Building Philanthropy to Build a Better Florida

Philanthropy Glossary

New to philanthropy? Learn the basics with our helpful glossary of philanthropic terms, compiled from the very best resources on the Web. Thanks to our colleagues at the Connecticut Council for Philanthropy for this resource. 
 
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501(c)(3):  Section of the Internal Revenue Code that designates an organization as charitable and tax-exempt. Organizations qualifying under this section include religious, educational, charitable, amateur athletic, scientific or literary groups, organizations testing for pubic safety or organizations involved in prevention of cruelty to children or animals. Most organizations seeking foundation or corporate contributions secure a Section 501(c)(3) classification from the IRS. Note: the tax code sets forth a list of sections 501(c)(4-26) to identify other nonprofit organizations whose function is not solely charitable (e.g., professional or veterans organizations, chambers of commerce, fraternal societies, etc.). See also operating foundation; private foundation; public charity.
 
509(a): Section of the tax code that defines public charities (as opposed to private foundations). A 501(c)(3) organization also must have a 509(a) designation to further define the agency as a pubic charity. See Public support test.
 
Affinity Group: A coalition of grantmaking institutions that shares information or provides professional development and networking opportunities to individual grantmakers with a shared interest in a particular subject or funding area.
 
Annual report: A voluntary report issued by a foundation or corporation that provides financial data and descriptions of its 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 grantmaker's grantmaking programs. Approximately 1,100 foundations issue them.
 
Articles of Incorporation: A document filed with the Secretary of State r other appropriate state office by persons establishing a corporation. This is the first legal step in forming a nonprofit corporation.
 
Assets: The amount of capital or principal — money, stocks, bonds, real estate, or other resources — controlled by a foundation or corporate giving program. Generally, assets are invested and the resulting income is used to make grants.
 
Associates program: A fee-based membership program of the Foundation Center providing toll-free e-mail and telephone reference, photocopy and fax service, computer searches of Foundation Center databases, attendance at an annual conference, and access to a special Associates-only Web site.
 
Beneficiary: In philanthropic terms, the donee or grantee receiving funds from a foundation or corporate giving program is the beneficiary, although society may benefit as well.
 
Bequest: A sum of personal or real property made available upon the donor’s death.
 
“Bricks and Mortar”: An informal term for grants for buildings or construction projects.
 
Bylaws: Guidelines for the operation of a nonprofit corporation, developed according to state law requirements. Bylaws often provide the methods for the selection of directors, the creation of committees and the conduct of meetings.
 
Capacity building: A process funders use to assist nonprofit organizations in strengthening their internal operations to become more efficient and effective for those they serve.
 
Capital campaign: An organized drive to collect and accumulate substantial funds to finance major needs of an organization such as a building, major repair project or endowment purpose.
 
Capital support: Funds provided for endowment purposes, buildings, construction, or equipment.
 
Challenge grant: A grant that is paid only if the donee organization is able to raise additional funds from other sources. Challenge grants are often used to stimulate giving from other donors. See also Matching grant.
 
Charitable deduction: The portion of a gift to a qualified charity that is deductible from an individual’s federal income tax, individual’s gift tax or individual’s estate tax.
 
Checkbook philanthropy: Spontaneous, responsive giving by a donor sometimes without personal involvement. Often involves giving small amounts in an unplanned manner.
 
Committed funds: A portion of a donor’s budget that has already been pledged for future allocation.
 
Community foundation: A 501(c)(3) organization that makes grants for charitable purposes in a specific community or region. The funds available to a community foundation are usually derived from many donors and held in an endowment that is independently administered; income earned by the endowment is then used to make grants. Although a community foundation may be classified by the IRS as a private foundation, most are public charities and are thus eligible for maximum tax-deductible contributions from the general public. See also 501(c)(3); Public charity.
 
Community fund: An organized community program which makes annual appeals to the general public for funds that are usually not retained in an endowment but are instead used for the ongoing operational support of local agencies. See also Federated giving program.
 
Company-sponsored foundation (also referred to as a corporate foundation): A private foundation whose assets are derived primarily from the contributions of a for-profit business. While a company-sponsored foundation may maintain close ties with its parent company, it is an independent organization with its own endowment and as such is subject to the same rules and regulations as other private foundations. See also Private foundation.
 
