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Glossary of Terms

The following list, arranged alphabetically, includes common terms used by grantmakers and grantseekers. For terms not listed here, please see the Types of Support definitions list for grantmakers, the Types of Support definitions list for grants, the Types of Financial Data definitions list for grantmakers, and the Types of Financial Data definitions list for companies.

501(c)(3): The section of the Internal Revenue code that defines nonprofit, charitable (as broadly defined), 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 grantmaker that provides financial data and descriptions of 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 grantmaking program.

Assets: The total amount of capital or principal—money, stocks, bonds, real estate, or other resources—controlled by the grantmaker. Generally, assets are invested and the income is used to make grants.

Beneficiary: In philanthropic terms, the donee or grantee receiving funds from a grantmaker is the beneficiary, although society benefits as well.

Bricks and Mortar: An informal term for grants for buildings or construction projects.

Capital Support: Funds provided for a variety of enduring purposes, such as building construction or acquisition, endowments, or land acquisition, and including, for example, grants for "bricks and mortar."

Challenge Grants: Grants awarded that will be paid only if the donee organization is able to raise additional funds from another source. Challenge grants are often used to stimulate giving from other donors. (See also Matching Grants.)

Community Foundation: A 501(c)(3) organization that makes grants for charitable purposes in a specific community or region. Funds are usually derived from many donors and held in an endowment independently administered; income earned by the endowment is then used to make grants. Although a few community foundations might be classified by the IRS as private foundations, most are classified as public charities eligible for maximum income tax-deductible contributions from the general public. (See also 501(c)(3); Public Charity.)

Community Fund: An organized community program that makes annual appeals to the general public for funds that are usually not retained in an endowment but are used for the ongoing operational support of local social and health service agencies. (See also Federated Giving Program.)

Company-Sponsored Foundation (also referred to as Corporate Foundation): A private foundation whose grant funds are derived primarily from the contributions of a for-profit business organization. The company-sponsored foundation might maintain close ties with the donor company, but it is an independent organization with its own endowment and is subject to the same rules and regulations as other private foundations. (See also Private Foundation.)

Cooperative Venture: A joint effort between or among two or more grantmakers (including foundations, corporations, and government agencies). Partners might share in funding responsibilities or contribute information and technical resources.

Corporate Giving Program: A grantmaking program established and administered within a for-profit business organization. Corporate giving programs do not have a separate endowment and their annual grant totals are generally more directly related to current profits. They are not subject to the same reporting requirements as private foundations. Some companies make charitable contributions through both a corporate giving program and a company-sponsored foundation.

Distribution Committee: The board responsible for making grant decisions. For community foundations, it is intended to be broadly representative of the community served by the foundation.

Donee: The recipient of a grant. (Also known as the grantee or the beneficiary.)

Donor: The individual or organization that makes a grant or contribution. (Also known as the grantor.)

Employee Matching Gifts: Usually associated with corporate grantmakers, grants to organizations to match contributions made by employees of the grantmaker's sponsoring company. Many companies support employee matching gift programs in higher education to stimulate their employees to give to the college or university of their choice.

Endowments: Grants to organizations intended to be kept permanently and invested to provide income for continued support.

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.

Expenditures: Total disbursements made by the grantmaker, including grants and non-grant expenses.

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 the foundation and have a significant role in grantmaking decisions. (See also Operating Foundation; Private Foundation; Public Charity.)

Federated Giving Program: A joint fundraising effort usually administered by a nonprofit "umbrella" organization that in turn distributes contributed funds to several nonprofit agencies. The 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 Agent/Sponsor: A nonprofit organization with 501(c)(3) status that has agreed to receive and administer a grant for an individual not affiliated with a nonprofit organization or a group without 501(c)(3) status. The check is sent to the fiscal agent (also known as a fiscal sponsor) and then disbursed to the applicant, minus a small administrative fee, usually between 5 percent and 7 percent of the grant.

Form 990: The annual information return that all public charities (as distinct from private foundations) must submit to the IRS each year and that is also filed with appropriate state officials. The form requires information on the charity's assets, income, operating expenses, contributions and grants, paid staff and salaries, program funding areas, grantmaking guidelines and restrictions, and grant application procedures.

Form 990-PF: The annual information return that all private foundations (as distinct from public charities) must submit to the IRS each year and that is also filed with appropriate state officials. The form requires information on the foundation's assets, income, operating expenses, contributions and grants, paid staff and salaries, program funding areas, grantmaking guidelines and restrictions, and grant application procedures.

General Purpose Foundation: An independent private foundation that awards grants in many different fields of interest. (See also Special Purpose Foundation.)

General Purpose Grants: Grants to organizations for day-to-day operating costs or to further the general purpose or work of an organization, rather than for a specific purpose or project. Also referred to as unrestricted grants. (See also Operating Support Grants.)

