The Astor Home for Children

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 prevention of 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.). See also operating foundation; private foundation; public charity.

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. See also public support test.

AAFRC: American Association of Fund-Raising Counsel

ABFE: Association of Black Foundation Executives

ACGA: American Council on Gift Annuities

Advisory Board: A group of individuals, who offer advice, inform or notify. An advisory board differs from an elected board in that they do not have any oversight responsibilities.

Affiliate Funds: Affiliate Funds operate like freestanding community foundations for smaller communities. By affiliating with a local community foundation, these communities can enjoy the benefits of a community foundation without having to file incorporation papers, apply to the IRS for §501(c)(3) status, arrange for annual audits, or raise funding for staff. Affiliates have a local board of directors who raise the initial investment, create awareness about the foundation within their communities, and determine recipients for grants.

Affinity card: a credit card, offered to the constituents of an organization that provides for a percentage of a transaction fee to be paid as a royalty to the organization.

Affinity Group: A separate and independent coalition of grantmaking institutions or individuals associated with such institutions that shares information or provides professional development and networking opportunities to individual grantmakers with a shared interest in a particular subject or funding area.

AHP: Association for Healthcare Philanthropy

Altruism: Altruism, like passion, is the key intent that philanthropy expresses; a concern for the welfare of others; selflessness.

Annual fund: total gifts made on a yearly basis to support yearly budgets or general operations.

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 contributions activities, policies and guidelines.

ARNOVA: Association for Research on Nonprofit Organizations and Voluntary Action

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. See also payout requirement.

Assets: The amount of capital or principal — money, stocks, bonds, real estate, or other resources — controlled by a foundation or corporate giving program. Generally, assets are invested and the income is used to make grants.

Benefactor: A generous donor.

Beneficiary: In philanthropic terms, the donee or grantee receiving funds from a foundation or corporate giving program is the beneficiary, although society may benefit as well.

Benevolence: An act of kindness or generosity.

Bequest: A bequest can be a legacy; a sum of money; a gift of personal or real property committed to an organization and donated upon the donor's death.

Board of Directors: An organized body of advisors with oversight responsibility.

"Bricks and Mortar": An informal term indicating grants for buildings or construction projects.

Building Campaign: A drive to raise funds for construction or renovation of buildings.

Bylaws: Rules governing the operation of a nonprofit corporation. Bylaws often provide the methods for the selection of directors, the creation of committees and the conduct of meetings.

Campaign: An organized effort to raise a specified amount of money for a particular purpose in a specified period of time.

Capital support: Funds provided for endowment purposes, buildings, construction, or equipment.

CFRE: Certified Fund Raising Executive

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.

Cause-related marketing: Marketing in which a for-profit organization, by using the name of a nonprofit organization, promotes its product and in return provides financial support to the organization according to a predetermined formula based on sales and purchases.

Challenge grant: A grant made on condition that other funds will be obtained on some prescribed formula, usually within a specified period of time, with the objective of encouraging other gifts or grants. See also matching grant.

Charitable deduction: the portion of a gift to a qualified charity that is deductible from an individual's or corporation's federal income tax, individual's gift tax, or individual's estate tax.

Charitable gift annuity: With a charitable gift annuity, the donor contributes cash or marketable securities in exchange for a contractual promise to pay him/her (and/or another annuitant) a guaranteed income for life. The rate of that income is based on the age(s) of the annuitant(s). A charitable gift annuity pays a fixed, guaranteed amount for life to one or two persons-the donor and his or her spouse, for example. In almost every instance, a portion of the payments will be tax-free, plus the donor receives an income tax deduction for a portion of the value of the assets contributed.

Charitable gift fund: Charitable gift funds are vehicles for giving that are established as charitable affiliates of for-profit financial institutions such as banks and mutual fund companies. These funds are donor-advised funds (see descriptions under community foundations); therefore, distribution is made to nonprofit organizations at the advice of the donor, with final authority in the board of the charitable affiliate. Cash gifts are deductible at rates of up to 50% of adjusted gross income; gifts of appreciated property are deductible at rates of up to 30% of adjusted gross income.