Conflict of interest policy: Written policy developed within a foundation to address conflict of interest issues between trustees and potential grantees in a manner that is fair both to potential grantees and to the foundation trustee with whom they have a relationship. The policy details what is—and what is not acceptable behavior on the part of the trustee.
 
Corporate foundation: See Company-sponsored foundation.
 
Cooperative venture: A joint effort between or among two or more grantmakers. Cooperative venture partners may share in funding responsibilities or contribute information and technical resources.
 
Corporate giving program: A grantmaking program established and administered within a for-profit corporation. Because corporate giving programs do not have separate endowments, their annual grant totals generally are directly related to company profits. Corporate giving programs are not subject to the same reporting requirements as corporate foundations.
 
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Declining grant: A multi-year grant that becomes smaller each year, in the expectations that the recipient organization will increase its fundraising from other sources.
 
Deferred gift: A gift that is committed to a charitable organization, but is not available for use until some future time, usually the death of the donor.
 
Demonstration grant: A grant made to establish an innovative project or program that, is successful, will serve as a model and may be replicated by others.
 
Designated funds: A type of restricted fund in which the fund beneficiaries are specified by the grantors.
 
Directors and Officers Insurance (D & O Insurance): D & O liability insurance is designed to help protect the directors and officers of a foundation against claims other than those for personal injury, property damage or loss of property.
 
Discretionary funds: Grant funds distributed at the discretion of one or more trustees, which usually do not require prior approval by the full board of directors. The governing board can delegate discretionary authority to staff.
 
Disqualified person: Substantial contributors to a private foundation, foundation managers, certain pubic officials, family members of disqualified persons and corporations and partnerships in which disqualified persons hold significant interests. Financial transaction between disqualified persons and foundations are in violation of self-dealing rules, except as specified by law.
 
Distribution committee: The committee responsible for making grant decisions. For community foundations, the distribution committee 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: An individual or organization that makes a grant or contribution to a donee. (Also known as the grantor.)
 
Donor Collaborative (Cooperative venture): A joint effort between or among two or more grantmakers. Partners may share in funding responsibilities or contribute information and technical resources.
 
Donor designated fund: A fund held by a community foundation where the donor has specified that the fund’s income or assets be used for the benefit of one or more specific public charities. These funds are sometimes established by a transfer of assets by a public charity to a fund designated for its own benefit, in which case they may be known as grantee endowments. The community foundation’s governing body must have the power to redirect resources in the fund if it determines that the donor’s restriction in unnecessary, incapable of fulfillment or inconsistent with the charitable needs of the community or area served (Also known as Donor advised fund).
 
E-philanthropy: Term used to describe the variety of methods of giving using the Internet. Many sites have been developed that accept donations in addition to providing information regarding nonprofit groups.
 
Endowment: A bequest or gift that is intended to be kept permanently and invested to create income for an organization or foundation.
 
Employee matching grant: A contribution to a charitable organization by an employee that is matched by a similar contribution from his or her employer. Many corporations have employee matching-gift programs in higher education that encourage their employees to give to the college or university of their choice.
 
Ethical investing: See social investing.
 
Excise tax: the annual tax of 1 or 2 percent of net investment income that must be paid to the IRS by private foundations.
 
Expenditure responsibility: When a private foundation makes a grant to an organization that is not classified by the IRS as tax-exempt under Section 501(c)(3) and as a public charity according to Section 509(a), it is required by law to ensure that the funds are spent for charitable purpose and not for private gain or political activities. Such grants require a pre-grant inquiry and a detailed, written agreement. Special reports on the status of the grant must be filed with the IRS, and the grantees must be listed on the foundation’s IRS Form 990-PF.
 
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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 family foundations and have a significant role in their grantmaking decisions.
 
Federated giving program: A joint fundraising effort usually administered by a nonprofit "umbrella" organization that in turn distributes the contributed funds to several nonprofit agencies. Community chests or funds, the United Jewish Appeal and other religious appeals, the United Negro College Fund are examples of federated giving programs. See also Community fund.
 
Fiscal sponsorship: Affiliation with an existing nonprofit organization for the purpose of receiving grants. Grantseekers may either apply for federal tax-exempt status or affiliate with a nonprofit sponsor.
 
