The Grant Seeker's Handbook: A Guide to Finding Funds
Chapter 8

A LOOK AT THE PRIVATE SECTOR: INSTITUTIONS AND INDIVIDUALS

INSTITUTIONS

Three types of institutional grantmaking should hold your attention in the nongovernmental sector. The first two are usually the focus for grantmaking research; the third does not seem to be considered as often.

1. Grantmaking by foundations is intentional and consistent with the rationale for their creation, overseen and informed by a body of related federal legislation and some measure of public scrutiny, and marked by a well-developed database from which your research can be undertaken. You will find foundation funding research eminently do-able.
   
   
2. Giving by corporations is absolutely voluntary and not driven by any measure of legislation. It tends to be secondary to traditional corporate pursuits, not the least of which is making a profit, and is blessed with no comparable database for your research.* You will find corporate giving research quite another matter, although things are improving some.
   
   
3. Religious, or church-based, grantmaking embodies a combination of features from the first two categories. For instance, it is both voluntary and intentional. Money is made available for this type of support for nonprofit organizations from the members of the respective religious organizations.
   

Let’s take a closer look at each of these categories.

Foundations

Foundations can be formed by an individual, a group of individuals, such as a family, or an organization, such as a corporation. The attributes of any nonprofit organization, briefly discussed in CHAPTER 2, present themselves in foundations as well: there are bylaws and Articles of Incorporation and tax exemption and a board of directors or trustees.

What distinguishes foundations from your own organization, most likely, is that they have money (that you want) and they give it away. Foundations are established to grant money to charitable organizations. As grantmaking organizations, they are often marked by the existence of an endowment or body of money that is invested in traditional ways. The income from such investments is the basis by which foundations make grants.

The IRS has grouped approximately 46,832 (as of 1998) foundations in the United States into small, medium and large foundations. In 1998, the largest 8 percent of all foundations held $10 million or more in assets and represented about 3,731 foundations.** These foundations accounted for more than 80% of all foundation asset holdings and provided about 75% of total grants made that year. Another way of looking at this is that there are a lot of medium-to-small grantmaking foundations out there—around 43,000 or so.

Awareness of certain legal tax provisions affecting foundations should help you understand how they operate.

• Foundations are required to pay out an amount equivalent to 5% of their assets in charitable contributions each fiscal year.
  
  
• Most foundations are endowed, which means they hold a body of money, exempted from taxation and contributed by donors to create them. Endowment funds are invested, and the income from investments is the basis for meeting the 5% payout requirement. (Some foundations, especially those that are corporate or company-sponsored, are given funds, often from annual profits, which are distributed in the same year and never become assets).
  
  
• Most foundations must pay a 2% excise tax on investment income, which is used to cover the costs of IRS oversight and enforcement of tax statutes imposed on foundations. In 1998, a change in the laws effecting foundations allows them to opt for a reduced tax of 1%, with an amount equivalent to the other 1% that ostensibly would be used for IRS enforcement paid out in grants. (Sadly, nowhere near the amount of money collected for this purpose goes towards enforcement. For more information on this issue, visit the site of National Committee for Responsive Philanthropy—their most current press release on the subject (as of 7/2004) is located at http://www.ncrp.org/Releases/PR-01-20-2004.htm.
  
  
• Foundations are required to disclose the names of their grant recipients and the amounts given to each. This information can be found on a foundation’s required annual tax return called a 990-PF. (More information on 990-PFs follows.)
  
  
• With rare exceptions, organizations receiving foundation grants must be classified as tax-exempt under Section 501(c)(3) of IRS regulations. (If you haven’t already read it, check CHAPTER 2 for information on nonprofit status and its importance.)
  
  
• Foundations are restricted in giving to individuals and must file special forms with the IRS before they can do so. As a result, few foundations make grants directly to individuals. (For information on foundation grants for individuals, be sure to see CHAPTER 10.)
  

Types of Foundations

Most foundations limit their field of activity in some way. A look at the following will give you some sense of obvious limitations based on how foundations are constituted.

