Operating foundations and family foundations are a significant source of grant money, but they can leave out a significant number of funding opportunities. It’s all about the relationships. A lot of money is held in places you will not find in public records.
Following is a brief description of two hard-to-find pools of money: community foundations and donor-advised funds; as well as family foundations and two types of private foundations: operating and non-operating.
The Council of Foundations defines community foundations as “grantmaking public charities that are dedicated to improving the lives of people in a defined local geographic area. They bring together the financial resources of individuals, families and businesses to support effective nonprofits in their communities.” There are now more than 750 community foundations in the U.S.
Community foundations are as varied as the nonprofits they help. Some have assets in the billions of dollars. I live in Kansas City and the Greater Kansas City Community Foundation is now one of the largest community foundations in the country. It began in 1978 with $200 and is now manages more than $2 billion in assets. It houses more than 3,800 charitable funds, including donor-advised funds and family foundations.
Community foundations often serve as entrepreneurial charities, focusing their giving on tackling a community’s major issues. They provide competitive grants but they also manage family foundations and donor-advised funds, which are generally not competitive. The downside of community foundations is that most of their donor information is confidential – you won’t have access to it.
Donor-advised funds are the fastest-growing philanthropic vehicle in the country, accounting for more than three percent of all U.S. charitable giving. It’s acts as a charitable savings account. A donor contributes to the fund, but the contribution is irrevocable. The donor can’t withdraw any funds for their personal use. The donor directs charitable giving to their favorite charities.
These are also the most difficult sources of money to locate. They are usually not publicly acknowledged annual reports and they don’t have to file tax returns. To receive money from them, you must either personally know the individual/family who created the fund or know the financial professional who manages the fund.
Donor-advised funds are typically housed in community foundations and are frequently managed by attorneys. Building a relationship with the professional manager is very important if you don’t know the donor. The manager usually handles multiple donor-advised funds and can make recommendations to the donor(s) for her/his charitable giving, if asked. It’s all about the relationship!
In 2015, the average size of an individual donor-advised fund was $252,325, but their total charitable giving was $38.83 billion. This number is significantly greater than charitable giving from private foundations. Community foundations manage more than 68,000 donor-advised funds, with assets greater than $28.7 billion.
Family foundations receive their funds from a single family, with multiple family members often making donations to the foundation. At least one family member must play a significant role in governing or managing the foundation. Many times, the family member(s) are third and fourth-generation descendants of the original donor.
Family foundations comprise more than 50 percent of all private foundations. They number 40,456 of the 73,764 foundations in the United States. Family foundation assets range from several hundred thousand dollars to more than $1 billion, with total family foundation assets at $294 billion.
A private foundation is a legal entity created by an individual, family or a group of individuals for philanthropic purposes. Private foundations do not qualify as public charities, though they do good in the community. They are created from a single primary donation from an individual or business and the foundation is managed by its own directors. Private foundations invest the primary donation and distribute the investment income each year for charitable purposes.
These are two types of private foundations: operating foundations and non-operating foundations. Operating foundations run their own charitable activities, while non-operating foundations simply give money to other organizations.
From 2009 to 2012, I was the primary grant writer for the Truman Medical Center Charitable Foundation, a private operating foundation. Our only purpose was to raise money to support programs and services at Truman Medical Centers. Though we were frequently asked to make charitable gifts to other organizations, we could only distribute our money to TMC.
The Bill and Melinda Gates Foundation is a non-operating private foundation. Though the Gates Foundation has assets of more than $38 billion, almost 70 percent of the private foundations in the U.S. have assets of less than $1 million and 93 percent have assets of less than $10 million. Private foundations have assets totaling more than $628 billion and make charitable contributions totaling more than $44 billion.
To access these funds, keep repeating the mantra, “It’s all about the relationship!”