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GLOSSARYAnnual Report: A voluntary report published by a foundation or corporation describing its grant activities. It may be a simple, typed document listing the year's grants or an elaborately detailed publication. A growing number of foundations and corporations use an annual report as an effective means of informing the community about their contributions activities, policies and guidelines.
Articles of Incorporation: A document filed with the secretary of state or other appropriate state office by persons establishing a corporation. This is the first legal step in forming a nonprofit corporation.
Assets: Cash, stocks, bonds, real estate or other holdings of a foundation.
Bequest: A sum of money made available upon the donor's death.
Board Discretionary Fund: A term collectively referring to unrestricted and field of interest funds, which are not bound by permanent restrictions nor connected to an active donor advisor; grants from these funds are made at the discretion of the community foundation's board of governors.
Bylaws: Rules governing the operation of a nonprofit corporation. Bylaws often provide the methods for the selection of directors, the creation of committees and the conduct of meetings.
Challenge Grant: A grant that is made on the condition that other monies must be secured, either on a matching basis or via some other formula, usually within a specified period of time, with the objective of stimulating giving from additional sources.
Charitable Gift Annuity: A gift instrument that provides payments during a donor's lifetime in return for a charitable gift, which, after the donor's death, is used for the ongoing support of the community or other nonprofit purposes designated by the donor.
Charity: In its traditional legal meaning, the word "charity" encompasses religion, education, assistance to the government, promotion of health, relief of poverty or distress and other purposes that benefit the community. Nonprofit organizations that are organized and operated to further one of these purposes generally will be recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and will be eligible to receive tax-deductible charitable gifts.
Charitable Remainder Trust: A gift instrument that provides income for life or a defined period of time to the donor or other named beneficiaries that is ultimately used for the ongoing support of the community or other nonprofit purposes designated by the donor.
Community Foundation: A community foundation is a tax-exempt, nonprofit, autonomous, publicly supported, philanthropic institution composed primarily of permanent funds established by many separate donors of the long-term diverse, charitable benefit of the residents of a defined geographic area. Typically, a community foundation serves an area no larger than a state. Community foundations provide an array of services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent foundations.
Corporate Giving Program: A corporate giving (direct giving) program is a grantmaking program established and administered within a profit-making company. Gifts or grants go directly to charitable organizations from the corporation. Corporate foundations/giving programs do not have a separate endowment; their expense is planned as part of the company's annual budgeting process and usually is funded with pre-tax income.
Decline: Also referred to as Denial, a decline is the refusal or rejection of a grant request. Some declination letters explain why the grant was not made, but many do not.
Demonstration Grant: A grant made to establish an innovative project or program that will serve as a model, if successful, and may be replicated by others.
Designated Funds: A type of restricted fund in which the fund beneficiaries are specified by the grantors.
Discretionary Funds: Grant funds distributed at the discretion of one or more trustees, which usually do not require prior approval by the full board of directors. The governing board can delegate discretionary authority to staff.
Donee: See Grantee.
Donor: See Grantor.
Donor Advised Fund: A fund held by a community foundation where the donor, or a committee appointed by the donor, may recommend eligible charitable recipients for grants from the fund. The community foundation's governing body must be free to accept or reject the recommendations.
Donor Designated Fund: A fund held by a community foundation where the donor has specified that the fund's income or assets be used for the benefit of one or more specific public charities. These funds are sometimes established by a transfer of assets by a public charity to a fund designated for its own benefit, in which case they may be known as grantee endowments. The community foundation's governing body must have the power to redirect resources in the fund if it determines that the donor's restriction is unnecessary, incapable of fulfillment or inconsistent with the charitable needs of the community or area served.
Donor Recommendation: A request by a donor advisor to make a grant from his or her fund to a named nonprofit recipient for a specified or general purpose.
Endowment: The principal amount of gifts and bequests that are accepted subject to a requirement that the principal be maintained intact and invested to create a source of income for a foundation. Donors may require that the principal remain intact in perpetuity, or for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose.
Endowment Partner: A nonprofit organization selected by The Community Foundation to participate in a special program aimed at assisting nonprofits in building their endowments through small grants for technical assistance and related activities.
Excise Tax: The annual tax of 1 or 2 percent of net investment income that must be paid to the IRS by private foundations.
Expenditure Responsibility: When a private foundation makes a grant to an organization that is not classified by the IRS as tax-exempt under Section 501(c)(3) and as a public charity according to Section 509(a), it is required by law to ensure that the funds are spent for charitable purposes and not for private gain or political activities. Such grants require a pre-grant inquiry and a detailed, written agreement. Special reports on the status of the grant must be filed with the IRS, and the grantees must be listed on the foundation's IRS Form 990-PF.
