Failing to Fund

American individuals, estates, foundations and corporations gave an estimated $240.72 billion to charitable causes in 2003, according to the Giving USA 2004 report of the American Association of Fundraising Counsel. Of that money, foundations gave $26.30 billion, representing 10.9% of all contributions to charitable organizations in 2003. Have you ever wondered how to get some of that money for your organization? This article will tell you what to do and what not to do to help your organization get a piece of the pie.

What Is a Foundation?

A foundation is an organization established to give away money. Because of the federal regulations, foundations must give money away every year. Foundations are of four basic types:

Independent: A nongovernmental, nonprofit organization with a fund of its own, managed by its own trustees and established to aid charitable organizations. An example is the Robert Wood Johnson Foundation.

Community-based: A pool of money from many donors for distribution to nonprofit organizations within a specific community. An example is the New York Community Trust.

Corporate: A company that has established its own foundation to make grants to causes they choose. An example is Microsoft Charitable Trust.

Operating: A foundation set up to distribute money to its own organization. An example is a hospital foundation.

For the purpose of this article, I am not covering government grant-makers.

Louis J. Beccaria, PhD, is the president and CEO of the Phoenixville Community Health Foundation, whose community-based mission is to improve the health and quality of life in the surrounding counties of southeastern Pennsylvania. Originally endowed with $32 million, the foundation donates over $1.2 million annually to local nonprofit organizations. It has funded many emergency service organizations over the years, providing thousands of dollars for training, AEDs, education, water rescue and structures.

Beccaria outlines a few mistakes that grant seekers and recipients often make:

• Applications are sent “blind,” without making contact.
• Projects are not well thought out.
• Post-grant reports are not submitted.

Beccaria suggests that emergency services do not receive a great percentage of the grants awarded because agencies tend not to understand the process of grant seeking or how to communicate an organizational strategic plan. On the other side, foundations may find it difficult to pick and choose among EMS agencies, so they fund none. Phoenixville Community Health Foundation limits its funding to local groups, and includes EMS agencies among other nonprofits. This is often true with community-based foundations and something to consider when seeking funding sources.

Keeping Beccaria’s comments in mind, then, let’s look at the top six mistakes that grant-seekers and recipients make:

1. Wrong Nonprofit Status

The IRS recognizes many different types of nonprofit organizations. Most are 501(c) “something.” 501(c)(3) is the status to have if you want grant money and corporate contributions.

The benefit of a 501(c)(3) organization is that it can provide tax-exemption to the contributor. Nonprofits organized as 501(c)(4) or any other 501(c) classification cannot provide this exemption across the board to donors. Donations made to 501(c)(4) organizations are tax deductible only if the money is used for “exclusively public purposes.”

And that is the point: Most foundations, corporations and businesses are aware of this distinction and may turn your request down if you are organized as anything other than a (c)(3). So, the first step for fundraising is to know your status and have proof of it. Your organization’s “Federal Determination” letter from the IRS will provide it. Contact the IRS at 800/829-1040 if you need a copy.

2. Sloppy Research