Charitable giving plan: A plan that best reflects one's life experiences, values, goals and passions that structures giving to a charitable organization(s).

Charitable lead trust: A charitable lead trust is a variation on the charitable remainder trust. It is a legal device used to set aside money or property of one person for the benefit of one or more persons or organizations. Specifically, this type of trust allows for a regular, fixed amount to go to a charity for a specific number of years. At the end of that time, the remainder of the trust passes to one's heirs. A charitable lead trust can be a tremendous way for a donor to provide a stream of income to a charity during a period of time prior to having the trust's assets pass to the donor's heirs at a substantially reduced gift or estate tax cost.

Charitable organization: an organization that is eligible to receive charitable donations and is tax-exempt under federal tax law. See also charity.

Charitable remainder trust: A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations. With a charitable remainder trust the donor takes a one-time charitable deduction in the year the trust is formed. The donor then receives income from the trust for life. Upon the donor's death, the assets of the trust are distributed to the donor's designated charity or charities. The amount of income can be fixed or variable, depending on the type of trust. It is common for such trusts to be funded with property that has increased in value, due to the fact that neither the donor nor the trust pays any capital gains tax at the time of funding.

Charity: In its traditional legal meaning, the word "charity" encompasses religion, education, and assistance to the government, promotion of health, relief of poverty or distress and other purposes that benefit the community. Nonprofit organizations that are organized and operated to further one of these purposes generally will be recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code (see 501(c)(3)) and will be eligible to receive tax-deductible charitable gifts. See also charitable organization.

COF: Council on Foundations

Commission on Private Philanthropy and Public Needs: the formal name of the Filer Commission; a privately funded study of the role of philanthropic giving in the US and of the independent sector; made formal recommendations to the independent sector, Congress, and the American public as to how the practice of private philanthropy could be made more effective.

Community foundation: A 501(c)(3) — tax-exempt, nonprofit, autonomous, publicly supported, philanthropic that makes grants for charitable purposes in a specific community or region. The funds available to a community foundation are usually derived from many donors and held in an endowment that is independently administered; income earned by the endowment is then used to make grants. Although a community foundation may be classified by the IRS as a private foundation, most are public charities and are thus eligible for maximum tax-deductible contributions from the general public.

Community 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. There are more than 500 community foundations across the United States today. The Cleveland Foundation is the oldest; the New York Community Trust is the largest. Examples of recently started, thriving community foundations include the Community Foundation for the Fox Valley Region, Wisconsin, and the Delaware Community Foundation. See also 501(c)(3); public charity.

Corporate Foundation: A corporate (company-sponsored) foundation is a private foundation that derives its grantmaking funds primarily from contributions of a for-profit business. While a company-sponsored foundation may maintain close ties with its parent company, it is an independent organization with its own endowment and as such 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. See also corporate giving program; private foundation.

Cooperative venture: A joint effort between or among two or more grantmakers. Cooperative venture partners may share in funding responsibilities or contribute information and technical resources.

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 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 pretax 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.

Corporate sponsorship: financial support of a project by a corporation in exchange for public recognition and other benefits.

Custodian: A bank or other financial institution that has custody of stock certificates and other assets of a mutual fund, individual, corporation or institution. All custodians can hold assets in safekeeping, collect income on securities in custody, settle transactions, invest cash overnight, handle corporate accounting and provide accounting reports.

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.

Deferred gift: A gift that is committed to a charitable organization but is not available for use until some future time, usually the death of the donor.

Demonstration Grant: A grant made to establish an innovative project or program that will serve as a model, if successful, and may be replicated by others.

Designated Funds: A type of restricted fund in which the fund beneficiaries are specified by the grantors.

Direct mail fund raising: Solicitation of funds by mass mail.

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.

Distribution committee: The committee responsible for making grant decisions. For community foundations, the distribution committee is intended to be broadly representative of the community served by the foundation.

Disqualified Person: (Private Foundation) Substantial contributors to a private foundation, foundation managers, certain public officials, family members of disqualified persons, and corporations and partnerships in which disqualified persons hold significant interests. The law bars most financial transactions between disqualified persons and foundations. See also self-dealing.

