

Let’s look now at three specific areas of difference that are important for grantwriters to understand. We’ll look at 6 other differences in later posts.

Foundations are almost always funded themselves with private money, although the donations to foundations are tax-advantaged for the donors. Thus, in some sense, even foundations are funded with public money because the donors reduce their taxes, thus taking money away from government revenues.

Government funding at all levels comes directly from tax revenues and is thus dependent entirely on the economic and tax systems at work that fund the government at large.

Grant funding opportunities are announced by foundations through posting on web sites, shared via regular mail or emails to selected individuals (or whoever is on their email list).

Recently, Facebook pages and blogs are ways to spread the word of funding availability as well. Government grant announcements come via official sources.

The Federal government uses www.grants.gov to post all funding opportunities. States and local jurisdictions have numerous avenues that grantwriters must become familiar with.

Grant applications are submitted either electronically or on paper for foundations. Government applications are almost always submitted electronically (at least at the Federal and state levels), usually through special websites set up for this purpose.

My next two posts will discuss other differences between foundation and government grants and what this means for grantwriting.

Grantwriting Requires Excellence in Research Skills!

In my experience, few people truly enjoy their mandatory “research” classes they take in college. I think this is because research courses are so often taught poorly.

Too often, research courses are presented as a set of unfathomable rules for doing pointless studies about narrow topics of interest to only a very small number of people in the entire world.

If I could do one thing to improve the college experience for everyone, I would rename “research” courses as “detective” courses.

This brings about a completely different image. Instead of ivory-tower professors pursing tiny bits of knowledge, students would imagine themselves as following in the footsteps of Sherlock Holmes, Sam Spade, and the many TV shows where detectives solve crimes based on careful collection and weighing of information that lead to a conclusion as to who committed the deed.

Grantwriting requires excellence in research skills.

Grantwriters need such careful information collection at many different points in the process, but here we concentrate on finding appropriate funding opportunities.

Sleuthing out where the most appropriate grant requests are and what the foundation or government agency is asking for is the type of research you need to do.

You need to become like the detective trying to find the criminal by thinking like the criminal, but in this case, you are trying to achieve the feat of raising funds by thinking like a funder.

This requires detective (research) skills but is actually not as difficult as it may seem at first.

Funders are actually happy to tell you what they are looking for—they don’t want to waste their time by reading proposals that don’t match their interests. But all too often grant writers don’t look for or collect information on what funders want in a thorough way.

This results in wasted time, unfunded grant proposals and significant levels of frustration.

How do you find out what funders want to give money to?

Foundations frequently post on their website the types of ideas that they want to give attention (and money) to. You can often read at least synopses of recently given grants which provide you with hard data on the decision-making outcomes of that foundation.

Government agencies also describe through position papers and strategic plans what their goals and objectives are for the future, and describe what issues are important for them.

Grantwriters need to look for such information and then read it carefully to understand what to focus on for future funding opportunities from those government bodies.

In short, the top grant proposal writers learn what potential funders want to support and they begin to gather information to support proposals for programs, interventions and services that match what the funders want to give money for.

Grantwriters need to use their detective (research) skills in this way to find funding opportunities that are highly targeted to match the capabilities of the nonprofit they are working for.