Corporation Philanthropy Proposal by rrh20397

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									Philanthropy Glossary
                                                                               Connecticut Council for Philanthropy


  501(c)(3): Section of the Internal Revenue Code that designates an organization as charitable
  and tax-exempt. Organizations qualifying under this section include religious, educational,
  charitable, amateur athletic, scientific or literary groups, organizations testing for pubic safety or
  organizations involved in prevention of cruelty to children or animals. Most organizations
  seeking foundation or corporate contributions secure a Section 501(c)(3) classification from the
  IRS. Note: the tax code sets forth a list of sections 501(c)(4-26) to identify other nonprofit
  organizations whose function is not solely charitable (e.g., professional or veterans
  organizations, chambers of commerce, fraternal societies, etc.). See also operating
  foundation; private foundation; public charity.

  509(a): Section of the tax code that defines public charities (as opposed to private foundations).
  A 501(c)(3) organization also must have a 509(a) designation to further define the agency as a
  pubic charity. See Public support test.

  Affinity Group: A coalition of grantmaking institutions that shares information or provides
  professional development and networking opportunities to individual grantmakers with a shared
  interest in a particular subject or funding area.

  Annual report: A voluntary report issued by a foundation or corporation that provides financial
  data and descriptions of its grantmaking activities. Annual reports vary in format from simple
  typewritten documents listing the year's grants to detailed publications that provide substantial
  information about the grantmaker's grantmaking programs. Approximately 1,100 foundations
  issue them.

  Articles of Incorporation: A document filed with the Secretary of State r other appropriate
  state office by persons establishing a corporation. This is the first legal step in forming a
  nonprofit corporation.

  Assets: The amount of capital or principal — money, stocks, bonds, real estate, or other
  resources — controlled by a foundation or corporate giving program. Generally, assets are
  invested and the resulting income is used to make grants.

  Associates program: A fee-based membership program of the Foundation Center providing
  toll-free e-mail and telephone reference, photocopy and fax service, computer searches of
  Foundation Center databases, attendance at an annual conference, and access to a special
  Associates-only Web site.

  Beneficiary: In philanthropic terms, the donee or grantee receiving funds from a foundation or
  corporate giving program is the beneficiary, although society may benefit as well.

  Bequest: A sum of personal or real property made available upon the donor’s death.

  “Bricks and Mortar”: An informal term for grants for buildings or construction projects.

  Bylaws: Guidelines for the operation of a nonprofit corporation, developed according to state
  law requirements. Bylaws often provide the methods for the selection of directors, the creation
  of committees and the conduct of meetings.
                      Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@CTphilanthropy.org www.CTphilanthropy.org          3-25-09
Capacity building: A process funders use to assist nonprofit organizations in strengthening
their internal operations to become more efficient and effective for those they serve.

Capital campaign: An organized drive to collect and accumulate substantial funds to finance
major needs of an organization such as a building, major repair project or endowment purpose.

Capital support: Funds provided for endowment purposes, buildings, construction, or
equipment.

Challenge grant: A grant that is paid only if the donee organization is able to raise additional
funds from other sources. Challenge grants are often used to stimulate giving from other
donors. See also Matching grant.

Charitable deduction: The portion of a gift to a qualified charity that is deductible from an
individual’s federal income tax, individual’s gift tax or individual’s estate tax.

Checkbook philanthropy: Spontaneous, responsive giving by a donor sometimes without
personal involvement. Often involves giving small amounts in an unplanned manner.

Committed funds: A portion of a donor’s budget that has already been pledged for future
allocation.

Community foundation: A 501(c)(3) organization that makes grants for charitable purposes in
a specific community or region. The funds available to a community foundation are usually
derived from many donors and held in an endowment that is independently administered;
income earned by the endowment is then used to make grants. Although a community
foundation may be classified by the IRS as a private foundation, most are public charities and
are thus eligible for maximum tax-deductible contributions from the general public. See also
501(c)(3); public charity.

Community fund: An organized community program which makes annual appeals to the
general public for funds that are usually not retained in an endowment but are instead used for
the ongoing operational support of local agencies. See also federated giving program.