Form 990: The tax information form filed annually with the IRS and the state’s Attorney General’s office by tax-exempt organizations and institutions with gross revenue of more than $25,000 except religious. This tax return includes information about the organization’s assets, income, operating expenses, contributions, paid staff and salaries, names and addresses of persons to contact, and program areas.
 
Form 990-PF: The IRS form filed annually by all private foundations. The letters “PF” stand for “Private Foundation.” The IRS uses this form to determine if a private foundation is complying with the Internal Revenue Code. The 990-PF form lists foundation assets, receipts, expenditures, compensation of officers and a list of grants made during the year.
 
Funding cycle: A chronological pattern of proposal review, decisionmaking and applicant notification. Some donor organizations make grants at set intervals (quarterly, semi-annually, etc., while others operate under an annual cycle.
 
General/operating support: A grant made to further the general purpose or work of an organization, rather than for a specific purpose or project; also called an unrestricted grant or basic support.
 
General purpose foundation: An independent private foundation that awards grants in many different fields of interest. See also Special purpose foundation.
 
Gift fund: Commercially sponsored donor-advised fund typically formed by a mutual fund group or similar financial institution offering some grantmaking assistance to donors.
 
Giving circle: A group of people who meet regularly to share information and to make joint giving decisions.
 
Giving patterns: The overall picture of the types of projects and programs that a donor has historically supported. The past record may include areas of interest, geographic locations, dollar amount of funding or kinds or organizations supported.
 
Grant monitoring: The ongoing assessment of the progress of the activities funded by a donor, with the objective of determining if the terms and conditions of the grant are being met and if the goal of the grant is likely to be achieved.
 
Grantee financial report: A report detailing how grant funds were used by an organization. Many corporate grantmakers 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 and expenses, assets and liabilities. Some funders may require an audited financial report.
 
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.
 
Guidelines: Procedures set forth by a funder that grantseekers should follow when approaching a grantmaker.
 
Independent foundation: A grantmaking organization usually classified by the IRS as a private foundation. Independent foundations may also be known as family foundations, general-purpose foundations, special purpose foundations, or private non-operating foundations. See also Private foundation.
 
In-kind contribution: A contribution of equipment, supplies, or other tangible resource, as distinguished from a monetary grant. Some corporate contributors may also donate the use of space or staff time as an in-kind contribution.
 
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Letter of inquiry: A brief letter outlining an organization's activities and its request for funding that is sent to a prospective donor in order 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.
 
Letter of intent: A grantor’s letter or brief statement indicating intention to make a specific gift.
 
Leverage: A method of grantmaking practiced by some foundations. Leverage occurs when a small amount of money is given with the express purpose of attracting larger funding from other sources or of providing the organization with the tools it needs to raise other kinds of funds.
 
Lobbying: Efforts by any group or organization to influence legislation by influencing the opinion of legislators, legislative staff and government administrators directly involved in drafting legislative proposals. Section 501(c) (3) of the tax code limits lobbying activities by pubic charities. Public charities may lobby as long as lobby8ing does not become a substantial part of their activities. Private foundations generally may not lobby except in limited circumstances such as on issues affecting their tax-exempt status or the deductibility of gifts to them. Conducting nonpartisan analysis and research and disseminating the results to the public generally is not lobbying for purposes of these restrictions.
 
Matching gifts program: A grant or contributions program that will match employees’ or directors’ gifts made to qualifying educations, arts and cultural, health or other organizations. Specific guidelines are established by each employer or foundation (some foundations also use this program for their staff and trustees.)
 
Matching grant: A grant or gift made with the specification that the amount donated must be matched on a one-for-one basis or according to some other prescribed formula.
 
Mission statement: A mission statement reflects the organizations core values and reasons for existing. It should capture what the organization does, why it does it, how it does it, and for whom it does it. A mission statement broadly addresses the current and future purpose of the organization.
 
Nonprofit or not for profit: A nonprofit is an organization whose purpose it is to serve a public good, rather than make a profit; net earnings are not distributed to the owners or shareholders (as in a private corporation) or to the members, but are retained for the propose for which the organization was established. The sector includes hospitals, universities, religious organizations, cooperatives, charities, voluntary organizations, economic and trade associations (the association is a nonprofit, even though the industry which it represents is not.), among many others.
 
