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 public 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 Internal Revenue Service (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.).

Agency Fund

Established by a nonprofit organization (agency) for the benefit of the nonprofit organization where the profits are distributed annually to the nonprofit organization to support operations, programs, etc.

Assets

Cash, stocks, bonds, real estate or other holdings of a foundation. Generally, assets are invested and the income is used to make grants. (See Payout Requirement.)

Bequest

A sum of money made available upon the donor’s death as indicated in their will.

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 (see 501(c)(3)) and will be eligible to receive tax-deductible charitable gifts.

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. There are more than 500 community foundations across the United States today. The Cleveland Foundation was the first community foundation established in 1914.

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.

Discretionary Fund

Grant fund 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. At TFEC discretionary dollars are made up of Area of Interest Funds and Unrestricted Funds.

Donor

The individual or organization that makes a grant.

Donor or Committee 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.

Employer Identification Number (EIN)

A nine-digit number assigned by the Internal Revenue Service. Every IRS-designated tax-exempt nonprofit organization has its own EIN.

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.

Field of Interest Fund

A fund held by a community foundation that is used for a specific, donor designated, charitable purpose such as education or health research. Learn more.

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 grantee organization. Most foundations require a financial report from grantees.

Fiscal Sponsor

A fiscal sponsor is a nonprofit organization that provides fiduciary oversight, financial management, and other administrative services to help build the capacity of charitable projects. Fiscal sponsorships are useful for organizations that are not yet recognized as tax-exempt under Internal Revenue Code Section 501 (c)(3) or that simply have decided that operating under the umbrella of another tax-exempt organization makes sense. TFEC offers fiscal sponsor services.

Fiscal Year

A 12-month period around which an organization operates. Most organizations operate either on a calendar year (January – December) or a fiscal year (July – June).

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. Form 990-PF includes a list of grants made during the year by private foundations. See our current Form 990/Form 990-T on our financial page.

Funder

A donor, corporation, community foundation, etc. that provides a grant to a nonprofit organization for projects and/or programs.

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.

Grant

An award of funds to an organization or individual to undertake charitable activities.

Grantee

The individual or organization that receives a grant.

Grantor

See Donor or Funder.

Grantmaking

The giving of funds for a specific purpose.

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.

In-kind Contribution

A donation of goods or services rather than cash or appreciated property.

Internal Revenue Service (IRS)

The federal agency with responsibility for regulating foundations and their activities. On-line at www.irs.gov.

Letter of Intent

A donor’s letter or brief statement indicating intention to make a specific gift.

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.

Operating Support

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 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.

Planned Gift

Any gift given for any amount and for any purpose whether for current or deferred use, which requires the assistance of a professional staff person, a qualified volunteer or the donor’s advisors to complete. In addition, it includes any gift that is carefully considered by a donor in light of estate or financial plans.

Restricted Fund

A type of fund in which the fund beneficiaries are specified by the donors.

Scholarship Fund

A type of fund that provides grants in the form of scholarships in which the criteria are established by the donor and the selection process jointly managed by the donor and TFEC. Scholarship funds may be either permanent (only a portion of the income is granted and principal grows in perpetuity), or nonpermanent (both principal and income may be granted).

Tax-Exempt Organization

Organizations that do not have to pay state and/or federal income taxes.

Trust

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

Unrestricted Fund

A fund that is not specifically designated to particular uses by the donor, or for which restrictions have expired or been removed.