The Types of Foundations
Foundations today range from small foundations with total assets of $500,000 or even less to the Bill and Melinda Gates Foundation with assets in 2009 of $34 billion, making it the nation’s largest. Most foundations fall well in the middle of this dramatic spread. We can divide foundations into several categories; an understanding of each will help you in researching prospects and focusing your grant proposal.
PHILANTHROPY FACT
According to the Foundation Center’s helpful FC stats, in 2008, health captured the greatest share of foundation grants (23 percent), with education coming in second (22 percent), followed by human services and the arts (tied at 13 percent each), public affairs (10 percent), and the environment and animals (9 percent). (Source: FC Stats—Grants, The Foundation Center, 2008.)
Typical Foundations
Statistically, it’s hard to justify any model as a typical foundation, but I can describe the type of foundation you most often will encounter in your work as a grant writer.
One of these foundations will have been founded a number of years ago by a single wealthy individual, legally making it a private foundation. The individual’s name, or that of a close relative, is probably also the name of the foundation. This person might or might not still be living, but even if he or she is, some people not related to the founder might serve on the board of trustees. Usually, the longer the founder is deceased, the greater the number of nonrelatives on the board.
The foundation probably employs a professional staff of 5 to 200 program officers, assistants, and executive staff. The board of trustees meets several times a year to consider grant proposals. A program officer presents the proposals to the board after carefully screening them according to the foundation’s guidelines and interests.
The philanthropy or trusts department of banks or lawyers administer many smaller foundations, in which case the banks’ or lawyers’ employees serve as the foundation staff.
Foundations fitting this very general description will be the easiest for you to learn about and approach for a number of reasons. They publish guidelines. They will at least look at any application that comes through the door. And they have professional staff who can guide you.
Here are a few examples of my so-called typical foundations:
This foundation’s principal interests are in improved teaching of the performing arts in public schools and in health, particularly neuroscience and immunology. It employs nearly 46 people. Grants: $20 million in 2008.
This foundation gives in California only, primarily for the arts; higher education; workforce development; civic culture; sustainable communities; and children, youth, and families. It has 41 employees. Grants: $69 million estimated in 2008.
This foundation makes grants for urban issues in Chicago; improvement of schools in Chicago, Cleveland, Detroit, and Milwaukee; poverty in the Midwest; the natural environment of the Great Lakes; election finance reform; and gun control. It also makes grants to individuals whose work falls within these areas. It has 24 staff members. Grants: $36 million in 2009.
Interests of this foundation include kindergarten through college education; health care and education; human services, particularly for children; economic development; art and cultural activities; and the environment. It prefers one-time capital projects of established charities. Its staff consists of 12 people who also manage several other foundations. Grants: $106 million in 2009.
This foundation’s wide-ranging interests include the arts; civil society; feeding and employing the poor; medical research, training, and distribution of services; revitalization of the African continent; and more. It also runs a conference center in Italy for scholars, scientists, artists, writers, policymakers, and others to conduct creative and scholarly work. Around 173 people manage these programs. Grants: $138 million in 2008.
This foundation’s primary interests lie in health, food systems, and rural development especially in Latin America and Southern Africa, youth and education, and philanthropy and voluntarism. They also make special grants in their local community. They have 130 employees. Grants: $244 million in 2009.
WORDS TO THE WISE
Foundations tend to fund locally, but don’t overlook funders outside your area. For example, the Jerome Foundation in Minneapolis makes grants in Minnesota and in New York City. The better foundation directories will have an index of geographic interest to cross-check against office locations. When searching online databases, search by the location of the recipient as well as the funder.
Although these are all very large foundations, their range of interests is not atypical nor is the way they limit their grantmaking to organizations in specific geographic areas. As with all funders, you must do your homework to be sure your grant proposal meets all their restrictions.
Family Foundations
A family foundation is one in which the majority of trustees (frequently all) are related to the foundation’s founder. Most foundations begin as family foundations, but here we’re talking about those that are still governed by the family that founded them. The Council on Foundations estimates that two fifths of all private and community foundations are run by families. These foundations account for 43 percent of all foundation giving.
Many family foundations have few or no paid staff and depend on family members volunteering their time. Because the volume of applications can easily overwhelm these volunteers, be sure only to approach them (1) if they state they will accept unsolicited proposals and (2) when you’re certain your organization fits their requirements and you’re ready to submit a proposal.
As with any family undertaking, family dynamics frequently come into play at these foundations. At some, the “I’ll vote to make a grant to your library if you’ll vote to support my hospital” interaction can make for seemingly erratic grantmaking. This makes your research that much harder. On the positive side, if you or someone on your board knows one of the family foundation’s trustees, that trustee will likely have enough sway to get your grant approved.
If you notice very specific and seemingly erratic geographic restrictions, you’ll probably find that family members live in each of those locations. Your research may be able to pinpoint who lives where, allowing you to then discover that family member’s local giving preferences, which in turn will help you focus your proposal.