Operating foundation: A 501(c)(3) organization classified by the IRS as a private foundation whose primary purpose is to conduct research, social welfare, or other programs determined by its governing body or establishment charter. An operating foundation may make grants, but the amount of grants awarded generally is small relative to the funds used for the foundation's own programs. See also 501(c)(3).
 
Operating support grant: A contribution given to cover an organization’s day-to-day, ongoing expenses, such as salaries, utilities, office supplies, etc.
 
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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 its total assets.
 
Philanthropy: The origin of the word “philanthropy” is Greek and means “love for mankind.” Today, philanthropy includes the concept of voluntary giving by an individual or group to promote the common good. Philanthropy also commonly refers to grants of money given by foundations and corporate giving programs to nonprofit organizations. Philanthropy addresses the contribution of an individual or group to other organizations that in turn work for the causes of poverty or social problems, improving the quality of life for all citizens. Philanthropic giving support a variety of activities, including research, health, education, arts and culture, as well as social services.
 
Pledge: A promise to make future contributions to an organization, For example, some donors make multi-year pledges promising to grant a specific amount of money each year.
 
Post-Grant evaluation: A review of the results of a grant with the emphasis upon whether or not the grant achieved its desired objective.
 
Pre-tax net income: A corporation’s annual net income before it has paid taxes. The IRS currently allows corporations to deduct charitable contributions as much as 10 percent of their pretax net income.
 
Private foundation: A nongovernmental, nonprofit organization with funds (usually from a single source, such as an individual, family, or corporation) and program managed by its own trustees or directors. Private foundations are established to maintain or aid social, educational, religious, or other charitable activities serving the common welfare, primarily through the making of grants. See also 501(c)(3); public charity.
 
Program amount: Funds that are expended to support a particular program administered internally by a foundation or corporate giving program.
 
Program officer: A staff member of a foundation who reviews grant proposals and processes applications for the board of trustees. Only a small percentage of foundations have program officers.
 
Program-related investment (PRI): A loan or other investment made by a private foundation to a for-profit or nonprofit organization for a project related to the foundation’s stated purpose and interests. Program-related investments are an exception to the general rule barring jeopardy investments. Often, program-related investments are made from a revolving fund; the foundation generally expects to receive its money back with limited, or below-market, interest, which will then provide additional funds for loans to other organizations. A program-related investment may involve loan guarantees, purchases of stock or other kinds of financial support.
 
Proposal: A written application, often accompanied by supporting documents, submitted to a foundation or corporate giving program in requesting a grant. Most foundations and corporations do not use printed application forms but instead require written proposals; others prefer preliminary letters of inquiry prior to a formal proposal. Consult a grantor’s published guidelines for specific details.
 
Public charity: A nonprofit organization that qualifies for tax-exempt status under section 501(c)(3) of the IRS code. Public charities are the recipients of most foundation and corporate grants. Some public charities also make grants, such as United Ways. Charitable organizations that are not public charities are private foundations and are subject to more stringent regulatory and reporting requirements. See also 501(c)(3); Private foundation.
 
Public support test: The means by which the IRS determines if a nonprofit organization is a private foundation or a public charity. As listed in the Internal Revenue Code, the “One-third Support Test” and “Facts and Circumstances Test,” rely primarily on gifts and contributions to meet the minimum percentage requirement and do not count gross receipts (admission fees, fees for services, etc.) as public support.
 
Qualifying distributions: Expenditures of a private foundation made to satisfy its 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 tax-exempt purposes.
 
RFP: An acronym for Request for Proposal, this is a request sent by foundations to organizations that might qualify for funding within a specific program of the foundation. The RFP lists project specifications and application procedures.
 
Restricted funds: Income or assets that are restricted in their use, in the types of organizations that may receive grants from these funds, or in the procedures used to make grants from such funds.
 
Results-based Accountability (RBF): Also known as outcome-based accountability. A management tool that starts with results and works back to determine a means to achieving the results. The term implies that expected results (also known as goals) are clearly articulated, and that data are regularly collected and reported to address questions of whether results have been achieved.
 
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Seed money: A grant or contribution used to start a new project or organization. Seed grants may cover salaries and other operating expenses of a new project.
 