Community Foundations are for, by and of a specific community. For example, the California Community Foundation (http://www.calfund.org/) specifically serves Los Angeles County, with a few exceptions made at the direction of donors. Like all community foundations, its assets from which grants are made comprise a pool of funds created by many donors instead of a single or limited source. The geographic area of foundation interest and grantmaking is usually evident in the foundation’s name, as in the case of the Santa Barbara Foundation, for instance.

To find out in detail the number and variety of donors, along with important information on how to apply for funds, and what the Foundation will and won’t consider funding, try to get a copy of the foundation’s current annual report. Many foundations now have their annual reports online, and some of these reports are available for reference at the Nonprofit Resource Library.

Independent Foundations, also known as national or general-purpose foundations, operate under broad charters with the potential for pursuing broad purposes in their grantmaking. Often begun by families or individuals, it is reasonable to assume that their independent label comes from a lessened influence by those persons who started them. This leads to another characteristic that will be important in your research efforts—the existence of professional staff. While the foundation world is not marked by legions of paid professional staff, the majority of staff will be found in these larger foundations. These foundations are less likely to have geographic limitations in their grantmaking than other types of foundations. Quite the opposite may be possible, which is to say that they will look for major impact on a broad geographic scale in their grants.

Special Interest Foundations restrict their grants to a specific field of interest, often as a result of the terms of a will or their Articles of Incorporation. By virtue of this narrowed focus, such specialized foundations may be a good source of state-of-the-art information in their areas of grantmaking. The most important consideration from a research perspective is to see whether your ideas and their special interests mesh. If they don’t, avoid approaching them for consideration.

Family Foundations have been created to facilitate the charitable contributions of a particular family. While there is no neat distinction from independent foundations, it is safe to say that family influence and a much smaller level of grantmaking are paramount here. Also, you’re not likely to find staff in these smaller foundations. Family members are donors and usually sit on the board of the foundation. Giving patterns are tied to the interests of family members (for example, schools attended, communities where they reside, programs in which they are directly involved). Since they are often community based and focused, the possibility of approaching them less formally than staffed foundations seems reasonable. You will find greater possibilities for general operating support in this segment of the foundation world along with no scarceness of modest grants. (Wait until your research divulges $50 and $100 grants.)

Operating Foundations are named as such because they utilize the majority of their investment income to operate their own charitable activities and programs. They can and do choose to make grants to other organizations, however, to further their own interests.

Corporate or Company-Sponsored Foundations derive their grantmaking funds from a donor profit-making corporation that usually bears the same name. Established by businesses to carry out systematic charitable giving, these separate legal entities represent the most visible form of corporate giving because of their foundation status. Their grantmaking tends to focus on the educational, cultural and social welfare needs of the communities where the donor corporation’s facilities and employees are located. Among many other reasons, these foundations exist to enhance corporate image, an awareness of which should guide your research.

In the rest of this chapter, we’ll take a look at resources for foundation research, as well as information about corporate giving on a broader scale.

Essentials for Further Foundation Research:
Fundraising Databases and Something Known as the 990-PF

As stated previously in this chapter, well-developed databases exist for your research of foundations. One reason for this is the IRS, which is responsible for tracking the activities of foundations, as established by an emerging body of legislation. The tracking of foundations leads to the creation of data, especially in the form of tax returns filed by foundations with the IRS—the mighty 990-PF. Publishers of grant directories and databases, such as The Foundation Center, take IRS information and arrange it so that you can put it to good use in your own tracking of foundation activities.

In the past, grantseekers would have to rely on print directories (commonly cross-referencing several directories simultaneously) and microfiche to research foundations. Now that the 990-PF forms are scanned in electronically, more and more information is available in searchable web and CD-ROM databases.

Fundraising Databases

The Nonprofit Resource Library subscribes to many commercial databases that are free to use here at the Center. These databases are used to identify potential funders including foundations, corporate giving programs and government agencies. You must come in to the library to use the databases, although it is possible to print-out, email or download information from all of the databases.