Company-sponsored foundation (also referred to as a corporate foundation): A private
foundation whose assets are derived primarily from the contributions of a for-profit business.
While a company-sponsored foundation may maintain close ties with its parent company, it is an
independent organization with its own endowment and as such is subject to the same rules and
regulations as other private foundations. See also private foundation.

Conflict of interest policy: Written policy developed within a foundation to address conflict of
interest issues between trustees and potential grantees in a manner that is fair both to potential
grantees and to the foundation trustee with whom they have a relationship. The policy details
what is—and what is not acceptable behavior on the part of the trustee.

Corporate foundation: See company-sponsored foundation.

Cooperative venture: A joint effort between or among two or more grantmakers. Cooperative
venture partners may share in funding responsibilities or contribute information and technical
resources.

Corporate giving program: A grantmaking program established and administered within a for-
profit corporation. Because corporate giving programs do not have separate endowments, their
                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
annual grant totals generally are directly related to company profits. Corporate giving programs
are not subject to the same reporting requirements as corporate foundations.

Declining grant: A multi-year grant that becomes smaller each year, in the expectations that
the recipient organization will increase its fundraising from other sources.

Deferred gift: A gift that is committed to a charitable organization, but is not available for use
until some future time, usually the death of the donor.

Demonstration grant: A grant made to establish an innovative project or program that, is
successful, will serve as a model and may be replicated by others.

Designated funds: A type of restricted fund in which the fund beneficiaries are specified by the
grantors.

Directors and Officers Insurance (D & O Insurance): D & O liability insurance is designed to
help protect the directors and officers of a foundation against claims other than those for
personal injury, property damage or loss of property.

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.

Disqualified person: Substantial contributors to a private foundation, foundation managers,
certain pubic officials, family members of disqualified persons and corporations and
partnerships in which disqualified persons hold significant interests. Financial transaction
between disqualified persons and foundations are in violation of self-dealing rules, except as
specified by law.

Distribution committee: The committee responsible for making grant decisions. For
community foundations, the distribution committee is intended to be broadly representative of
the community served by the foundation.

Donee: The recipient of a grant. (Also known as the grantee or the beneficiary.)

Donor: An individual or organization that makes a grant or contribution to a donee. (Also known
as the grantor.)

Donor Collaborative (Cooperative venture): A joint effort between or among two or more
grantmakers. Partners may share in funding responsibilities or contribute information and
technical resources.

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 in unnecessary, incapable of fulfillment or inconsistent
with the charitable needs of the community or area served (Also known as Donor advised fund).

E-philanthropy: Term used to describe the variety of methods of giving using the Internet.
Many sites have been developed that accept donations in addition to providing information
regarding nonprofit groups.
                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
Endowment: A bequest or gift that is intended to be kept permanently and invested to create
income for an organization or foundation.

Employee matching grant: A contribution to a charitable organization by an employee that is
matched by a similar contribution from his or her employer. Many corporations have employee
matching-gift programs in higher education that encourage their employees to give to the
college or university of their choice.

Ethical investing: See social investing.

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 purpose 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: An independent private foundation whose funds are derived from members
of a single family. Family members often serve as officers or board members of family
foundations and have a significant role in their grantmaking decisions.

Federated giving program: A joint fundraising effort usually administered by a nonprofit
"umbrella" organization that in turn distributes the contributed funds to several nonprofit
agencies. United Way and community chests or funds, the United Jewish Appeal and other
religious appeals, the United Negro College Fund, and joint arts councils are examples of
federated giving programs. See also community fund.

Fiscal sponsorship: Affiliation with an existing nonprofit organization for the purpose of
receiving grants. Grantseekers may either apply for federal tax-exempt status or affiliate with a
nonprofit sponsor.

Form 990: The tax information form filed annually with the IRS and the state’s Attorney
General’s office by tax-exempt organizations and institutions with gross revenue of more than
$25,000 except religious. This tax return includes information about the organization’s assets,
income, operating expenses, contributions, paid staff and salaries, names and addresses of
persons to contact, and program areas.

