Philanthropy 101
1) What is
“philanthropy”?
The Council on Foundations states, “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.”
The Giving Forum states, “Philanthropy means
giving to promote the common good. It can be the giving of time,
money, or knowledge – as long as it improves the quality of life
for society. Anyone can participate in philanthropy. Everyone benefits
from its work.”
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2) What is a
foundation and/or a grantmaker?
Foundations and grantmakers are only a part of philanthropy. The Giving Forum states that, “Grantmakers are
people and organizations that give monetary awards (grants) to
nonprofits. They vary in size and scope from large, national corporate
giving programs to small, local family foundations.”
The Council on Foundations explains: “In the field
of philanthropy, the term "foundation" has no precise meaning. The Internal
Revenue Code governs the operations of both private foundations
(including family, independent, and company foundations) and
public charities (community foundations and those nonprofit
charitable organizations which raise funds to conduct their programs and
operations). The rules governing private foundations are stricter in
limiting foundation activities than are those for public
charities.”
Types of Grantmakers
Grantmakers are people and organizations that give monetary awards
(grants) to nonprofits. They vary in size and scope from large, national
corporate giving programs to small, local family foundations. The
Council on Foundations and Giving Forum characterize the most common
types of foundations as:
- Community Foundations: 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. 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 Foundations & Giving Programs:
See the next question below.
- Family Foundations: “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. They are often
foundations 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. Most family foundations concentrate their
giving locally, in their communities.
- Operating Foundations: 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. The Carnegie Endowment for International Peace and the
Getty Trust are examples of operating foundations.
- Private Foundations: 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.
- Public Foundations: 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.
To learn more, see the Giving Forum’s explanation of “Types of Grantmakers”.
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3)
What is the difference between a corporate foundation and a corporate
giving program (also known as corporate or community relations
programs)?
The Council on Foundations defines the two types of
grantmakers as follows:
Corporate Foundation: A corporate (company-sponsored)
foundation is a private foundation that derives its grantmaking funds
primarily from the contributions of a profit-making business. The
company-sponsored foundation often maintains close ties with the donor
company, but it is a separate, legal organization, sometimes with its
own endowment, and is subject to the same rules and regulations as other
private foundations. There are more than 2,000 corporate foundations in
the United
States holding some $11 billion in
assets.
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. The Foundation Center has identified more than 700
corporate foundations/giving programs in the United
States; however, it is believed that
several thousand are in operation.
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4)
How does philanthropy/grantmaking contribute to improving society?
Philanthropy – by making contributions to nonprofit
organizations – has been responsible for many of the
United
States’ proudest accomplishments.
Philanthropy helped fuel the civil rights movements for women,
African-Americans and Latinos, among others as well as supporting the
rich tapestry of arts in this country.
The Council on Foundations describes
philanthropy’s contributions by pointing out societal advancements
directly related to foundation grantmaking, in a series of “Great
Grants”:
- Emergency 911
- The Hospice Movement
- The Pap Smear
- Public Libraries
- The Polio Vaccine
- Rocket Science
- Sesame Street
- White Lines on Highways
- Combatting World Hunger
- Yellow Fever Vaccine
The Giving Forum points out the unique role of
philanthropy in this country: “Organized philanthropy as it is
practiced now in the United
States is one of the nation’s great social
innovations – ‘America’s passing
gear’ for accelerating invention, in Paul Ylvisaker’s
memorable words. While reflecting on philanthropic innovations just
taking hold, it is useful to remember that today’s institutional
forms and ingrained practices were once new and untested.”
A timeline prepared by The Giving Forum called The Future of Philanthropy provides a
brief tour of some of the major innovations in organized giving. Not all
of them were the very first of their kind; some of the dates mark the
time of an innovation’s mainstream adoption or the start of its
more widespread use. But all have helped to shape philanthropy as it
exists today.
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5) What
is the philanthropic landscape of Southern
California?
SCG provides services to grantmakers in five Southern California
counties - Los Angeles, Orange, Riverside, San Bernardino and Ventura.
As of June 2008, there are 4,096 foundations in those counties, with the
largest number (72%) located in Los Angeles County. In total more than
$56 billion in assets is held by foundations in SCG's service area and
more than $5 billion is given in grants each year. You may view, print or download a PDF with full information
on the philanthropic landscape.
All of the information below is from the website of The Foundation
Center and is based on 2005 tax reporting by foundations.
From “Geographic Distribution of Grants
Awarded and Grants Received by State, circa
2005”
IN THE UNITED STATES:
- No. of Grantmakers: 1,154
- Grants Awarded: $16,428,068,369 through 130,961 grants
- Grants Received: $15,413,306,888 through 126,599 grants
IN CALIFORNIA:
- No. of Grantmakers: 128
- Grants Awarded: 2,134,964,121 through 19,577 grants
- Grants Received: 2,209,929,664 through 18,946
SOURCE: FC Stats: The Foundation Center's Statistical
Information Service, The Foundation Center, 2007
Due to rounding, figures may not add up. Based on all grants of
$10,000 or more awarded by a national sample of 1,154 larger
U.S.
foundations (including 800 of the 1,000 largest ranked by total
giving). For community foundations, only discretionary grants are
included. Grants to individuals are not included in the file. The
difference between total grants awarded and total grants received
represents grants to overseas recipients.
From “Aggregate Financial Information for
Foundations in the Los Angeles, CA, Metropolitan Area, circa
2005”
- No. of Foundations: 2,758
- Assets Held: $34,722,596,623
- Gifts Received: $2,034,298,540
- Total Giving: $1,542,212,464
Source: FC Stats: The Foundation Center's Statistical
Information Service, The Foundation Center, 2007.
Due to rounding, figures may not add up. The search set includes
all active private and community grantmaking
foundations located in the metro area. Only grantmaking operating
foundations are included. Metropolitan Areas are designated by the U.S.
Office of Management and Budget.
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6) I want to
start a foundation – how do I do it?
The Council on Foundations has extensive information on
how to establish a foundation. They state: “This information is
not a substitute for knowledgeable legal counsel who can walk you
through the steps and critical decisions in establishing a foundation.
Relevant forms and further information can be obtained from your state
government and the IRS. Seeking the help of an attorney to assist you
in setting up a foundation is strongly recommended.”
In addition, The Council on Foundations has a helpful publication, First Steps in Starting a Foundation,
detailing the basics of starting a foundation. It includes several
sample documents. You may order it online or call (888) 239-5221 (Item #101).
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7)
What is a donor advised fund or a supporting organization?
Not long ago, the obvious choice for a person with wealth who wanted
to engage in more systematic charitable giving was to start a private
foundation. But increasingly philanthropists have many charitable
vehicles to choose from. One of the most popular alternatives is to open
a donor advised fund at a community or public foundation, or with one of
the large for-profit companies that provide such services.
The Council on Foundations defines a donor advised fund as, “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.”
Learn more about donor advised funds from your local community
foundation:
Several public foundations that may hold donor advised funds are also
members of SCG:
An alternative growing in popularity is the supporting organization,
which the Council on Foundations defines as: “A charity
that is not required to meet the public support test because it supports
a public charity. To be a supporting organization, a charity 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 in connection with community foundations. Supporting
organizations are distinguishable from donor-advised funds because they
are distinct legal entities.
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8)
Where else can I get information about the field?
(As of January 4, 2008)
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