Grantmaking Basics
Americans
who support charitable organizations find themselves with a generous but
bewildering array of philanthropic choices and options. Here are a few
"rules of thumb"
Clarity
of Purpose. Establish policies and procedures that define your
program interests and your fundamental objectives.
Goverance. Create an identifiable person, board, committee or other decision-making
body that is responsible for establishing and implementing your policies
and procedures and reviewing and revising them on a regular basis.
Grantmaking
Procedures. Establish and follow clear processes for receiving,
reviewing and acting on grant applications that are consistent with your
policies and purposes. Communicate openly with grantseekers about your
grantmaking policies and procedures.
In the beginning,
you may want to remain anonymous. This may give you time to develop a
charitable mission and ease into philanthropy.
Make readily
available a brief written statement about policies, program interests,
grantmaking practices, geographic and policy restrictions and preferred
ways of receiving applications. It is important that grantseekers whose
proposals fall outside our interests are notified in a timely manner and
that those whose proposals are still under consideration are informed
of the steps and timing that will be taken in reaching the final decision.
Public
recognition or privacy: Some donors prefer recognition others
prefer confidentiality. Your approach may change over time. See
Privacy
Legal
Complying with the law is essential and we recognize that inadvertent
violations can occur if the basic legal rules are not understood. AEF
reviews all charities prior to fulfilling a grant recommendation.
Issues
to consider:
Contributions
Donors considering charitable contributions of illiquid, non cash assets,
i.e. closely-held stock or real estate, should be aware that:
Smaller charities are often not equipped to handle gifts of illiquid,
non-cash assets, or if accepted, the liquidation is poorly handled resulting
in fewer dollars to charity.
Breaking up concentrated holdings for distribution to multiple charities
creates execution challenges.
Most larger charities want to liquidate gifts of illiquid, non cash
assets immediately. How might this impact your decision.
Accountability
It is important to match the size of the contribution to the capacity
of the charity. Capacity is a term that encompasses size, administrative
capability, stability, and accountability of the board. Are the charity's
administrative expenses reasonable? Does the charity have the sophistication
to use a large gift effectively? Large grants can be like a heavy rock
dropped into the bottom of a small boat. Many small charities have become
divided over large contributions due to the lack of a clear strategic
plan, clear policies, and investment experience. Also, some charities
may treat contributions as "free money" and use them to pay
for fundraising and administrative expenses, which is not what the donor
intended.
Mismanagement
of contributions
Donors may have concerns that the value of their investments will be
eroded with poor investment decisions, particularly with small charity.
Administration
For many donors, Donor Advised Funds are an attractive alternative to
creating a private foundation. Because they are donations to a public
charity, contributions to a Donor Advised
Fund qualify for more favorable charitable deduction treatment than
contributions to a private foundation. Because they are assets of a
public charity, Donor Advised Funds are not subject to the self-dealing,
payout, and taxable expenditure rules applicable to private foundations.
Finally, because the public charity owns and administers the Fund, the
donor is freed of the administrative burden of creating and maintaining
a private foundation and also benefits from the philanthropic and substantive
expertise of the public charity.
Privacy
Donor Advised Funds provide donors with flexible options for recognition
or privacy. In contrast, Private foundations have little confidentiality
and offer no anonymity. With the advent of the Internet, information
is more available than ever. Today, anyone with a computer can access
Guidestar (www.guidestar.org) to gain information on any private foundation.
Since all of the information is pulled from a foundation’s 990-PF,
anyone can see the asset balance, the directors, contact information,
administrative fees paid, every grant that is made (organization name
and amount), and investment management fees (holdings are sometimes
included).
Questions?
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