Form 990-PF: The IRS form filed annually by all private foundations. The letters “PF” stand for
“Private Foundation.” The IRS uses this form to determine if a private foundation is complying
with the Internal Revenue Code. The 990-PF form lists foundation assets, receipts,
expenditures, compensation of officers and a list of grants made during the year.

Funding cycle: A chronological pattern of proposal review, decisionmaking and applicant
notification. Some donor organizations make grants at set intervals (quarterly, semi-annually,
etc., while others operate under an annual cycle.

General/operating support: A grant made to further the general purpose or work of an
organization, rather than for a specific purpose or project; also called an unrestricted grant or
basic support.

                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
General purpose foundation: An independent private foundation that awards grants in many
different fields of interest. See also special purpose foundation.

Gift fund: Commercially sponsored donor-advised fund typically formed by a mutual fund group
or similar financial institution offering some grantmaking assistance to donors.

Giving circle: A group of people who meet regularly to share information and to make joint
giving decisions.

Giving patterns: The overall picture of the types of projects and programs that a donor has
historically supported. The past record may include areas of interest, geographic locations,
dollar amount of funding or kinds or organizations supported.

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 financial report: A report detailing how grant funds were used by an organization.
Many corporate grantmakers require this kind of report from grantees. A financial report
generally includes a listing of all expenditures from grant funds as well as an overall
organizational financial report covering revenue and expenses, assets and liabilities. Some
funders may require an audited financial report.

Grassroots fundraising: Efforts to raise money from individuals or groups from the local
community on a broad basis. Usually an organization's own constituents — people who live in
the neighborhood served or clients of the agency's services — are the sources of these funds.
Grassroots fundraising activities include membership drives, raffles, auctions, benefits, and a
range of other activities.

Guidelines: Procedures set forth by a funder that grantseekers should follow when approaching
a grantmaker.

Independent foundation: A grantmaking organization usually classified by the IRS as a private
foundation. Independent foundations may also be known as family foundations, general-
purpose foundations, special purpose foundations, or private non-operating foundations. See
also private foundation.

In-kind contribution: A contribution of equipment, supplies, or other tangible resource, as
distinguished from a monetary grant. Some corporate contributors may also donate the use of
space or staff time as an in-kind contribution.

Letter of inquiry: A brief letter outlining an organization's activities and its request for funding
that is sent to a prospective donor in order to determine whether it would be appropriate to
submit a full grant proposal. Many grantmakers prefer to be contacted in this way before
receiving a full proposal.

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 larger funding from other
sources or of providing the organization with the tools it needs to raise other kinds of funds.


                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
Lobbying: Efforts by any group or organization to influence legislation by influencing the
opinion of legislators, legislative staff and government administrators directly involved in drafting
legislative proposals. Section 501(c) (3) of the tax code limits lobbying activities by pubic
charities. Public charities may lobby as long as lobby8ing 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. Conducting
nonpartisan analysis and research and disseminating the results to the public generally is not
lobbying for purposes of these restrictions.

Matching gifts program: A grant or contributions program that will match employees’ or
directors’ gifts made to qualifying educations, arts and cultural, health or other organizations.
Specific guidelines are established by each employer or foundation (some foundations also use
this program for their staff and 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.

Mission statement: A mission statement reflects the organizations core values and reasons for
existing. It should capture what the organization does, why it does it, how it does it, and for
whom it does it. A mission statement broadly addresses the current and future purpose of the
organization.

Nonprofit or not for profit: A nonprofit is an organization whose purpose it is to serve a public
good, rather than make a profit; net earnings are not distributed to the owners or shareholders
(as in a private corporation) or to the members, but are retained for the propose for which the
organization was established. The sector includes hospitals, universities, religious
organizations, cooperatives, charities, voluntary organizations, economic and trade associations
(the association is a nonprofit, even though the industry which it represents is not.), among
many others.