A list of all of the databases that are available in the library can be found at http://dev.cnmsocal.org/resources/articles/additional-fundraising-databases.html. We also provide links to the online tutorials for the databases so that you can learn how to use the system before coming into the library. Due to overwhelming demand, the amount of time that library staff can spend providing one-on-one instruction is limited. The Nonprofit Resource Library does offer a low-cost class called Grants Database Searching where you can get hands-on experience on how to use all of the databases. Some of the library’s resources are described below:

• FC Search
  Publisher: The Foundation Center. Electronic database comprising 76,000 grantmakers and 250,000 grants. This database allows you to easily save your search results in electronic format. The great thing about FC Search is that you can save profiles of grantmakers in a basic text format so that you can take the information with you when you leave the library. The online version of FC Search is called Foundation Directory Online and can be accessed at http://fconline.fdncenter.org/ for a subscription fee.
  
  
• Grants Locator
  Publisher: eCivis, http://www.ecivis.com. An electronic database of state and federal funding opportunities for local governments and nonprofit organizations. Grants Locator contains an average of 3,000 grants at a given time. You can access this database at the Nonprofit Resource Library (ask library staff for the login and password).
  
  
• Grant Explorer
  Publisher: GuideStar, http://www.guidestar.org. An electronic database containing research information on funding, programs and grants. Grant Explorer contains more than 42,000 of the nation’s largest foundations and more than 1,600,000 grants of $5,000 or more. Grant Explorer’s records allow the user to search for more specific information on grantmakers by providing full access to the 990-PFs. You can access this database at the Nonprofit Resource Library (ask library staff for the login and password). For online tutorial, visit http://www.guidestar.org/services/ge.jsp.
  
  
• Grants to Individuals
  Publisher: The Foundation Center, http://gtionline.fdncenter.org/. An electronic database containing 6,000 foundation programs that fund students, artists, researchers and other individual grantseekers. You can access this database at the Nonprofit Resource Library (ask library staff for the login and password). For online tutorial, visit http://gtionline.fdncenter.org/learnmore/.
  

• Guide to Funders in Southern California
  Publisher: Volunteer Center of Orange County, http://www.volunteercenter.org/. This database, located online at http://www.alephinc.net/socal/Public/Funding.asp, contains information on over 750 California grantmakers, including all foundations located in Orange County and all corporate grantmakers in the State of California. It is updated regularly and will eventually be expanded to include funders from other Southern California counties. You can access this database at the Nonprofit Resource Library (ask library staff for the login and password). For online guide, visit http://www.alephinc.net/socal/Public/Help.asp.
  
  
• Guide to Grants
  Publisher: Chronicle of Philanthropy, http://philanthropy.com. An electronic database of all foundation and corporate grants listed in The Chronicle of Philanthropy since 1995. Grants start at $5,000. Grant records link automatically to stories featured in the Chronicle. The Library also has access to the Chronicle’s online Archive of articles dating back to 1997.
  

Foundation Center Cooperating Collections

Probably the most popular and most accessible database is FC Search, one of the resources available at the Nonprofit Resource Library. This fundraising database is published by The Foundation Center, a nonprofit organization headquartered in New York, and made available free to the public at a network of participating libraries and nonprofit centers all across the United States. Some Cooperating Collections choose to have access to the online version rather than the FC Search CD-ROM version.

To find a Foundation Center Library or Cooperating Collection in your area, go to the Foundation Center’s home page at http://www.fdncenter.org/ and click on Locations. To see a list of nonprofit centers in California that may have FC Search, visit the California Management Assistance Partnership’s web site at http://www.c-map.org.

When you go to a library or center that is part of the Cooperating Collections network, you will find the same set of print materials, called the Core Collection. This set of directories may look enormous and insurmountable, but most of the information in the print directories is part of the electronic FC Search database (and the Foundation Directory Online web version.) Some people may prefer to browse these print materials rather than using the computer databases.

Two extremely useful directories are not part of FC Search—the Foundation 1000 and Corporate Foundation Profiles. Grantseekers should make sure to consult these, because the directories contain in-depth profiles of the larger foundations, with analyses of their giving history and trends.

Below is a list of FC Core Collection directories whose information is contained in FC Search and the Foundation Directory Online web version.

