Foundations are involved in grant awards in two ways. They award grants to eligible individuals and organizations. They can also receive grants from other foundations and government grant programs.
Foundations play a major role in making sure eligible nonprofit and community-based organizations have funds to develop and sustain programs and services. Bylaws of foundations outline categories of funding and types of support provided. Most foundations have geographic limitations of some kind.
There are several types of foundations including family, private, and public foundations. The majority of foundations are structured as grant-making organizations. Not all foundations are able to award grants to other foundations. Eligibility is determined by the IRS code that regulates each foundation type.
Some foundations are able to receive grants from other funding sources. Foundations that are awarded grants must meet all eligibility and fiscal requirements of the grantor. They are required to document expenditures and submit progress reports. Evaluations must detail achievement of goals and lessons learned. Comprehensive final reports should include recommendations for replication and feedback on the implementation process.
Grants for foundations typically focus on a specific project with potential for wide community impact. Funds are not to be used for operating the foundation. It is not uncommon for a community-based foundation to take the lead in a major initiative and be the applicant for grant funding. Foundations are eligible for government grants that have no eligibility restrictions in terms of applicant type. Foundation grants have their own eligibility requirements depending on the foundation’s bylaws and mission.
Periodically, foundations will go through strategic reorganizations to be better prepared to meet current community funding needs. They may have to revise their bylaws to reflect the new direction and focus of the foundation. Foundation funding must follow the bylaws and documented processes submitted to the IRS to avoid penalties. Even grants for foundations are governed by IRS oversight. If foundations receive funding they are not legally structured to accept, they can be penalized. The IRS makes a clear distinction between operating foundations and private foundations. This distinction has tax implications for each foundation. Grants to foundations must take this into consideration.
When applying for grants, foundations assign a program officer to be the point of contact who is responsible for grant management activities. Foundation grants can provide significant financial support for community projects based on foundation-led research and evaluation activities. This strengthens grant requests and adds assurance the project will be implemented with fidelity.