Operating foundation: A 501(c)(3) organization classified by the IRS as a private foundation
whose primary purpose is to conduct research, social welfare, or other programs determined by
its governing body or establishment charter. An operating foundation may make grants, but the
amount of grants awarded generally is small relative to the funds used for the foundation's own
programs. See also 501(c)(3).

Operating support grant: A contribution given to cover an organization’s day-to-day, ongoing
expenses, such as salaries, utilities, office supplies, etc.

Payout requirement: The minimum amount that private foundations are required to expend for
charitable purposes (including grants and, within certain limits, the administrative cost of making
grants). In general, a private foundation must meet or exceed an annual payout requirement of
five percent of the average market value of its total assets.

Philanthropy: 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 and corporate giving programs 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
support a variety of activities, including research, health, education, arts and culture, as well as
social services.

                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
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.

Pre-tax net income: A corporation’s annual net income before it has paid taxes. The IRS
currently allows corporations to deduct charitable contributions as much as 10 percent of their
pretax net income.

Private foundation: A nongovernmental, nonprofit organization with funds (usually from a
single source, such as an individual, family, or corporation) and program managed by its own
trustees or directors. Private foundations are established to maintain or aid social, educational,
religious, or other charitable activities serving the common welfare, primarily through the making
of grants. See also 501(c)(3); public charity.

Program amount: Funds that are expended to support a particular program administered
internally by a foundation or corporate giving program.

Program officer: A staff member of a foundation who reviews grant proposals and processes
applications for the board of trustees. Only a small percentage of foundations have program
officers.

Program-related investment (PRI): A loan or other investment made by a private foundation to
a for-profit 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 will then 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.

Proposal: A written application, often accompanied by supporting documents, submitted to a
foundation or corporate giving program in requesting a grant. Most foundations and corporations
do not use printed application forms but instead require written proposals; others prefer
preliminary letters of inquiry prior to a formal proposal. Consult a grantor’s published guidelines
for specific details.

Public charity: A nonprofit organization that qualifies for tax-exempt status under section
501(c)(3) of the IRS code. Public charities are the recipients of most foundation and corporate
grants. Some public charities also make grants. Charitable organizations that are not public
charities are private foundations and are subject to more stringent regulatory and reporting
requirements. See also 501(c)(3); private foundation.

Public support test: The means by which the IRS determines if a nonprofit organization is a
private foundation or a public charity. As listed in the Internal Revenue Code, the “One-third
Support Test” and “Facts and Circumstances Test,” rely primarily on gifts and contributions to
meet the minimum percentage requirement and do not count gross receipts (admission fees,
fees for services, etc.) as public support.

Qualifying distributions: Expenditures of a private foundation made to satisfy its annual
payout requirement. These can include grants, reasonable administrative expenses, set-asides,
loans and program-related investments, and amounts paid to acquire assets used directly in
carrying out tax-exempt purposes.
                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
RFP: An acronym for Request for Proposal, this is a request sent by foundations to
organizations that might qualify for funding within a specific program of the foundation. The RFP
lists project specifications and application procedures.

Restricted funds: Income or assets that are restricted in their use, in the types of organizations
that may receive grants from these funds, or in the procedures used to make grants from such
funds.

Results-based Accountability (RBF): Also known as outcome-based accountability. A
management tool that starts with results and works back to determine a means to achieving the
results. The term implies that expected results (also known as goals) are clearly articulated, and
that data are regularly collected and reported to address questions of whether results have been
achieved.

Seed money: A grant or contribution used to start a new project or organization. Seed grants
may cover salaries and other operating expenses of a new project.

Self-dealing: An illegal financial transaction between a private foundation and a disqualified
person(s). There are a few exceptions to the self-dealing rule, including the reasonable
compensation of disqualified persons by a foundation for services that are necessary to fulfilling
the foundation’s charitable purposes. Violations of this rule result in an initial penalty tax equal to
five percent of the amount involved, payable by the self-dealer.