Disqualified Person: (Public Charity): As applied to public charities, the term disqualified person includes (1) organization managers, (2) and any other person who, within the past five years, was in a position to exercise substantial influence over the affairs of the organization, (3) family members of the above, and (4) businesses they control. Paying excessive benefits to a disqualified person will result in the imposition of penalty excise taxes on that person, and, under some circumstances, on the charity's board of directors. See also Intermediate Sanctions.

Donee: The recipient of a grant. See also grantee; beneficiary.

Donor: A donor is anyone who gives resources - financial, social, intellectual and time - to a nonprofit organization, public charity or fund. A donor is committed to making a difference in society. See also grantor.

Donor advised fund: A fund held by a community foundation or other public charity, where the donor, or a committee appointed by the donor, may recommend eligible charitable recipients for grants from the fund. The public charity's governing body must be free to accept or reject the recommendations.

Donor Designated Fund: A fund held by a community foundation where the donor has specified that the fund's income or assets be used for the benefit of one or more specific public charities. These funds are sometimes established by a transfer of assets by a public charity to a fund designated for its own benefit, in which case they may be known as grantee endowments. The community foundation's governing body must have the power to redirect resources in the fund if it determines that the donor's restriction is unnecessary, incapable of fulfillment or inconsistent with the charitable needs of the community or area served.

Due Diligence: The degree of prudence that might be properly expected from a reasonable person in the circumstances; applicable to foundation personnel who act in a fiduciary capacity. See also fiduciary duty.

Employee matching grant: A contribution to a charitable organization by an employee that is matched by a similar contribution from his or her employer. Many corporations have employee matching-gift programs in higher education that encourage their employees to give to the college or university of their choice.

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. Donors may require that the principal remain intact in perpetuity, or for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose.

Expenditure responsibility: When a private foundation makes a grant to an organization that is not classified by the IRS as tax exempt under Section 501(c)(3) and as a public charity according to Section 509(a), it is required by law to ensure that the funds are spent for charitable purposes and not for private gain or political activities. Such grants require a pre-grant inquiry and a detailed, written agreement. Special reports on the status of the grant must be filed with the IRS, and the grantees must be listed on the foundation's IRS Form 990-PF.

Excise Tax on Net Investment Income (private foundations): A tax on the net investment income of private foundations. Normally set at 2 percent per year, the rate may be reduced to 1 percent if the foundation meets certain expenditure requirements.

Family Foundation: "Family foundation" is not a legal term, and therefore, it has no precise definition. Yet, approximately two-fifths of the estimated 46,832 private foundations in this country are believed to be family managed. The Council on Foundations defines a family foundation as one 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, and as the donor(s), that family member(s) or their relatives play 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 and who receive no compensation; in many cases, second- and third-generation descendants of the original donors manage the foundation. Most family foundations concentrate their giving locally, in their communities.

Federated giving program: A joint fundraising effort usually administered by a nonprofit "umbrella" organization that in turn distributes the contributed funds to several nonprofit agencies. United Way and community chests or funds, the United Jewish Appeal and other religious appeals, the United Negro College Fund, and joint arts councils are examples of federated giving programs. See also community fund.

Fiduciary Duty: The legal responsibility for investing money or acting wisely on behalf of another. Managers of charitable entities have fiduciary obligations to the charity. See also due diligence.

Field of Interest Fund: A fund held by a community foundation that is used for a specific charitable purpose such as education or health research.

Filer Commission: informal name for the Commission on Private Philanthropy and Public Needs.

Financial Report: An accounting statement detailing financial data, including income from all sources, expenses, assets and liabilities. A financial report may also be an itemized accounting that shows how grant funds were used by a donee organization. Most foundations require a financial report from grantees.

Fiscal sponsorship: Affiliation with an existing nonprofit organization for the purpose of receiving grants. Grantseekers may either apply for federal tax-exempt status or affiliate with a nonprofit sponsor.

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. Form 990-PF includes a list of grants made during the year by private foundations.

