The types of nonprofit organizations generally designated to receive grants are organizations that have obtained 501(c)(3) tax-exempt
status from the IRS. Government organizations and foundations have limited staff, time, resources, and expertise, but they do have funds.
Therefore, these entities
seek to support
nonprofit organizations that work towards alleviating issues they view as important, but that they are unable to alleviate themselves.
It is completely incorrect to refer to or view any grants
as “free” money; nonprofit organizations are required to follow certain
stipulations in order to receive grant funding. The function and purpose of a
nonprofit is to fill the gap that exists between government organizations (that
provide basic services to its citizens) and the for-profit sector (that charges
consumers for commerce and services). Nonprofits are expected to address the
issues the government is unable to and for-profits choose not to. Typically, these are philanthropic causes.
Corporate Foundations
This type of organization is a private foundation that derives its grantmaking funds primarily from the contributions of a profit-making business. This company-sponsored foundation often maintains very 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.
• i.e. Wells Fargo Foundation, Coca-Cola Foundation
Private Foundations
A nongovernmental, nonprofit organization with funds (usually from a single source, such as an individual, family, or corporation) and programs managed by its own trustees or directors. It is established to aid social, educational, religious, or other charitable activities, primarily through grantmaking. These foundations are also tax-exempt under Section 501(c)(3) of the Internal Revenue Code. Private foundations are generally founded by an individual, a family, or a group of individuals and are organized either as a nonprofit corporation or a charitable trust.
• i.e. Weingart Foundation or Ford Foundation
Family Foundations
This type of grant maker has funds that 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 and is also the donor. The family member plays a significant role in governing and/or managing the foundation throughout its life. Most family foundations are run by family members who serve as trustees or directors on a voluntary basis, receiving no compensation.
• i.e. The Bill and Melinda Gates Foundation - $29 billion endowment, 5% of the assets must be used each year
Community Foundations
A community foundation is composed primarily of permanent funds established by many separate donors for the long-term benefit of the residents of a defined geographic area. Typically, a community foundation serves an area no larger than a region of handful of counties within a state. Community foundations provide services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent foundations.
• i.e. California Community Foundation
Federal Agencies
Billions of dollars in federal grants are awarded each year for programs and projects that benefit the public. This assistance is rooted in the Constitution and its call to “promote the general welfare.” Even though many nonprofits hope to get government grants, it is easier said than done as the eligibility requirements are very strict, and the competition is fierce. It is not to be undertaken lightly and without forethought. A federal grant can be extremely useful, however, this type of grant should only be considered a “soft” option for funding. Nonprofits should rely on more sustainable sources of income if they wants to succeed financially.
• i.e. Rapid Rehousing Programs