• Guide to U.S. Foundations, Their Trustees, Officers, and Donors is published annually and lists approximately 37,571 foundations by state, in descending order of total grants paid for the year of record.
  
  
• The Foundation Directory provides varied information on more than 7,000 foundations with assets of $2 million or more, or annual giving of $200,000 or more. Each entry includes a section on purpose and activities, financial data, donors, trustees and officers, application information and the federal Employer Identification Number (EIN). Many entries indicate a contact person; some include a telephone number.
  
  
• The Foundation Directory, Part 2 provides information on more than 5,000 mid-sized grantmakers. The foundations featured hold assets in excess of $4.5 billion and donate well over $420 million each year! Foundations are indexed by foundation name, donors, trustees, officers, subject area and type of support.
  
  
• Foundation Grants Index is published annually and updated bimonthly in the Foundation Grants Index Bimonthly. This annual provides information on more than 72,000 grants of $10,000 or more made by more than 1,000 of the more active U.S. foundations.
  
  
• Subject directories such as The National Guide to Funding in Health and The National Guide to Funding for Children, Youth and Families focus on the major funders and giving trends in a specific area.
  

Grant Directories

In addition to the directories published by the Foundation Center, the Nonprofit Resource Library has many other directories that grantseekers can use to identify potential funders. Since our collection is always changing, please write to the librarian to ask for directories you are interested in.

Deadlines and RFPs

In addition to the databases and directories that allow you to proactively search for funders who may be a good match for your organization, you may also want to stay current on grants that are currently being announced. These grant announcements are also called RFPs or Request for Proposals. The Center for Nonprofit Management follows grant announcements, and announce interesting opportunities in our e-newsletter.

The print newsletters you should look at when visiting the Library include Foundation & Corporate Giving Alert, Arts & Culture Funding Report, Health & Contracts Weekly and Arts Deadline List.

Form 990-PF

You don’t have to love 990-PFs, but you’re probably going to have to use them. If you’re still reading this handbook, chances are you’ll be squinting at 990s before long. Here’s why you’ll be cursing these blessings, the litany according to 990, as it were:

• Form 990-PF, as it is known by those savvy in the ways of foundation research, and as it called by the IRS, is the annual information form and tax return that private foundations must file with the IRS.
  
  
• The feds scan these forms when received from foundations and the forms are then made available via several websites.
  

• The 990s are scanned as PDF files, which require Adobe Acrobat Reader to view. Acrobat Reader can be downloaded for free from Adobe’s website . Some 990s can be hundreds of pages long, so it’s best to download 990s using a computer with a high-speed Internet connection.
  

Following is what you should be able to find out by looking over 990s, along with what the information means to you from a researching perspective:

• The name and address of the foundation.
  
  
• A telephone number, which may lead you to anyone from the foundation — from founding donor to a financial or legal intermediary such as an attorney, accountant or bank. (You won’t necessarily discover program-related information if you call, but that’s for you to find out, and you won’t find out anything phone-wise if you don’t call.)
  
  
• Financial information, itemizing the value of the foundation’s assets, any gifts or contributions of $5,000 or more received by the foundation for the year of record, and total grants paid out by the foundation for the same year, including the names and addresses of recipients, purpose of the grant and amount. (Data about assets will give you some sense of grantmaking capacity; data about grants made will confirm this. And having access to organizations that have been successful in getting grants should help with your strategies, if you’re willing to seek them out.)
  
  
• Identification of officers, directors, trustees, foundation managers and staff paid more than $30,000 a year, if employed by the foundation. (Here is the human element in your research, the possible people connection, so to speak. If staff exists, they are there to deal with you; if only non-staff categories are listed, they’ll probably be more difficult to reach.)
  
  
• The most recently revised 990s request that foundations indicate the name, address and telephone number of the person to whom applications for funding should be sent, the form in which applications should be submitted, deadlines and limitations or restrictions on awards. (Obviously, if you have this kind of information, any awkwardness you might experience in approaching an unstaffed foundation should be eliminated.)
  