Foundation: An organization created from designated funds from which the income is distributed as grants to nonprofit organizations and, in some cases, to individuals

Funding Cycle: A chronological pattern of proposal review, decisionmaking and applicant notification. Some donor organizations make grants at set intervals (quarterly, semiannually, etc.), while others operate under an annual cycle.

General/operating support: A grant made to further the general purpose or work of an organization, rather than for a specific purpose or project; also called an unrestricted grant or basic support.

General purpose foundation: An independent private foundation that awards grants in many different fields of interest. See also special purpose foundation.

Giving Circle: A pooled fund that makes grants and is managed by the funds donors. Giving Circles pool time, talent and resources between people who share a common interest in a social cause or issues, and allow for a wide range in charitable styles, philosophies and politics, structure, size, and focus through a very hands-on approach.

Grant Monitoring: The ongoing assessment of the progress of the activities funded by a donor, with the objective of determining if the terms and conditions of the grant are being met and if the goal of the grant is likely to be achieved.

Giving Pattern: The overall picture of the types of projects and programs that a donor has supported historically. The past record may include areas of interest, geographic locations, dollar amount of funding or kinds of organizations supported.

Grant: An award of funds to an organization or individual to undertake charitable activities.

Grantee: The individual or organization that receives a grant.

Grantee financial report: A report detailing how grant funds were used by an organization. Many corporate grantmakers require this kind of report from grantees. A financial report generally includes a listing of all expenditures from grant funds as well as an overall organizational financial report covering revenue and expenses, assets and liabilities. Some funders may require an audited financial report.

Grant Monitoring: The ongoing assessment of the progress of the activities funded by a donor, with the objective of determining if the terms and conditions of the grant are being met and if the goal of the grant is likely to be achieved.

Grantor: The individual or organization that makes a grant. See also donor

Grassroots fundraising: Efforts to raise money from individuals or groups from the local community on a broad basis. Usually an organization's own constituents — people who live in the neighborhood served or clients of the agency's services — are the sources of these funds. Grassroots fundraising activities include membership drives, raffles, auctions, benefits, and a range of other activities.

Guidelines: A statement of a foundation's goals, priorities, criteria and procedures for applying for a grant.

Independent foundation: An individual usually funds these private foundations, often by bequest. They are occasionally termed "nonoperating" because they do not run their own programs. Sometimes individuals or groups of people, such as family members, form a foundation while the donors are still living. Many large independent foundations, such as the Ford Foundation, are no longer governed by members of the original donor's family but are run by boards made up of community, business and academic leaders. Private foundations make grants to other tax-exempt organizations to carry out their charitable purposes. Private foundations must make charitable expenditures of approximately 5% of the market value of their assets each year. Although exempt from federal income tax, private foundations must pay a yearly excise tax of 1%-2% of their net investment income. The Ford Foundation and the John D. and Catherine T. MacArthur Foundation are two examples of well-known "independent" private foundations. See also private foundation.

Independent sector: nonprofit or tax-exempt organizations collectively that are specifically not associated with any government, government agency, or commercial enterprise.

In-kind contribution: A contribution of equipment, supplies, or other tangible resource, as distinguished from a monetary grant. Some corporate contributors may also donate the use of space or staff time as an in-kind contribution.

Intermediate Sanctions: Penalty taxes applied to disqualified persons of public charities (see also disqualified person) at receive an excessive benefit from financial transactions with the charity. An excessive benefit may result from overcompensation for services or from other transactions such as charging excessive rent on property rented to the charity. Unlike private foundations, public charities are not barred from engaging in financial transactions with disqualified persons as long as the transaction is fair to the charity. Penalty taxes also may apply to organization managers, such as the charity's board, that knowingly approve an excess benefit transaction.

Internal Revenue Service (IRS): The federal agency with responsibility for regulating foundations and their activities. Online at www.irs.gov .

Investment Consultants: Advisors who aid in the investment decisions of individuals and financial committees and officers of institutions. Investment consultants provide information and make recommendations about asset allocations, manager structures, manager reviews and portfolio performance.