PHILANTHROPY FACT
Family foundations are among the largest foundations in the United States; the Bill and Melinda Gates Foundation is the nation’s largest of any kind. The top five family foundations contribute upward of $3.2 billion annually and include families such as the Packards (as in Hewlett-Packard) and Microsoft’s Gates, which accounts for $2 billion of that amount.
The changing of the generations at a family foundation can result in a sharp change in funding priorities. It’s only natural that the younger generation will want to differentiate itself from its parent’s grantmaking.
When researching foundations, note the surnames of the trustees, if the founder is living, and if he or she is also a trustee. You might have to do a little detective work because surnames might have changed with marriages.
If it appears that you’re dealing with a family foundation, be prepared to …
• Forget about applying to one if they do not accept unsolicited proposals, unless you can …
• Find a personal connection with a trustee.
• Look carefully at the most recent grant awards to see how they match (or don’t) any published guidelines.
Here are a few examples of the larger family foundations:
The Brown Foundation, Inc., supports public primary and secondary education in Texas, services for children, and the visual and performing arts. It has eight people on staff. Grants: $64 million in 2007.
Its mission is “to help the region of southwestern Pennsylvania thrive as a whole community—economically, ecologically, educationally, and culturally—while advancing the state of knowledge and practice in the fields in which it works.” The foundation is run by a staff of 32, and it gave away $65 million in 2008.
Walmart may be an international company, but the Walton family practices most of its philanthropy locally to support reform in K–12 education and the environment—especially marine and freshwater conservation—in the delta region of Arkansas and Mississippi, and northwest Arkansas. Six staff members helped the family distribute $168 million in 2008.
Community Foundations
The United States has more than 700 community foundations, and Canada has 174, serving virtually every geographical area. These foundations collectively make grants of as much as $4.5 billion annually, making them an important source to consider for your proposal. Community foundations are considered public foundations because they actively solicit support from a wide range of the public. This is in contrast to the private foundations discussed in the previous two sections, which receive support from one or two individuals.
Community foundations bring philanthropy within the grasp of those who are comfortably well-off but unable to put millions into a private foundation. This is not to say that immensely wealthy people do not contribute to community foundations; many do, establishing funds at a community foundation in addition to their private foundations. The concentration of technology millionaires in Silicon Valley have made the Silicon Valley Community Foundation among the largest in the United States.
A chief characteristic of a community foundation is the many funds that have been entrusted to it, each established by a different donor to benefit some aspect of life in that particular community. The New York Community Trust, for example, has some 2,000 different funds.
So how do you go about deciding which of those 2,000 funds to apply to? You don’t. You cannot apply directly to most of them. Although administered by the community foundation, the donors have retained the right to advise the foundation on what grants to make. Legally, the final decision rests with the community foundation, but donor recommendations are usually followed when they fall within the guidelines of the community foundation. Theoretically, you could solicit these donors as individuals, but finding their names will be difficult. Other funds at community foundations might issue a request for proposal (RFP) or have formal guidelines.
DEFINITION
A request for proposal (RFP) is a means funders employ to encourage proposals for a program established by the funder. In many cases, an RFP is no different from the guidelines a funder issues for grants. With the RFP, the funder is being proactive in soliciting proposals, perhaps for a new initiative or for a program that’s not been receiving good proposals. The Foundation Center maintains a free, current national list of RFPs on its website at foundationcenter.org, which they’ll also e-mail you weekly for free.
You can gain access to the funds without donor advisors with one application—you simply apply to the community foundation itself, after first researching its areas of interest, of course. If it finds your proposal both worthy of funding and meeting the restrictions established by a particular fund’s donor, your grant letter will tell you that you have received a grant “from the Betty F. and Henry S. Smith Fund of the Community Trust.” (And yes, if you get a grant from them, you have to use the whole long name in all acknowledgments and donor listings.) Not every grant from a community foundation will be from a specific fund. It likely will also maintain a general endowment from which it makes grants.
If a community foundation is on your prospect list …
• Research to see if any of your potential individual donors or one of their family members has established a donor-advised fund.
• Check to see if the community foundation solicits proposals through RFPs.
• Only apply to a specific fund at a community foundation if its guidelines say to do so.
• Only apply to a community foundation in your area. It isn’t interested in work you might do elsewhere, and community foundations in other areas might be unable to fund you, even for a program that takes place in its community.
Operating Foundations
An operating foundation may make grants, but grantmaking is a small part of what it does. An operating foundation can be private or public. It usually runs one or more research or service programs that are its primary reason for existing. For the most part, these will not be good prospects because they do limited grantmaking and have a narrow range of interests. But if their interests match yours, go for it.
Here are a few examples of what you can expect operating foundations to look like:
Educational initiatives in Ohio are the sole concerns of this foundation, which does make grants. Grants: $4.5 million, but this was a mere 16 percent of what it spent on programs in 2009.
