Mansfield Library Subject Guides
printable pdf version
An Introduction to Types of Foundations
What is a foundation?
A foundation is a nonprofit, nongovernmental organization with a principal
fund or endowment of its own that maintains or aids charitable, educational,
religious, or other activities serving the public good, primarily by
making grants to other nonprofit organizations. The number of active
grantmaking foundations is now approximately 27, 000.
- Independent: Grantmaking organization whose funds are
generally derived from an individual, a family, or a group of individuals.
It may be operated under the direction of the donor or members of
the donor's family or may have an independent board of directors.
There are currently over 27,000 independent foundations in the U.S.
Examples: Ford Foundation, Carnegie Corporation
- Company-Sponsored: Created and funded by a business corporation
but are separate legal organizations from the sponsoring corporation.
Company foundations are generally managed by a board of directors
often composed of corporate officials, but which may include individuals
with no corporate affiliation. Giving programs often focus on communities
where the company has operations and on research and education in
fields related to company activities. There are
approximately 1,700 company-sponsored foundations today.
Examples: Chrysler Corporation Foundation, Merrill Lynch & Co. Foundation
- Community Foundations: These are supported by and operated
for a specific community or region. Technically, these are not "private"
foundations because they draw support from a variety of sources and
raise money themselves. Their grantmaking activities are administered
by a governing body or distribution committee representative of community
interests. There are about 327 community foundations.
Example: New York Community Trust
- Operating Foundations: These are established to operate
research, social welfare, or other charitable programs determined
by the donor or the governing body. Most of the foundation's funds
are expended for its own programs. Many hospitals and universities
maintain operating foundations, whose grants are directly related
to the organization's program.
Use of the Word "Foundation"
Anyone can use the foundation-not all with this name are designated
as private foundations by the IRS. This also means that they do not
all have to fill out an IRS 990-PF. This does NOT mean that these organizations
don't ever give grants-many of them do.
Examples: Princess Grace Foundation, Ms. Foundation
Finding a Match
The Basic Principle underlying funding research is the
matching of the activities and goals of the nonprofit organization
to the funding interests of the foundation. Therefore, before beginning
the research, you need to have a very clear idea of exactly what your
organization's mission is, and what it needs money for, along with who
will benefit (e.g. who is the client?). Hint: The proposal
and the coverletter should stress user benefit terms-what the client
needs and how the non-profit organization will satisfy that need. The
proposal should not be written in terms of what the grantseeking organization
needs.
Developing a Broad Prospect List
Three basic strategies should be used to develop a broad list of funding
prospects:
- Subject Approach : Identifies foundations that have expressed an interest in funding programs in your specific subject field.
- Geographic Approach : Identifies foundations that fund programs in a specific city, state or region.
- Types of Support Approach : Identifies foundations that provide specific types of support to nonprofits, such as building construction or renovation, research, endowments, etc.
It is IMPORTANT to use all 3 of these approaches in order to make sure all prospects have been covered. Some foundations are interested in specific geographic access (especially corporate), others in the subject and still others will only give certain types of support.
Large and/or Small Foundations - Which to look
at?
No hard and fast rules, but some characteristics about each:
Large Foundations
- They have more money to give away; grant tend to be larger.
- They are interested in model programs/prototype projects with national impact.
- They often have paid, professional staff to review proposals-subject specialists.
- They may publish annual reports or guidelines.
- Their staff may be available to take phone calls.
- Their staff may be available for personal visits.
Smaller Foundations
- Grants are often smaller, but more likely to provide for general operating support.
- They are more oriented toward giving in their own geographic area.
- They often support a wide range of activities.
- They may be inclined to continue their support for a longer period of time.
- There is less information available; grant seekers must rely on 990-PFs.
- They may have no listed telephone number.
- Their board may meet infrequently-once a year.
Nonprofit organizations and foundations are PARTNERS. Private foundations
MUST give away 5%of their assets, and a partnership with a nonprofit
organization is the only way for them to meet this requirement. Nonprofits
are the foundations' access to the people who will benefit. It is up
to the nonprofit organization to reassure the foundation that they will
spend theirmoney wisely and are credible.
SOMEONE IS GOING TO RECEIVE IT.