Investment Manager: An individual, firm or committee responsible for making day-to-day decisions to buy, hold or sell assets. Also known as money managers or investment advisors.

IS: Independent Sector (an alliance headquartered in Washington, D.C.)

Jeopardy Investment: An investment that risks the foundation's ability to carry out its exempt purposes. Although certain types of investments are subject to careful examination, no single type is automatically a jeopardy investment. Generally, a jeopardy investment has been made when a foundation's managers have failed to exercise ordinary business care and prudence. The result of a jeopardy investment may be penalty taxes imposed upon a foundation and its managers. (See Program Related Investment.)

Legacy: The gift that an individual leaves, both in the details of their will and in the tradition of giving they shared with their descendents. See also bequest

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. This saves the time of the prospective donor and the time and resources of the prospective applicant.

Leverage: A method of grantmaking practiced by some foundations. Leverage occurs when a small amount of money is given with the express purpose of attracting funding from other sources or of providing the organization with the tools it needs to raise other kinds of funds. Sometimes known as the "multiplier effect."

Life Insurance Gift: A gift of life insurance may be made either by designating a charity as a beneficiary of a policy or by arranging for it to become the owner of the policy. The former entails many of the same advantages as a bequest, whereas the latter can result in current income tax savings.

Limited-Purpose Foundation: A type of foundation that restricts its giving to one or very few areas of interest, such as higher education or medical care.

Loaned Executives: Corporate executives who work for nonprofit organizations for a limited period of time while continuing to be paid by their permanent employers.

Lobbying: Efforts to influence legislation by influencing the opinion of legislators, legislative staff and government administrators directly involved in drafting legislative proposals. The Internal Revenue Code sets limits on lobbying by organizations that are exempt from tax under Section 501(c)(3). Public charities (see public charity) may lobby as long as lobbying does not become a substantial part of their activities. Private foundations (see private foundations) generally may not lobby except in limited circumstances such as on issues affecting their tax-exempt status or the deductibility of gifts to them. Conducting nonpartisan analysis and research and disseminating the results to the public generally are not lobbying for purposes of these restrictions.

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 that is made to match funds provided by another donor. See also challenge grant; employee matching gift.

Memorialize: To commemorate; to present a memorial to; to honor the memory of an individual or group by donating resources or establishing a fund that reflects the gifts, values or concerns of the individual or group.

NASCO: National Association of State Charity Officials

NCIB: National Charities Information Bureau

NCNB: National Center for Non-Profit Boards

NCPG: National Committee on Planned Giving

NCRP: National Center for Responsive Philanthropy

NCVO: National Council for Voluntary Organizations

NGO: nongovernmental organization : any private organization

NSFRE: National Society of Fund Raising Executives

Nonprofit Organization: A term describing the Internal Revenue Service's designation of an organization whose income is not used for the benefit or private gain of stockholders, directors, or any other persons with an interest in the company. A nonprofit organization's income must be used solely to support its operations and stated purpose.

Operating foundation: 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. To qualify as an operating foundation, specific rules, in addition to the applicable rules for private foundations, must be followed. The Carnegie Endowment for International Peace and the Getty Trust are examples of operating foundations. See also 501(c)(3).

Operating support grant: A grant to cover the regular personnel, administrative, and miscellaneous expenses of an existing program or project. See also general/operating support.

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

Parity: Equality, as in amount, status, or value. Parity in philanthropy is the equal participation by spouses or other family members in the allocation of charitable dollars and in receiving the satisfaction and recognition of their contributions.

Passion: Boundless enthusiasm; deep and positive emotion; fervent expression of hope; belief in the essential connection of individual and community; and love of humanity. Passion, like altruism, is essential to the action of giving and the purpose of philanthropy.

Pass-Through Foundation: The pass-through foundation is a private grantmaking organization that distributes all of the contributions it receives each year (not just 5% of assets). The pass-through election may be made or revoked on a year-to-year basis.

Payout requirement: The minimum amount that private foundations are required to expend for charitable purposes (including grants and, within certain limits, the administrative cost of making grants). In general, a private foundation must meet or exceed an annual payout requirement of five percent of the average market value of its total assets.