Family Foundation: "Family foundation" is not a legal term, and therefore, it has no precise definition. Yet, approximately two-thirds of the estimated 44,000 private foundations in this country are believed to be family managed. The Council on Foundations defines a family foundation as a foundation whose funds are derived from members of a single family. At least one family member must continue to serve as an officer or board member of the foundation, and as the donor, they or their relatives play a significant role in governing and/or managing the foundation throughout its life. Most family foundations are run by family members who serve as trustees or directors on a voluntary basis-receiving no compensation; in many cases, second- and third-generation descendants of the original donors manage the foundation. Most family foundations concentrate their giving locally, in their communities.
Field of Interest Fund: A permanent fund through which a donor has defined long-term grant interests (by geography, issue, population or other characteristic); part of the pool used to make board discretionary grants.
Financial Report: An accounting statement detailing financial data, including income from all sources, expenses, assets and liabilities. A financial report may also be an itemized accounting that shows how grant funds were used by a donee organization. Most foundations require a financial report from grantees.
Form 990/Form 990-PF: The IRS forms filed annually by public charities and private foundations respectively. The letters PF stand for private foundation. The IRS uses this form to assess compliance with the Internal Revenue Code. Both forms list organization assets, receipts, expenditures and compensation of officers. Both forms include a list of grants made during the year.
Funding Cycle: A chronological pattern of proposal review, decision making and applicant notification. Some donor organizations make grants at set intervals (quarterly, semi-annually, etc.), while others operate under an annual cycle.
Giving Pattern: The overall picture of the types of projects and programs that a donor has supported historically. The past record may include areas of interest, geographic locations, dollar amount of funding or kinds of organizations supported.
Grant: An award of funds to an organization or individual to undertake charitable activities.
Grant Monitoring: The ongoing assessment of the progress of the activities funded by a donor, with the objective of determining if the terms and conditions of the grant are being met and if the goal of the grant is likely to be achieved.
Grantee: The individual or organization that receives a grant.
Grantor: The individual or organization that makes a grant.
Grassroots Fundraising: Efforts to raise money from individuals or groups from the local community on a broad basis. Usually an organization does grassroots fundraising within its own constituency—people who live in the neighborhood served or clients of the agency's services. Grassroots fundraising activities include membership drives, raffles, bake sales, auctions, dances and a range of other activities. Foundation managers often feel that successful grassroots fundraising indicates that an organization has substantial community support.
Guidelines: A statement of a foundation's goals, priorities, criteria and procedures for applying for a grant.
High Net Worth (HNW) Individual: An individual with $5 million or more in personal assets.
In-Kind Contribution: A donation of goods or services rather than cash or appreciated property.
Independent Foundation: These private foundations are usually founded by one individual, often by bequest. They are occasionally termed "non-operating" because they do not run their own programs. Sometimes individuals or groups of people, such as family members, form a foundation while the donors are still living. Many large independent foundations, such as the Ford Foundation, are no longer governed by members of the original donor's family but are run by boards made up of community, business and academic leaders. Private foundations make grants to other tax-exempt organizations to carry out their charitable purposes. Private foundations must make charitable expenditures of approximately 5 percent of the market value of their assets each year. Although exempt from federal income tax, private foundations must pay a yearly excise tax of 1 or 2 percent of their net investment income. The Rockefeller Foundation and the John D. and Catherine T. MacArthur Foundation are two examples of well-known "independent" private foundations
Intermediate Sanctions: Penalty taxes applied to disqualified persons of public charities that receive an excessive benefit from financial transactions with the charity. An excessive benefit may result from overcompensation for services or from other transactions such as charging excessive rent on property rented to the charity. Unlike private foundations, public charities are not barred from engaging in financial transactions with disqualified persons as long as the transaction is fair to the charity. Penalty taxes also may apply to organization managers, such as the charity's board, that knowingly approve an excess benefit transaction.
Internal Revenue Service (IRS): The federal agency with responsibility for regulating foundations and their activities.
Jeopardy Investment: An investment that risks the foundation's ability to carry out its exempt purposes. Although certain types of investments are subject to careful examination, no single type is automatically a jeopardy investment. Generally, a jeopardy investment is found to be made when a foundation's managers have failed to exercise ordinary business care and prudence. The result of a jeopardy investment may be penalty taxes imposed upon a foundation and its managers.