  

For many of the smaller, unstaffed foundations that might engage your interest or provoke your curiosity — there are many of them in the metropolitan area — the 990-PF is likely to be the only source of written information you’ll see. So, unless you already have some kind of a personal contact with a foundation trustee or donor family member (highly desirable though not easy to come by for most researchers), the 990 shapes up as important to your efforts to make sense of foundations.

These 990s tend to be less important with larger foundations, because those foundations may already be described in The Foundation Center publications previously mentioned. Larger foundations may also publish their own annual reports or some type of application guidelines and procedures.

Demystifying the 990-PF

The Foundation Center has available on their website a tutorial that “…provides an overview of the content, accessibility and value of Form 990-PF… When you complete the course, you will know: what the 990-PF is, and the type of information that can be found in this document, the disclosure requirements for foundations that file this return, the components of the 990-PF that are of most interest to Grantseekers….” This tutorial is available free online from the FC Virtual Classroom at http://fdncenter.org/learn/classroom/index.jhtml.

Corporations

Although corporations are able to deduct up to 10% of their pre-tax income for charitable contributions, most corporations with identifiable giving programs average just below 2%. While this may seem like a small portion of what’s possible, corporate giving totaled $12.29 billion in 2002. This sum is even impressive when you consider that many corporations are not involved in any form of philanthropic giving. This is also a glum realization since so many who could give, don’t. Perhaps another part of your challenge in this area is finding ways to get more corporate entities to loosen dollars for what goes on in the nonprofit sector. Your most creative thinking will be needed.

The place of corporate foundations among other types of foundations has already been briefly discussed, along with the advantage this holds for research. Beyond the foundation variety of corporate giving is direct giving — by far the largest category of their philanthropic activities.

Learning about direct corporate giving is particularly challenging because there are no requirements for public disclosure of program expenses, including grants made or gifts given. Some businesses conduct intentional, high profile, visible direct giving programs and provide guidelines, but they are the exception. Occasionally, you will find information about giving activities in a corporate annual report. The key word here is “occasionally,” since annual reports are typically written to reassure stockholders or to influence potential investors.

Since reporting charitable contributions is strictly voluntary, these contributions may well be seen as something like ordinary business expenses or the cost of doing business. (Remember, such expenses are itemized against income to reduce tax liability, which means they are every bit as advantageous as the 10% charitable deduction mentioned above.) On the one hand, this detracts from your ability to clearly segment and understand corporate giving to nonprofits; on the other hand, it might suggest that you look at other strategies for approaching corporations.

Businesses are always interested in reaching out to expand markets for their goods and services and profit possibilities. They also tend to be concerned about the welfare of their employees. So, while philanthropic intent may not be evident, awareness of corporate needs, or a willingness to indicate how your nonprofit organization might help broaden a market while remaining true to its mission, could help create a mutually beneficial relationship.

Corporations that give generally base philanthropic budgets on earnings. How money is distributed, however, is not always easy to discern. There may be a formalized contributions program. Decisions about donations may be the responsibility of a staffed contributions office, or may be vested in members of senior corporate management. There may also be reason to seek out someone in the public or community relations department. In fact, it is not inappropriate to imagine more than one point of entry into a corporation to examine possibilities for contributions. The point is that corporations vary greatly in their contributions policies and procedures. Any particular corporation may have any combination of direct giving, corporate foundation grants, or employee-directed and funded giving programs.

In pursuing corporate contributions, bear in mind the following:

• Corporations should not be seen first and foremost as grantmakers, because they aren’t. Unlike foundations, their first priority is the business of business. Many are publicly held, which means management must be concerned with stockholders and investors. This, in part, explains why there is relatively little information about corporations as grantmakers, and why so many are not actively philanthropic.
  
  
• The quality of published information about corporate giving is improving, as are ideas about strategies for approaching corporations. Experience and the nature of corporate activities strongly suggest that some type of interpersonal involvement will help secure interest in and support for your organization or pursuits. Simply put, if you want corporate dollars, get corporate people involved in your organization or activities.
  