Grantee Financial Report: A report detailing how grant funds were used by an organization. Many corporations 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, expenses, assets, and liabilities.

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.

Independent Foundation: A grantmaking organization usually classified by the IRS as a private foundation. Independent foundations might also be known as family foundations, general purpose foundations, special purpose foundations, or private non-operating foundations. The Foundation Center defines independent foundations and company-sponsored foundations separately; however, federal law normally classifies both as private, non-operating foundations subject to the same rules and requirements. (See also Private Foundation.)

In-Kind Gifts: Non-monetary donations to organizations, including donated equipment, donated land, or donated products. Some grantmakers might also donate facility space or staff time as an in-kind gift.

Letter of Inquiry: A brief letter outlining an organization's activities and its request for funding sent to a grantmaker to determine whether it would be appropriate to submit a full grant proposal. Many grantmakers prefer to be contacted in this way before receiving a full proposal.

Matching Grants: Grants to organizations to match contributions provided by another donor. (See also Challenge Grants; Employee Matching Gifts.)

Operating Foundation: A 501(c)(3) organization classified by the IRS as a private foundation whose primary purpose is to operate research, social welfare, or other programs determined by its governing body or establishment charter. Some grants might be made, but the sum is generally small relative to the funds used for the foundation's own programs. (See also 501(c)(3).)

Operating Support Grants: Grants to cover the regular personnel, administrative, and other day-to-day operating costs of an organization. (See also General Purpose Grants.)

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 five percent of the average market value of the foundation's assets.

Private Foundation: A nongovernmental, nonprofit organization with funds (usually from a single source, such as an individual, family, or corporation) and programs managed by its own trustees or directors that was established to maintain or aid social, educational, religious, or other charitable activities serving the common welfare, primarily through the making of grants. "Private foundation" also means an organization that is tax-exempt under code section 501(c)(3) and is classified by the IRS as a private foundation as defined in the code. The code definition usually, but not always, identifies a foundation with the characteristics first described. (See also 501(c)(3); Public Charity.)

Program Officer: A staff member of a grantmaker who reviews grant proposals and processes applications for the board of trustees. Only a small percentage of grantmakers have program officers.

Program-Related Investments (PRIs): Loans or other investments (as distinguished from grants) made by a grantmaker to another organization for a project related to the grantmaker's stated charitable purpose and interests. Program-related investments are often made from a revolving fund; the grantmaker generally expects to receive its money back with interest or some other form of return at less than current market rates, and it then becomes available for further program-related investments.

Proposal: A written application, often with supporting documents, submitted to a grantmaker in requesting a contribution. Preferred procedures and formats vary. Consult published guidelines.

Public Charity: In general, an organization that is tax-exempt under code section 501(c) and is classified by the IRS as a public charity and not a private foundation. Public charities generally derive their funding or support primarily from the general public in carrying out their social, educational, religious, or other charitable activities serving the common welfare. Some public charities engage in grantmaking activities, although most engage in direct service or other tax-exempt activities. Public charities are eligible for maximum income tax-deductible contributions from the public and are not subject to the same rules and restrictions as private foundations. Some are also referred to as "public foundations" or "publicly supported organizations" and might use the term "foundation" in their names. (See also 501(c)(3); Private Foundation.)

Qualifying Distributions: Total disbursements made by the foundation to satisfy the 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 exempt purposes.

RFP: Request For Proposals. When the government initiates a new grant program, it issues an RFP to agencies that might be qualified to participate. The RFP lists project specifications and application procedures. A few grantmakers occasionally issue RFPs, but most prefer to consider proposals that are initiated by applicants.

Special Purpose Foundation: A private foundation that focuses its grantmaking activities in one or a few special areas of interest. For example, a foundation might only award grants in the area of cancer research or child development. (See also General Purpose Foundation.)

Total Giving: The total of all grants and contributions awarded by the grantmaker. This amount generally does not include commitments for future payment, the costs associated with foundation-administered programs, loans, or set-asides but includes all other forms of support such as grants, grants to individuals, employee matching gifts, and in-kind gifts.

Trustee: A member of a governing board. A foundation's board of trustees meets to review grant proposals and make decisions. Often also referred to as a "director" or "board member."

A number of sources were consulted in compiling this glossary, including The Handbook on Private Foundations, 3rd Edition, by David F. Freeman, John A. Edie, Jane C. Nober, and the Council on Foundations (Washington, DC, 2005); The Law of Tax-Exempt Organizations, 8th Edition, by Bruce R. Hopkins (Hoboken, NJ: John Wiley & Sons, 2003); and the AFP Fund-Raising Dictionary (2003).