Knowledge Foundation: A foundation that gathers data from its grantmaking, grantees, other experts and its own community experiences, derives new learning from it, shares these lessons learned internally and with the community, and invests the dollars, knowledge and expertise that are gathered from the organizations it supports.
Legacy Society: A group of community foundation donors who have committed a gift to the foundation through a provision in a will or trust.
Letter of Intent: A grantor's letter or brief statement indicating intention to make a specific gift.
Leverage: A method of grantmaking practiced by some foundations. Leverage occurs when a small amount of money is given with the express purpose of attracting funding from other sources or of providing the organization with the tools it needs to raise other kinds of funds. Sometimes known as the "multiplier effect."
Limited-Purpose Foundation: A type of foundation that restricts its giving to one or very few areas of interest, such as higher education or medical care.
Lobbying: Efforts to influence legislation by influencing the opinion of legislators, legislative staff and government administrators directly involved in drafting legislative proposals. The Internal Revenue Code sets limits on lobbying by organizations that are exempt from tax under Section 501(c)(3). Public charities may lobby as long as lobbying does not become a substantial part of their activities. Private foundations generally may not lobby except in limited circumstances such as on issues affecting their tax-exempt status or the deductibility of gifts to them.
Matching Gifts Program: A grant or contributions program that will match employees' or directors' gifts made to qualifying educational, arts and cultural, health or other organizations. Specific guidelines are established by each employer or foundation. (Some foundations also use this program for their trustees.)
Matching Grant: A grant or gift made with the specification that the amount donated must be matched on a one-for-one basis or according to some other prescribed formula.
National Philanthropy Day –is the special day set aside to recognize and pay tribute to the great contributions that philanthropy—and those people active in the philanthropic community—have made to our lives, our communities and our world.
Operating Foundation: Also called private operating foundations, operating foundations are private foundations that use the bulk of their income to provide charitable services or to run charitable programs of their own. They make few, if any, grants to outside organizations. To qualify as an operating foundation, specific rules, in addition to the applicable rules for private foundations, must be followed. The Carnegie Endowment for International Peace and the Getty Trust are examples of operating foundations.
Operating Support: A contribution given to cover an organization's day-to-day, ongoing expenses, such as salaries, utilities, office supplies, etc.
Philanthropic Series (P-Series) - A continuing education program for our professional advisors that are held annually in the Inland and Desert Region.
Pass-through Fund: A fund designation for a donor advised, special project or other fund that will have its assets contributed and granted out promptly, generally within six months; pass-through funds are typically charged a higher administrative fee than standard funds.
Payout Requirement: The minimum amount that a private foundation is required to expend for charitable purposes (includes grants and necessary and reasonable administrative expenses). In general, a private foundation must pay out annually approximately 5 percent of the average market value of its assets.
Philanthropy: Philanthropy is defined in different ways. The origin of the word philanthropy is Greek and means love for mankind. Today, philanthropy includes the concept of voluntary giving by an individual or group to promote the common good. Philanthropy also commonly refers to grants of money given by foundations to nonprofit organizations. Philanthropy addresses the contribution of an individual or group to other organizations that in turn work for the causes of poverty or social problems-improving the quality of life for all citizens. Philanthropic giving supports a variety of activities, including research, health, education, arts and culture, as well as alleviating poverty.
Pledge: A promise to make future contributions to an organization. For example, some donors make multi-year pledges promising to grant a specific amount of money each year.
Post-Grant Evaluation: A review of the results of a grant, with the emphasis upon whether or not the grant achieved its desired objective.
Professional Advisory Council (PAC): a group of professional advisors -bank and trust officers, financial planners, CPA's, estate planning attorneys, real estate and insurance professionals who play an important role with by referring clients who establish funds at The Community Foundation.
Preliminary Proposal: A brief draft of a grant proposal used to learn if there is sufficient interest to warrant submitting a proposal.
PRI: Acronym for program related investment; an investment by the community foundation to support a project that provides some public or charitable benefit with the expectation trustees or directors, established to maintain or aid social, educational, religious or other charitable activities serving the common welfare, primarily through grantmaking. U.S. private foundations are tax-exempt under Section 501(c)(3) of the Internal Revenue Code and are classified by the IRS as a private foundation as defined in the code.
Program Officer: Also referred to as a corporate affairs officer, program associate, public affairs officer or community affairs officer, a program officer is a staff member of a foundation or corporate giving program who may do some or all of the following: recommend policy, review grant requests, manage the budget and process applications for the board of directors or contributions committee.
