Grantmaking Policies and Procedures
To a large extent, the exempt purpose of a private foundation determines how grants will be made. A foundation that exists
solely to channel funds to a specific public charity or institution will not need to advertise the availability of grants or
review applications. But a foundation whose purpose is to address problems of inner-city poverty, for example, must be
prepared to receive and evaluate a wide variety of applications.
A clear set of policies and procedures for implementing the foundation's purpose should be determined by the donor in
conjunction with directors or trustees or, when applicable, with paid staff or representatives of the community. Any
geographical or other major restrictions on grantmaking should be determined. When contacted by potential recipients, a
foundation should respond promptly with a straightforward explanation of procedures for receiving and processing grant
applications. Many private foundations have a one-page fact sheet explaining their funding guidelines and priorities.
Some foundations require the completion of an application form; others provide applicants with an outline of materials that
constitute an application; still others agree to accept one of the "Common Grant Application Forms" currently in existence.
When an application is received it should be acknowledged promptly and the applicant given a reasonable idea about when a
decision will be reached. Applicants whose proposals are inappropriate because they fall outside the foundation's area of
interest or fail to meet policy restrictions should be notified immediately.
Review of grant proposals should conform to the foundation's policies and procedures and be carried out in a fair and
nondiscriminatory manner. Foundations boards and/or staff should work closely with successful applicants to insure agreement
about the exact purpose of the grant, reports that may be required by the foundation, and evaluation of the project.
The kind of grant determines how much follow-up and evaluation should be carried out by the foundation. Standard grants, such
as unrestricted gifts to churches or universities, require minimal attention. Grants to innovative projects usually entail
evaluation, which may include visits to the project, periodic reports from the grantee, and independent audits. Foundations
that deal in such grants may find, however, that following an ironclad evaluation plan is not practical. It is difficult to
predict how long it will take to determine the value of a new program or approach and exactly which monitoring tools apply. It
may be necessary to evolve an evaluation process in cooperation with each grantee.
The need for full- or part-time staff is also tied to a foundation's grantmaking policies and procedures. Evaluation of a
large number of grant applications on a predetermined schedule may be beyond the capabilities of a volunteer board of
directors or trustees. This type of grantmaking requires the services of professional foundation staff.
It is essential, at every step of the grantmaking process, that communication with grant seekers and the public be clear,
open, and based on mutual respect. Every private foundation plays a part in preserving the reputation of private philanthropy.
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Changing Grantmaking Emphasis
Once a foundation is in operation, the purposes for which grants have been made and their effectiveness should be periodically
reviewed. In many instances a shift of emphasis can take place within the purposes set forth in the foundation's charter or
trust instrument.
In evaluating the overall effectiveness of a grantmaking program, it is often advisable to call upon the expertise and insight
of individuals beyond the inner circle of the donor family, directors or trustees, and foundation staff. A foundation may wish
to seek assistance from a grantmaking professional who is on the staff of another private foundation. If it appears that the
purpose of grantmaking has become dated, and no longer speaks to what the foundation feels is an essential need, then it may
be changed.
Private foundations, with their discretionary power, are in a uniquely responsive position. They can keep pace with social
change more easily than governmental agencies, and with this capability comes the responsibility to be vigilant.
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The Special Case of the Stand-By Foundation
Stand-by foundations are created during a donor's lifetime with a minimum or modest endowment. The bulk of a stand-by
foundation's endowment will be received from the donor's estate upon his or her death. These types of organizations have
certain inherent advantages for the donor. The donor has the opportunity to select a board of directors or trustees and
foundation managers in whom he or she has confidence before large sums are involved in grantmaking. Stand-by foundations also
provide donors with the chance to explore various areas of philanthropy during their lifetimes. If either the board members or
the foundation's purpose prove unsatisfactory, they can be changed before the foundation's major endowment is received.
Stand-by foundations are also a good training ground for younger members of the donor family, and encourage them to develop
philanthropic goals of their own.
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Terminating a Foundation
In certain circumstances a private foundation board may decide that it is appropriate and timely to terminate a foundation.
This could occur because the foundation's purposes have been achieved. It is also possible that the foundation board and donor
family lose interest and find no likely candidates to take their places as future board members.
In such cases there are four options for terminating a foundation. They are:
- Spending out the assets;
- Transferring assets to existing public charities or other private foundations;
- Qualifying as a public charity; or
- Consolidating with other private foundation
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Reprinted with permission from the Forum of Regional Associations of
Grantmakers
©2003 Indiana Grantmakers Alliance, Inc.
32 East Washington Street, Suite 1100
Indianapolis, Indiana, 46204
Phone: (317) 630-5200 | Fax: (317) 630-5210
Email: info@indianagrantmakers.org
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