Set-asides: Funds set aside by a foundation for future payments for a specific purpose or
project that are counted as qualifying distributions toward the foundation's annual payout
requirement. In order for the full appropriation to count in the first year, the foundation must
demonstrate successfully to the IRS in advance that the funds will in fact be paid within 60
months and that the project can be better accomplished by such a set-aside than by an
immediate grant.

Site visit: Visiting a donee organization at its office location or area of operation; meeting with
its staff or directors or with recipients of its services.

Social investing: Also known as socially responsible or ethical investing. 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.

Socially responsible investing: See social investing.

Social venture fund: Charitable fund whose donor invests their expertise as well as their
money, providing support and requiring accountability of nonprofit organizations just as venture
capitalists do in business enterprises. See also venture philanthropy.

Special purpose foundation: A private foundation that focuses its grantmaking activities in one
or a few areas of interest. See also general purpose foundation.

Spend down or spend out: Process used by foundations to deplete assets resulting in the
closing of the foundation.

Strategic planning: Strategic planning is a disciplined effort to produce fundamental decisions
and actions that shape and guide what a foundation is, what it does and why it does it. Strategic
planning involves the entire process of defining the future direction and character of the
                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
foundation, and of attempting over an adopted timetable to attain the desired state to
accomplish related goals and outcomes.

Supporting organization: An organization created primarily to fund the activities of one or
more existing public charities. To be a supporting organization and therefore not be required to
meet the public support test, the organization must meet one of three complex legal tests that
assure, at a minimum, that the organization being supported has some influence over the
actions of the supporting organization. Although a supporting organization may be formed to
benefit any type of public charity, the use of this form is particularly common with community
foundations. Supporting organizations are distinguishable from donor-advised funds because
they are distinct legal entities.

Tax-exempt: Refers to organizations that do not have to pay taxes such as federal or state
corporate or income taxes, and may also be exempt from sales and local property taxes.
Individuals who make donations to such organizations may be able to deduct these
contributions from their income tax. Organizations other than churches seeking recognition of
their tax-exempt status under Section 501(c)(3) of the Internal Revenue Code must apply to the
IRS and, in most states, the attorney general’s office. See also 501(c)(3).

Technical assistance: Operational or management assistance given to nonprofit organizations.
This type of help can include fundraising assistance, budgeting and financial planning, program
planning, legal advice, marketing, and other aids to management. Assistance may be offered
directly by the staff of a foundation or corporation, or it may be provided in the form of a grant to
pay for the services of an outside consultant. See also in-kind contributions.

Tipping: The situation that occurs when a grant is made that is large enough to significantly
alter the grantee’s funding base and cause it to fail the public support test. This failure can result
in the grantee’s conversion from a public charity to a private foundation and would also require
expenditure responsibility on the part of the grantor.

Trust: A legal device used to set aside raised money or property of one person for the benefit of
one or more persons or organizations.

Trustee: A foundation board member or officer who helps make decisions about how grant
monies are spent. Depending on whether the foundation has paid staff, trustees may take a
more or less active role in running its affairs.

Unrestricted funds: A grant that does not specifically stipulate how the money is to be spent by
the grantee. Note: in community foundations, unrestricted funds refer to the funds the
foundation holds that are not designated by donors and may be granted at the discretion of the
board of the community foundation.

Venture philanthropy: Charitable funding where donors invest their expertise as well as their
money, providing support and requiring accountability of nonprofit organizations similar to what
venture capitalists do in business enterprises. Donors may assist nonprofit organizations in the
planning, launch and management of new programs or social purpose enterprises. In addition to
grants, venture philanthropists provide networking, management advice and an array of other
supports to organizations within a given portfolio of charitable investments. See also social
venture fund.

Virtual foundation: Refers to the transition from grantmaking through mail and face-to-face
meetings to grantmaking by e-mail and Internet transfers. Such a foundation may exist only on
the Internet and be capable of transferring money from philanthropists to organizations globally.
                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org
                Connecticut Council for Philanthropy, 221 Main Street, Hartford, CT 06106
Tel. 860-525-5585 Fax: 860-525-0436 Email: ccp@Ctphilanthropy.org www.Ctphilanthropy.org

								
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