Self-dealing: An illegal financial transaction between a private foundation and a disqualified person(s). There are a few exceptions to the self-dealing rule, including the reasonable compensation of disqualified persons by a foundation for services that are necessary to fulfilling the foundation’s charitable purposes. Violations of this rule result in an initial penalty tax equal to five percent of the amount involved, payable by the self-dealer.
 
Set-asides: Funds set aside by a foundation for future payments for a specific purpose or project that are counted as qualifying distributions toward the foundation's annual payout requirement. In order for the full appropriation to count in the first year, the foundation must demonstrate successfully to the IRS in advance that the funds will in fact be paid within 60 months and that the project can be better accomplished by such a set-aside than by an immediate grant.
 
Site visit: Visiting a donee organization at its office location or area of operation; meeting with its staff or directors or with recipients of its services.
 
Social investing: Also known as socially responsible or ethical investing. The practice of aligning a foundation’s investment policies with its mission. This may include making program-related investments and refraining from investing in corporations with products or policies inconsistent with the foundation’s values.
 
Socially responsible investing: See Social investing.
 
Social venture fund: Charitable fund whose donor invests their expertise as well as their money, providing support and requiring accountability of nonprofit organizations just as venture capitalists do in business enterprises. See also Venture philanthropy.
 
Special purpose foundation: A private foundation that focuses its grantmaking activities in one or a few areas of interest. See also General purpose foundation.
 
Spend down or spend out: Process used by foundations to deplete assets resulting in the closing of the foundation.
 
Strategic planning: Strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what a foundation is, what it does and why it does it. Strategic planning involves the entire process of defining the future direction and character of the foundation, and of attempting over an adopted timetable to attain the desired state to accomplish related goals and outcomes.
 
Supporting organization: An organization created primarily to fund the activities of one or more existing public charities. To be a supporting organization and therefore not be required to meet the public support test, the organization must meet one of three complex legal tests that assure, at a minimum, that the organization being supported has some influence over the actions of the supporting organization. Although a supporting organization may be formed to benefit any type of public charity, the use of this form is particularly common with community foundations. Supporting organizations are distinguishable from donor-advised funds because they are distinct legal entities.
 
Tax-exempt: Refers to organizations that do not have to pay taxes such as federal or state corporate or income taxes, and may also be exempt from sales and local property taxes. Individuals who make donations to such organizations may be able to deduct these contributions from their income tax. Organizations other than churches seeking recognition of their tax-exempt status under Section 501(c)(3) of the Internal Revenue Code must apply to the IRS and, in most states, the attorney general’s office. See also 501(c)(3).
 
Technical assistance: Operational or management assistance given to nonprofit organizations. This type of help can include fundraising assistance, budgeting and financial planning, program planning, legal advice, marketing, and other aids to management. Assistance may be offered directly by the staff of a foundation or corporation, or it may be provided in the form of a grant to pay for the services of an outside consultant. See also In-kind contributions.
 
Tipping: The situation that occurs when a grant is made that is large enough to significantly alter the grantee’s funding base and cause it to fail the public support test. This failure can result in the grantee’s conversion from a public charity to a private foundation and would also require expenditure responsibility on the part of the grantor.
 
Trust: A legal device used to set aside raised money or property of one person for the benefit of one or more persons or organizations.
 
Trustee: A foundation board member or officer who helps make decisions about how grant monies are spent. Depending on whether the foundation has paid staff, trustees may take a more or less active role in running its affairs.
 
Unrestricted funds: A grant that does not specifically stipulate how the money is to be spent by the grantee. Note: in community foundations, unrestricted funds refer to the funds the foundation holds that are not designated by donors and may be granted at the discretion of the board of the community foundation.
 
Venture philanthropy: Charitable funding where donors invest their expertise as well as their money, providing support and requiring accountability of nonprofit organizations similar to what venture capitalists do in business enterprises. Donors may assist nonprofit organizations in the planning, launch and management of new programs or social purpose enterprises. In addition to grants, venture philanthropists provide networking, management advice and an array of other supports to organizations within a given portfolio of charitable investments. See also Social venture fund.
 
Virtual foundation: Refers to the transition from grantmaking through mail and face-to-face meetings to grantmaking by e-mail and Internet transfers. Such a foundation may exist only on the Internet and be capable of transferring money from philanthropists to organizations globally.
 
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