Philanthropist: A person who loves humanity, is committed deeply to making society a better place, who believes that each individual, each dollar and each action makes a difference.

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. Philanthropy also commonly refers to grants of money given by foundations to nonprofit organizations. Philanthropy addresses the contribution of an individual or group to other organizations that in turn work for the causes of poverty or social problems, improving the quality of life for all citizens. Philanthropic giving supports a variety of activities, including research, health, education, arts and culture, as well as alleviating poverty.

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.

Pooled Income Fund: A pooled income fund is a life-income arrangement wherein the income from the donor's gift is paid to the donor (and/or designated friends and family members) for life at the rate earned by the total pool of gifts. A pooled income fund contribution has some of the same features as a mutual fund investment. Upon the death of the last beneficiary, the remaining funds pass to the charity or charities designated.

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

Preliminary Proposal: A brief draft of a grant proposal used to learn if there is sufficient interest to warrant submitting a proposal.

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. U.S. private foundations are tax-exempt under Section 501(c)(3) of the Internal Revenue Code and are classified by the IRS as a private foundation as defined in the code. See also 501(c)(3); public charity.

Professional Advisor: Individuals who assist in planning and executing charitable giving through providing information on giving options according to one's specific financial situation. Types of professional advisors include: attorney, accountant, estate planner, financial planner, stockbroker, insurance broker, planned giving officer, philanthropy consultant.

Program amount: Funds that are expended to support a particular program administered internally by a foundation or corporate giving program.

Program officer: A staff member of a foundation who reviews grant proposals and processes applications for the board of trustees. Only a small percentage of foundations have program officers.

Program Related Investment (PRI): A loan or other investment made by a private foundation to a profitmaking or nonprofit organization for a project related to the foundation's stated purpose and interests. Program related investments are an exception to the general rule barring jeopardy investments. Often, program related investments are made from a revolving fund; the foundation generally expects to receive its money back with limited, or below-market, interest, which then will provide additional funds for loans to other organizations. A program related investment may involve loan guarantees, purchases of stock or other kinds of financial support.

Proposal: A written application, often accompanied by supporting documents, submitted to a foundation or corporate giving program in requesting a grant. Most foundations and corporations do not use printed application forms but instead require written proposals; others prefer preliminary letters of inquiry prior to a formal proposal. Consult published guidelines.

Public Charity: A nonprofit organization that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and that receives its financial support from a broad segment of the general public. Religious, educational and medical institutions are deemed to be public charities. Other organizations exempt under Section 501(c)(3) must pass a public support test (see public support test) to be considered public charities, or must be formed to benefit an organization that is a public charity (see supporting organizations). Charitable organizations that are not public charities are private foundations and are subject to more stringent regulatory and reporting requirements (see private foundations; 501(c)(3)).

Public Foundation: Public foundations are nonprofit organizations that receive at least one-third of their income from the general public. Public foundations may make grants or engage in charitable activities. The IRS recognizes public foundations, along with community foundations, as public charities. Religious, educational and medical institutions are deemed to be public charities.

Public Support Test: There are two public support tests, both of which are designed to ensure that a charitable organization is responsive to the general public rather than a limited number of persons. One test, sometimes referred to as 509(a)(1) or 170(b)(1)(A)(vi) for the sections of the Internal Revenue Code where it is found, is for charities like community foundations that mainly rely on gifts, grant, and contributions. To be automatically classed as a public charity under this test, organizations must show that they normally receive at least one-third of their support from the general public (including government agencies and foundations). However, an organization that fails the automatic test still may qualify as a public charity if its public support equals at least 10 percent of all support and it also has a variety of other characteristics-such as a broad-based board-that make it sufficiently "public." The second test, sometimes referred to as the section 509(a)(2) test, applies to charities, such as symphony orchestras or theater groups, that get a substantial part of their income from the sale of services that further their mission, such as the sale of tickets to performances. These charities must pass a one-third/one-third test. That is, they must demonstrate that their sales and contributions normally add up to at least one third of their financial support, but their income from investments and unrelated business activities does not exceed one-third of support.