This foundation is devoted to research in the social sciences, supporting scholars who study at its facility or at other institutions. It also publishes books and holds seminars. Grants: $3.9 million in 2009.
Commercial Foundations
How can there be a “commercial foundation”? Well, technically there can’t be, but I’m using this term to identify and distinguish one of the most dramatic trends in funding in the last decade.
PHILANTHROPY FACT
All foundations do not have foundation in their name. Some might use the designation fund or trust or charitable trust, but others call themselves corporations, like the Carnegie Corporation of New York, mentioned at the beginning of this chapter.
The very wealthy have always had access to professionals to manage their philanthropy through the trust departments at their banks. This assistance, however, usually came only to those with seven-figure (or higher) deposits at the bank. In 1992, Fidelity Investments Corporation realized that many of its clients (both middle class and beyond) would be interested in a way to manage their philanthropy just like they managed their other investments. The result was the Fidelity Charitable Gift Fund. (Which shouldn’t be confused with the Fidelity Foundation, fidelityfoundation.org, which is the company foundation that makes grants only in areas where it has a major presence to a wide range of nonprofits.)
The Chronicle of Philanthropy’s 2009 ranking of the largest charities by total donations received showed that the Fidelity Charitable Gift Fund was the third-largest charity in the United States, receiving $1.6 billion in contributions, just $200 million behind the Salvation Army. The United Way Worldwide was the largest with $4 billion in donations.
Needless to say, every other investment bank took notice, and today dozens if not hundreds of institutions operate in the same way. Legally, these are 501(c)(3) nonprofits, not foundations at all, even though without any programs and vast reserves of money, they certainly look like foundations.
Don’t get excited by all that money in the gift funds operated by commercial financial institutions. You can’t apply for a grant. If one of its investors …I mean, donors … decides to make a grant to your charity, you’ll receive a check, possibly accompanied by a letter identifying the donor, or possibly not, because the gift funds allow donors to give anonymously. The commercial gift fund administrators do not need to receive your newsletters or anything else beyond the acknowledgment letter required by IRS regulations because they do not direct the grantmaking.
Foundations in Name Only
There’s no legal definition for a foundation. Even the IRS defines a foundation by what it is not. For example, a private foundation is defined as one that does not receive its funds from a wide segment of the public. Some organizations with the word foundation in their name aren’t foundations as we understand them.
They and other nonprofits that make grants using funds they’ve raised are called Grantmaking Public Charities by the Foundation Center to distinguish them from private, corporate, or public foundations. Examples include the Foundation for AIDS Research and the Actors Fund of America. The Foundation Center and other funder directory resources include many of them in their publications and databases. Community foundations and local service organizations might be able to point you to others.
Venture Philanthropy
The hot topic at the end of the twentieth century was venture philanthropy, which was used in relation to both foundation and corporate giving. The vogue term was coined possibly as long ago as 1984 to denote the source of much of this new philanthropic money (venture capitalists who were making a killing in the stock market) and the way they approached their philanthropy (supposedly just like they did their businesses).
HOW TO SAY IT
Strunk & White’s admonition in The Elements of Style, “Do not be tempted by a twenty-dollar word when there is a ten-center handy, ready, and able,” could have been written with venture philanthropists in mind. Shed all your jargon, and never say anything that could be viewed as talking down to your funders.
Venture philanthropy typically has these characteristics:
• Venture philanthropists seek involvement with the nonprofits they fund, not necessarily as board members or trustees, but as a source of management and technical assistance.
• They provide support over a period of years. Just as a business needs time to grow, so do nonprofits—something we can all agree on.
• They expect accountability beyond annual progress reports, making fulfillment of specific goals and frequent reporting essential.
• Venture philanthropists expect you to plan from the beginning of their support how you will continue the program after their support ends.
• They are likely to use the Internet to research charities that address particular problems.
If you apply to a foundation that practices venture philanthropy (and frequently they’ll say so if they do), be prepared for the higher level of involvement and for thinking of your grant proposal as a business plan. Also expect to provide some kind of ROI (return on investment), whether that’s a social return (through improved services), a financial return (when your charity performs more efficiently), or even an emotional return (warm-and-fuzzy feelings), the venture philanthropist expects something back—for the charity as much as for himself.
Financial transparency is key when engaging venture philanthropists. Have your 990 tax return ready to give them, and be sure the information on top staff salaries is included. High staff salaries won’t bother them: they expect highly skilled people to be paid well. They will expect full financial disclosure. Don’t be afraid to post your audited financial statement and 990 form on your website for them to find on their own.
Venture philanthropists have been successful in business and believe they can be successful in other areas (like philanthropy). Provide them with an opportunity for success.
The novelty of venture philanthropy has certainly cooled a bit these days. Some venture philanthropy foundations, however, continue to function and function well, such as the Robin Hood Foundation in New York City (robinhood.org).
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