  
• Remember to look for common ground or shared interests. Corporate interest in what you or your organization is doing will be higher if what you propose takes into account something of interest to corporate representatives. This again suggests the importance of looking for interpersonal connections to facilitate your approach to corporate support.
  
  
• Corporations have a history of and are often more able to make non-cash or in-kind donations such as equipment, furniture, printing, use of facilities, loaned executives and/or other volunteers. (See CHAPTER 9 for more information on this subject.)
  
  
• Look for a geographical connection. Search out companies with headquarters or facilities in your local area, especially if this is the area served by your nonprofit organization. (Many corporations limit their gifts to areas in which their facilities and employees are situated.) If this can’t be managed, look for evidence of substantial corporate enterprise in your community.
  
  

Another aspect of corporate giving is the employee matching gift program. Where such a program exists, the company will match its employees’ cash contributions to an eligible organization. There is usually a specified maximum and minimum to the gift, and a designated ratio (1:1, 2:1, 3:1) to the match. These gifts can go directly into operating budgets, further enhancing and broadening your organization’s funding base. So this is good money to find, and once again good reason to find opportunities to involve corporate personnel in your organization’s activities. Check with a company targeted for approach regarding availability of such a program. Encourage your individual donors to do likewise with their employers when making a gift to your organization. Also consult the other corporate directories available at the Nonprofit Resource Library.

We’ve already discussed the difficulty in finding research resources for approaching corporate givers. Here are a couple of other ideas about what you have to work with: Publications and newsletters are available on a reference basis at the Nonprofit Resource Library, including The Corporate Giving Directory from The Taft Group; Foundation and Corporate Alert; and Corporate Foundation Profiles, ninth edition, by The Foundation Center. FC Search can be used to specifically identify corporate giving projects. Business databases might help find corporations in an area, even if you are not sure whether they have a giving program.

There is no guarantee of cooperation or success, but it might make sense to try for a connection with your local Chamber of Commerce, since it is a corporate membership organization. If you represent a nonprofit, why not consider having your group join the chamber?

Religious Institutions

Among all the varied activities conducted by churches and religious organizations in the United States, one that people tend not to think of is grantmaking and support of other nonprofit organizations. If you are going to be enterprising and thorough in researching possible funders, don’t neglect to include churches and religious organizations in your efforts.

Church structures and organizational relationships can be quite complex. Do you know where your diocese, parish, congregation and synod are? Are you aware that the Catholic Church funds, through individual giving, the Campaign For Human Development, http://catholiccitizens.org/, which makes grants available to community-based groups throughout the country for self-determination and justice projects? Did you know that the National Council of Churches oversees a number of focused program efforts dealing with issues such as hunger and racial and ethnic concerns, from which the possibility of funding may exist? For all the apparent complexity and terms with which we may not be familiar, this type of funding appears to be possible through standard geographical levels, from national to regional to local. You can make sense of the possibilities by consulting an excellent resource available at the Nonprofit Resource Library: read through the current edition of the Religious Funding Resource Guide, published by the Women’s Technical Assistance Project at the Center for Community Change. You might also want to look at the Fund Raiser’s Guide to Religious Philanthropy, published by the ubiquitous and prolific Taft Group.

Now let’s take a look at the non-grant side of the private sector, beginning with people and including devices, such as fundraising events, to get them to part with their money.

INDIVIDUALS

The importance of giving by individuals in supporting the nonprofit sector has already been mentioned. That almost 76% of the $240 billion made available for charitable giving in 2002 came from living individuals and their bequests puts things in proper perspective.

Individual contributions can vary from very large to just the opposite. Occasionally, news will break about a gift in the millions, often to well-established, well-known institutions, especially in higher education. But smaller donations seem more typical. Such donations are usually solicited through personal contacts, face-to-face, by telephone or by letter.

Individuals can also make in-kind donations. Any service or time provided by a volunteer or any material thing given is such a donation. These donations are just as valuable as cash to an organization receiving them. They should be recorded and accounted for separately from cash contributions.

As you look around the Nonprofit Resource Library for resources to help you consider ways to induce personal giving to support your organization, you should remember a few tactics, no matter what publication you get your hands on.

