In the nonprofit sector, the term "philanthropy" is commonly used to describe the granting of money to nonprofit organizations by foundations and corporations. This type of giving is often referred to as organized philanthropy or grantmaking.

What is a foundation?
A foundation is a non-governmental, nonprofit organization, with funds and programs managed by its own trustees or directors, established to aid social, educational, charitable, religious, or other activities serving the common welfare, primarily through the making of grants.

Grantmaking foundations are created by gifts of money, stock or other resources from individuals, families or corporations that wish to dedicate some of their private resources toward serving the public good. These gifts or assets are typically invested and the income generated is used to make grants. Foundations can be divided into several distinct types:

• Private Foundations - include family foundations created by individuals and families as vehicles for carrying out their charitable vision and independent foundations which often were originally organized as family foundations, but over a period of time family involvement in the leadership has declined;
• Public Foundations - receive at least one-third of their income from the general public. Community Foundations are a type of public foundation and are organized to serve specific geographic regions, and receive their support from a variety of donors, rather than a single family or company. Other public foundations also make support from a variety of donors but for a specific issue such as health or arts;
• Corporate Foundations - a private foundation under the tax law and derives its funds from a profit-making company or corporation. It is independently constituted and its purpose is to make grants often on a broad basis.
• Operating Foundations - whose primary purpose is to run their own direct charitable programs but may also make grants.

What do foundations do?
There are as many answers to this question as there are grantmaking organizations themselves. Several common themes, however, distinguish the way foundations work.

• First, foundations are regulated by the Internal Revenue Code, which defines what types of activities are considered charitable. Most foundations give grants only to nonprofit, charitable organizations and are prohibited or limited from getting involved in certain lobbying or political activities. Some foundations will also provide grants to individuals, such as scholarships to attend a college or university.
• Second, within these regulations, grantmakers are free to choose what kinds of issues to address. While many foundations support the more traditional causes of higher education and social service, this freedom to choose supports a vitally needed diversity of operation and opinion that plays an important role in maintaining our very social fabric. Because private grantmakers do not need to seek election or produce a profit for shareholders, they are free to experiment with new ideas and model approaches, support activities that have not yet achieved public consensus, and act with flexibility. They can provide the "risk capital" for new ventures, and make long-term commitments to addressing community needs.
• Private grants are working in thousands of ways to improve the quality of life in our state and tackle some of our most pressing social problems:

In health care - private grants have helped community clinics prepare for and respond to the managed care revolution, financed the expansion of medical services to underserved communities through such strategies as mobile health care vans and school based clinics, and supported AIDS prevention programs for the most at-risk and frequently politically unpopular populations.

In the human service field - grantmakers are supporting a number of new approaches to meeting critical needs. For example, private grants have helped nonprofit organizations finance new business which can employ homeless people or those making the transition from welfare to work, funded innovative technology that improves services to victims of domestic violence, funded the development of services to help seniors stay independent as long as possible, and supported comprehensive community empowerment programs to build stronger communities. Beyond these specific programs grantmakers have funded research, analysis and advocacy efforts aimed at helping improve our policies in the human service arena.

In the arts - grantmakers provide support for major cultural institutions as well as grass roots community arts. Private funds have supported the development of new works, outreach efforts to bring new or underserved audiences to performances, and arts education in the schools and during the summer months.

In the environment - recent grants have supported critical land conservation and open space protection projects, wetlands restoration, environmental education for children.

What are the different types of foundations?
Private Foundations (including family and independent foundations)
Corporate Foundations (also corporate giving programs)
Public Foundations (including community foundations)
Operating Foundations

How are foundations regulated?
The Internal Revenue Code governs the operations of both private foundations (including family, independent and company foundations) and public charities (community foundations and those nonprofit foundations that raise funds to make grants for specific types of programs). The rules governing private foundations are stricter in limiting foundation activities than are those for the public foundations. For example, private foundations:

• Are required to pay out for charitable purposes each year an amount equal to 5% of the fair market value of their assets;
• Pay an excise tax of 1% to 2% on their investment earnings;
• Are prohibited from lobbying or political activity;
• Are subject to very strict self-dealing or conflict of interest rules which make sure that there is no inappropriate private gain from the foundations activities;
• File an annual information return with the IRS listing: all of the grants made during the year: their investment holdings: the names of those serving on their Board of Directors; their application guidelines and procedures; as well as other information. These returns are public documents, and can be viewed through the online service Guidestar.

How many foundations are there (nation-wide and Indiana)?
According to the Foundation Center, there are over 50,000 grantmaking foundations in the United States. Indiana has over 1,000 foundations with $20 billion in assets. For more statistics on foundation growth and giving patterns, visit the Foundation Center's FC Stats.

Which foundations fund in my program area?
The Directory of Indiana Grantmakers, available for purchase, lists most foundations and giving programs across the state. It is also available to use for free in many public libraries.

The Foundation Center is also a valuable resource. Among the many resources available for purchase by grantseekers are The Foundation Directory, a print directory of United States Foundation that includes a funding index; FC Search: The Foundation Center's Database on CD-ROM, a searchable database of 53,000 grantmakers that combines directory-type information with recent grant information, and Foundation Directory Online plus, a subscription-based online database containing information on the nation's 10,000 largest foundations.

How do I get money from a foundation?
Foundations primarily give grants only to tax-deductible, tax-exempt nonprofit organizations with 501c 3 status. Most large foundations offer printed guidelines for their grantmaking programs, available on their Web sites or in printed form by calling the organization.

A limited number of foundations give scholarships and fellowships to students and artists, but competition for these grants is extremely stiff. For more information, the Foundation Center publishes Foundation Grants to Individuals.

How do I find out about a specific foundation or corporate giving program?
For further research, a good place to start is the Directory of Indiana Grantmakers or the Foundation Center's Foundation Finder.

Partial text reprinted with permission from the Forum of Regional Associations of Grantmakers.

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