Glossary of Terms

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 preventionof 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.).

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 public charity.

Annual 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 contribution 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. Generally, assets are invested and the income is used to make grants.

Bequest
A sum of money made available upon the donor's death.

Bylaws
Rules governing the operation of a nonprofit corporation.

Capital Campaign
Also referred to as a Capital Development Campaign, a capital campaign is an organized drive to collect and accumulate substantial funds to finance major needs of an organization such as a building or major repair project.

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.

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 for the long-term diverse, charitable benefit of the residents of a defined geographic area.

Corporate Foundation
A corporate (company-sponsored) foundation is a private foundation that derives its grantmaking funds primarily from the contributions of a profitmaking business and is subject to the same rules and regulations as other private foundations.

Decline
Also referred to as a 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 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.

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.

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.

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.

Funding Cycle
A chronological pattern of proposal review, decision making and applicant notification. Some donor organizations make grants at set intervals (quarterly, semiannually, 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
The individual or organization that makes a grant.

In-Kind Contribution
A donation of goods or services rather than cash or appreciated property.

Letter of Intent
A grantor's letter or brief statement indicating intention to make a specific gift.

Letter of Inquiry
Also referred to as a query letter, 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.

Matching Gifts Program
A grant or contributions program that will match employees' or directors' gifts made to qualifying educational, arts, cultural, health or other organizations. Each employer or foundation establishes specific guidelines. (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 (or according to some other prescribed formula) basis.

Operating Support
A contribution given to cover an organization's day-to-day, ongoing expenses, such as salaries, utilities, office supplies, etc.

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.

Pledge
A promise to make future contributions to an organization. For example, some donors make multiyear pledges promising to grant a specific amount of money each year.

Postgrant Evaluation
A review of the results of a grant, with the emphasis upon whether or not the grant achieved its desired objective.

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, established to maintain or aid social, educational, religious, or other charitable activities serving the common welfare, primarily through grantmaking. Private foundation also means an organization that is tax exempt under Section 501(c)(3) of the tax code and is classified by the IRS as a private foundation defined by the code.

Restricted Funds
Assets or income that are restricted in their use, in the types of organizations that may receive grants from them, or in the procedures used to make grants from such funds.

Seed Money
A grant or contribution used to start a new project or organization.

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

Socially Responsible Investing
Also referred to as ethical investing and social investing, this is the practice of aligning a foundation's investment policies with its mission.

Spending Policy
An agreed-upon policy that determines what percentage of a group of assets, such as an endowment, should be spent to cover both operating costs and grants of an institution.

Supporting Organization
A supporting organization is a charity that is not required to meet the public support test because it supports a public charity.

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.

Trust
A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations. A private foundation can be organized as a charitable trust and is governed by a trust instrument that appoints initial trustees, sets forth their powers and provides for orderly selection of future trustees.

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.