Getting individuals to give money to your organization is a very personal matter, a personal transaction between them and someone who represents your organization or cause. It’s a transaction probably best done one-on-one, or face-to-face. This means that someone must ask someone else for money.

Foundations are aware that this is not always easy. Foundations continue to get letters asking for assistance, but not requesting a specific amount of money, for instance. Some foundation employees have trained people to raise money, and watched them stammer when role playing or practicing on video.

In personal solicitation, gone is the comfort of asking for funds in written form; intact is the realization that you will not be cushioned when the all-too-prevalent rejection arrives. Nonetheless, with the points emphasized in CHAPTER 3 in mind, someone is going to need to ask for money.

Who asks for money? Anyone connected to and knowledgeable about your organization or cause qualifies. Probably one of the best bets, though, is a member of your board. This may be because board members are also the ones to connect you to potential individual givers. Locating, approaching and asking individuals to support their nonprofit organization should be bread and butter work for board members. The impact of volunteers asking for money on their organization’s behalf is significant. The impression on those asked tends to be good, again assuming your board members are asking from solid grounding in your organization’s needs.

What about finding people to be asked? Nonprofit experience suggests that you begin to reach out through board, family, friends and participants in your programs (the best example of which is alumni/ae in educational settings), among others. This may lead you to people of wealth. If it does not, fear not. Data about individual giving in this country supports the fact that giving is broadly spread across population groups. What seems important is that you reach out from within your organization and its participants to build individual giving in a personal way.

Remember this: you will probably have little success in asking others to support your organization, if you, yourselves, don’t make financial contributions. You, yourselves, means board and staff. For example, being able to say to any potential benefactor, whether individual or organization, that your board is a 100% giving board is a positive inducement to their interest and willingness to fund your organization. Remember, too, that 100% giving means everyone gives, without specifying how much. That decision lies with each board member.

Types of personal giving include:

• Membership fees or dues, through which “friends’ groups,” sponsors, supporters or other individuals can provide support to your organization on an annual basis. Often, something like a newsletter is provided in return for membership status.
  
  
• Donor categories, dependent on the amount individuals give, which may confer varying degrees of honorary status or benefits, with emphasis on upgrading people from one category to a higher one.
  
  
• Direct mail appeals, in which funds are requested through mass mailings to various categories of prospective donors. Be sure to refer to the Direct Mail and Mail Order Handbook, published by Dartnell Press and Revolution In The Mailbox and Testing, Testing, 1,2,3, both by Mal Warwick. These books are available at the Nonprofit Resource Library.
  
  
• Outright gifts, such as cash, stocks and other tangible personal property, given to a nonprofit organization with possible favorable tax consequences to the donor.
  
  
• Bequests, or gifts to nonprofit organizations specified by the will of an individual upon death, again with possible beneficial tax considerations for the decedent’s estate.
  
  
• Planned gifts, through which donors can use various legal means to make a gift and still receive some immediate financial return or tax deduction. These include certain types of trusts, pooled income funds, insurance beneficiary designations and forms of deferred giving, among others.
  

It probably won’t surprise you to learn this is a complex area of philanthropic activity. If you would like to learn more, read the IRS publications below, which can be downloaded for free at www.irs.gov. Look for the Search Forms and Publications for search box and enter the publication number of interest:

• Publication 526, Charitable Contributions
  
• Publication 557, Tax-Exempt Status for Your Organization
  
• Form 8283, Noncash Charitable Contributions
  
• Publication 561, Determining the Value of Donated Property
  
• Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements
  
• Publication 4302, A Charity’s Guide to Car Donations
  

Four other devices exist through which money can be raised for your organization. These are fundraising events, federated funding, fees for service, and profit-making business. Each of them, in effect, constitutes a means by which individuals may choose to support the efforts of your organization or cause.

Fundraising Events

First, there is the world of Special Events Fundraising, and what a world it is, with events ranging from the eloquent simplicity of a car wash to the simply elegant panache of a formal banquet or concert, and every “-athon” you can imagine in between.

