Grantmaking Foundations: A Funding Option for Nonprofits
COVID 19 has brought several new challenges for the nonprofit sector, particularly in the United States. Nonprofit organizations still have an obligation to fulfill their charitable purposes and still need to fundraise so they can continue their charitable activities. One popular route many nonprofits choose is to seek grant monies from private or public foundations. Of the various types of charitable organizations with different IRS tax-exempt status’, foundations are designated as such because, as a charity, they award grants to other charitable groups to support like causes. Visit the IRS website for more specifics on tax-exempt organizations.
The Difference between a Public Charity and a Private Foundation
According to the Council on Foundations, foundations are categorized as either a private foundation or a public charity. Foundations are not the same as a charitable trust. The biggest differences between the two types of foundations are the funders and general public support. For example, the Gates Foundation is a private family foundation and their charity may fall more in line with the preferred causes of the family members or major funders. Whereas a community foundation might have a larger funding base consisting of more public support. Their charitable activities are more beholden to the interests of the public or their geographical location. The tax exemptions are also a little different between the two and there are different guidelines on what donations are tax-deductible between the various types of nonprofits. That same Council on Foundations article lists examples for both private foundations (from corporate foundations to private-operating foundations to community foundations, etc) and public charity foundations (such as those supported through donations or formal Supporting Organizations).
Charitable Foundations can be an excellent choice for monetary partnerships with stakeholders connected to the same cause. The latest Giving USA data shows that “Giving by foundations increased 2.5%, to an estimated $75.69 billion in 2019 (a flat growth rate of 0.7%, adjusted for inflation), reaching its highest-ever dollar amount. Giving by foundations has grown in nine of the last 10 years, and represented 17% of total giving for the second year in a row, the largest share on record.” Whether that giving is from private or public foundations, nonprofits need to know how to take advantage of that funding opportunity.
How Foundations Decide Where to Spend their Money
The pandemic has pushed some foundations to expand their grant-making activities to fill needed gaps for nonprofits from the lack of individual or corporate giving this year. There has also been a recent push for less restrictive funding and less rigorous application/reporting requirements for grant monies. This establishes trust in the nonprofit to run their own programs without the stringent reporting or application process that can be a barrier for many smaller and mid-sized nonprofits.
Almost all foundations have established spending policies within their articles of incorporation or their by-laws. They are then obligated to award grants in line with those policies. Some foundations are a bit more flexible. While their corporate documents might specify general guidelines, the spending strategy is dictated by the board of directors, a review committee, or the leadership team for the foundation. Many foundations, just like many of the nonprofits they fund, will also adapt their spending and their strategies based on fundraising, current events, or leadership decisions. Which type of nonprofits funded, and how much money goes out, really does depend on each specific foundation and its internal spending strategies and governing documents.
Research and Using Form 990-pf
So how can nonprofits become recipients of giving from foundations? First, the nonprofit needs to conduct some research on foundations in their area, or that support their charitable cause. Then, during their prospecting, the nonprofit can incorporate foundations into their fundraising strategies based on the best fit. A “best fit” foundation will be one that is closely tied to the nonprofit’s mission, has given grants to similar causes in the past, or has a personal relationship with someone at the organization. Hopefully, the nonprofit can find a foundation that fits multiple of these “best fit” criteria.
The research phase can really dictate acquisition strategy, help form ask materials, and help a nonprofit use their time more effectively. Philanthropy Daily dedicated an entire article on how nonprofits should use a foundation’s publicly accessible tax return forms, like the form 990-pf, to conduct more in-depth research on foundations being considered for possible asks. These forms list out the foundation’s size, assets, trustees, staff, and past grant-making activities. These forms will even list whether or not the foundation accepts unsolicited proposals and their application details. Using foundation directories can also help tremendously with research. Candid’s Foundation Directory Online (formerly the Foundation Center) is one such online directory.
Each Grantmaker’s Application Process is Unique
Many grantmakers now have online applications, while some smaller or less well-known foundations may have their opportunities “hidden” elsewhere due to their own staffing or monetary capacities for their application process. One quick and easy trick nonprofits can do almost instantly is to follow all their possible “best fit” foundations on social media and to create alerts for their postings. Many foundations will post out funding opportunities and application information.
Depending on the application process, grant writing knowledge or experience might be necessary. If a nonprofit doesn’t have grant writing experience on its staff and can’t hire a grant writer or consultant, there are several resources out there to gain grant writing knowledge. Candid Learning (formerly GrantSpace) has several resources and so does NonprofitReady. A nonprofit can even get really creative and perhaps partner with local university grant writing courses or programs to offer students real-world grant writing opportunities while they are in school.
Grant writing and in general “pitching” for financial support from individuals and organizations is really about telling the organization’s story. One good practice is to continually update and have on hand statistics or “wins” for the nonprofit for funding proposals (in person or online). Intentionally storing and updating this information will keep the nonprofit from starting from scratch every time they are faced with a new funding opportunity. A more formal technique for this is creating a nonprofit pitch deck. Once created, it should be made accessible for all staff and especially board members. Roadmap Marketing provides a guide on what a nonprofit pitch deck should include.
Building Relationships for your Nonprofit’s Charitable Purposes
One of the most impactful ways to gain support from foundations is establishing a personal relationship with the foundation. If the nonprofit doesn’t already have a connection via their board members, volunteers, staff or peers, then it is critical they establish something more personal with the foundation. Creating an authentic partnership with the foundation is a more strategic approach for long term funding. The organization is more likely to fund nonprofits and projects their board of directors trust and have a good working relationship with. Cold calls to the organization or attending their various events or webinars is one good way to make that first connection. For board engagement purposes, the first call could come from a board member before they connect the foundation to a staff member for more specifics. Starting an authentic connection and establishing a relationship should be done before submitting a grant proposal. Even if the person you are connected to isn’t a part of the decision making for the foundation’s grant awards, they at least can be an advocate for the nonprofit’s proposal.
As the Nonprofit Times points out in their prospecting tips article, a nonprofit should do their research, cultivate the relationships, and then make a good ask for foundation support. The research and relationship cultivation could have all been wasted if the right ask isn’t made at the right time. The right ask includes all the right information on the agreed-upon problem and the nonprofit’s suggested solution for that problem. As previously mentioned, some foundations will have very well established application guiltiness and processes. These should be followed as indicated by the foundation. For those with more flexible funding opportunities, figuring out the right timing will also be an important piece of the funding puzzle. The research will help with determining the right time.
Foundational giving will hopefully continue its increase in funding for nonprofits. Attempting funding from the different foundations does take time and energy and in some cases money. A nonprofit should consult its board, staff, and strategic plans to see if that time, energy, and possible dollars would be worth the attempt. A simple good start could be the research to identify possible good fits and then start establishing a very initial relationship. Those two steps could help determine if the rest of the efforts would be worth it. At the very least, a nonprofit should stay alert to any funding possibility from foundations. While grants should only be one part of a nonprofit’s overall fundraising strategy, it could play a huge part in that nonprofit’s survival or growth.
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