Program Related Investment: A loan or other investment made by a private foundation to a profit making or nonprofit organization for a project related to the foundation's stated purpose and interests. Program related investments are an exception to the general rule barring jeopardy investments. Often, program related investments are made from a revolving fund; the foundation generally expects to receive its money back with limited, or below-market, interest, which then will provide additional funds for loans to other organizations. A program related investment may involve loan guarantees, purchases of stock or other kinds of financial support.
Public Charity: A nonprofit organization that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and that receives its financial support from a broad segment of the general public. Religious, educational and medical institutions are deemed to be public charities. Other organizations exempt under Section 501(c)(3) must pass a public support test to be considered public charities, or must be formed to benefit an organization that is a public charity. Charitable organizations that are not public charities are private foundations and are subject to more stringent regulatory and reporting requirements.
Public Foundation: Public foundations, along with community foundations, are recognized as public charities by the IRS. Although they may provide direct charitable services to the public as other nonprofits do, their primary focus is on grantmaking.
Query Letter: Also referred to as a letter of inquiry, this is a brief letter outlining an organization's activities and a request for funding sent to a prospective donor to determine if there is sufficient interest to warrant submitting a full proposal. This saves the time of the prospective donor and the time and resources of the prospective applicant.
Regional Endowment: A geographically targeted group of funds under the auspices of the community foundation for which the foundation provides some operational support and/or general fund management; examples include any of the Arizona Community Foundations' Affiliates across the state.
Request for Proposal (RFP): A document that invites nonprofit agencies to apply to a specially defined grant initiative, defining the priorities, application process and limitations.
Restitution Fund: A fund established as the outcome of a class action lawsuit, discrimination suit or other public interest case to benefit a class of affected individuals and communities.
Restricted Grant: A grant made through a restricted fund (i.e., a grant made to a specific charity that was designated by the donor when the fund was established).
Solution Broker: A term used by the community foundation to describe our role in convening and connecting the necessary organizations and groups to create an effective solution to a community issue; refers to the community foundation's desire to be a neutral third party — or the "table" — that nonprofit, government and other entities can come to for help in navigating successful, positive change for the community.
Scholarship Fund: A fund established to provide scholarships to students who meet specific criteria as determined by the donor. Donor advised scholarship funds allow the donor or a committee specified by the donor to make scholarship decisions, while the community foundation makes that decision for restricted scholarship funds.
Seed Money: A grant or contribution used to start a new project or organization.
Self-Dealing: A private foundation is generally prohibited from entering into any financial transaction with disqualified persons. The few exceptions to this rule include paying reasonable compensation to a disqualified person for services that are necessary to fulfilling the foundation's charitable purposes. Violations will result in an initial penalty tax equal to 5 percent of the amount involved, payable by the self-dealer.
Spending Policy: The amount distributed in grants each year from permanent funds of the community foundation, as adopted by the community foundation's board of governors. Currently, this amount is 5 percent of a fund's value, using the average balance over the last 12 quarters.
Site Visit: Visiting a donee organization at its office location or area of operation and/or meeting with its staff or directors or with recipients of its services.
Social Investing: Also referred to as ethical investing and socially responsible investing, this is the practice of aligning a foundation's investment policies with its mission. This may include making program related investments and refraining from investing in corporations with products or policies inconsistent with the foundation's values.
Supporting Organization: A "subsidiary" fund with its own identity, tax identification (nonprofit status), mission and board of directors appointed by the donors (49 percent) and the community foundation (51 percent); it receives its nonprofit status because of its relationship to the community foundation and the foundation's majority on the board. The foundation markets the supporting organization as a viable alternative to a private foundation.
Tax-Exempt Organizations: Organizations that do not have to pay state and/or federal income taxes. Organizations other than churches seeking recognition of their status as exempt under Section 501(c)(3) of the Internal Revenue Code must apply to the Internal Revenue Service.
Technical Assistance: Operational or management assistance given to a nonprofit organization. It can include fundraising assistance, budgeting and financial planning, program planning, legal advice, marketing and other aids to management. Assistance may be offered directly by a foundation or corporate staff member or in the form of a grant to pay for the services of an outside consultant.
Tipping: The situation that occurs when a gift or grant is made that is large enough to significantly alter the grantee's funding base and cause it to fail the public support test. Such a gift or grant results in "tipping" or conversion from public charity to private foundation status.
Trust: A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations.
Trustee: The person(s) or institutions responsible for the administration of a trust.
Unrestricted Funds: Normally found at community foundations, an unrestricted fund is one that is not specifically designated to particular uses by the donor, or for which restrictions have expired or been removed.