There’s a saying about these events: “When they work, the money you get, and when they don’t, the blood you let.” Speaking of blood, it’s been said that special event fundraisers are successful if they get your organization the new kind — new blood, in the form of new volunteers to work for you. At best, such events are qualified successes. A successful event raises money for your organization—net money, that is. Money free and clear after expenses are paid. The key to success, then, is maximizing money to your organization through minimizing expenses for the event. This is where volunteers come in. They should be actively involved in planning and orchestrating special events; they should be supported in taking ownership for events to promote their success (no one wants to own a flop). Best of all, you can assure success if you get patrons to underwrite the costs of events, which is another variation on this theme. You will find a number of solid books on the subject of Special Events at the library.

Federated Funding

Federated funding refers to annual campaigns carried out for the benefit of member agencies under some common banner or federation name. The prototype, of course, is the United Way. The Jewish Federation Council also conducts its own fundraising drive each year. These campaigns are supported to a major extent by individuals and, with the United Way, by corporations and their employees. Your challenge is that you will be looking in from the outside, since member agencies get the lion’s share of money raised this way. However, non-member organizations may be able to petition for membership, or occasionally to compete for special or discretionary funding available outside the fold. The Combined Federal Campaign (CFC), http://www.opm.gov/cfc/, represents pooled federal employee contributions for financial support of eligible nonprofit organizations. In areas where federal agencies or installations are prevalent, this might be worth checking out further. (Your best source of information about the whys and wherefores of the CFC is probably the National Committee for Responsive Philanthropy, http://www.ncrp.org/, whose mission includes broadening access to philanthropic funds.

Fees for Service

An aspect of developing resources in the nonprofit sector that seems consistently overlooked is that of charging participants or users a fee for the service(s) your organization provides. It seems that the term not-for-profit or nonprofit is misunderstood, and perhaps this contributes to the current situation. Nonprofit does not mean that whatever your organization provides must be free, or that your organization cannot make money. It can indeed make money through fees — or any other legal means, for that matter — as long as the money is used for the organization’s stated tax-exempt purpose to benefit clients served.

A benefit of charging for services, well known by experienced nonprofit administrators, is that people being charged may take the services more seriously than if they were free. For example, a health clinic patient who pays a modest fee for treatment may be more likely to follow a nurse practitioner’s advice because of the financial vesting.

Of course, just because fees are extracted does not mean that everyone has to pay the same amount for what they get — a matter of extreme importance when dealing with low-income clients. Sliding fee scales can be devised allowing payment on the basis of ability. The matter of whether to assess fees demands careful thought by the nonprofit board and staff. Fees should not inhibit participants from services, nor should they be ignored as a source of income by nonprofits, where appropriate.

Profit Making Business

Nonprofit organizations are establishing businesses to generate income. There are nonprofits running businesses all around us — a cookie shop here, a trucking company there. This is being done because a common criticism is that nonprofits are too dependent on grants. In the spirit of free enterprise and the need for diversity, nonprofits are taking care of business. But, you’ve probably heard about the high failure rate among small businesses. Given this, it should be obvious that starting a business is not easily done without considerable expertise and usually lots of money, a precious commodity for most nonprofits, no matter how entrepreneurial their visions may be.

One other matter for careful consideration is that of unrelated business income. This refers to business regularly carried out by a nonprofit organization not substantially related to carrying out the tax-exempt purpose of the organization. Such income, as determined by the IRS, is subject to taxation, and it is possible that too much of this type of income could jeopardize nonprofit, tax-exempt status. To find out more about this, search the IRS site, www.irs.gov, for an article titled Unrelated Business Income Tax - General Rules, or search for Publication 598, Tax on Unrelated Business Income of Exempt Organizations.

*The exception is corporate or company-sponsored foundations which, by virtue of their foundation status, are included in the foundation database.

** Estimates based on data in Murray S. Weitzman, et al., New Nonprofit Almanac and Desk Reference: the Essential Facts and Figures for Managers, Researchers, and Volunteers. San Francisco: Jossey-Bass, 2002.

Continue to Chapter 9