Qualified Terminable Interest Property (QTIP): A qualified terminable interest property trust will provide the donor's spouse the right to income for life. Upon the spouse's death, the trust property will be passed on to a designated charity or charities. This arrangement is more flexible than the charitable remainder trust. Here, the trustee may be given broader powers including the right to invade trust principal for the support and comfort of the surviving spouse.

Qualifying distributions: Expenditures of a private foundation made to satisfy its annual payout requirement. These can include grants, reasonable administrative expenses, set-asides, loans and program-related investments, and amounts paid to acquire assets used directly in carrying out tax-exempt purposes.

Query Letter: Also referred to as a letter of inquiry, 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. This saves the time of the prospective donor and the time and resources of the prospective applicant. See also Preliminary Proposal.

Request for Proposals (RFP): An acronym for Request for Proposal. When the government issues a new contract or grant program, it sends out RFPs to agencies that might be qualified to participate. The RFP lists project specifications and application procedures. While an increasing number of foundations use RFPs in specific fields, most still prefer to consider proposals that are initiated by applicants.

Return, Rate of: The rate of return on an asset or a pool of assets is a measure of investment performance and should always be determined on a total-return basis, i.e., including realized and unrealized changes in market value in addition to earned income (i.e., dividends and interest income). Managers may report returns before or after management advisory fees, but returns are always reported after brokerage and trading costs.

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. Seed grants may cover salaries and other operating expenses of a new project.

Self-Dealing: A private foundation is generally prohibited from entering into any financial transaction with disqualified persons (see Disqualified Person). The few exceptions to this rule include paying reasonable compensation to a disqualified person for services that are necessary to fulfilling the foundation's charitable purposes. Violations will result in an initial penalty tax equal to 5 percent of the amount involved, payable by the self-dealer.

Set-asides: Funds set aside by a foundation for a specific purpose or project that are counted as qualifying distributions toward the foundation's annual payout requirement. Amounts for the project must be paid within five years of the first set-aside.

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. This may include making program-related investments and refraining from investing in corporations with products or policies inconsistent with the foundation's values.

Special purpose foundation: A private foundation that focuses its grantmaking activities in one or a few areas of interest. See also general purpose foundation.

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. Typical spending rules combine calculations based on previous years' spending, the current year's income, investment return rates, and the policy of the foundation covering grant commitments.

Strategic Giving: Engaging in philanthropy in a strategic manner to make a major philanthropic impact through making better choices surrounding how much one spends, invests and gives back to society.

Supporting Organization: A supporting organization is 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.

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. Charities may also be exempt from state income tax, sales tax and local property tax.

Technical assistance: Operational or management assistance given to nonprofit organizations. This type of help can include fundraising assistance, budgeting and financial planning, program planning, legal advice, marketing, and other aids to management. Assistance may be offered directly by the staff of a foundation or corporation, or it may be provided in the form of a grant to pay for the services of an outside consultant. See also in-kind contributions.

Tipping: The situation that occurs when a gift or grant is made that is large enough to significantly alter the grantee's funding base and cause it to fail the public support test. Such a gift or grant results in "tipping" or conversion from public charity to private foundation status.

Tithing: A belief, found in many faiths, of giving 10% - the first and best part - back to the place of worship.

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 appoint initial trustees, sets forth their powers and provides for orderly selection of future trustees.

Trustee: A foundation board member or officer who helps make decisions about how grant monies are spent. Depending on whether the foundation has paid staff, trustees may take a more or less active role in running its affairs.

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.

Venture Philanthropy: A philanthropy that borrows some of the best practices of the venture capital world to invest deeply in nonprofits to build their capacity effectively. Venture philanthropists value their donor dollars in terms of the social return of investment.

Volunteerism: Performing an act of kindness, freely giving of your talent, time, and effort for the simple fulfillment of community expectations.

Women's Giving: Considered by some to be the next frontier of the women's movement, women's giving builds on the tradition of volunteerism and is empowered with women's financial resources.

Sources:

• The Foundation Center's Guide to Funding Research and Resources Glossary
• The Nonprofit Good Practice Guide (a project of the Philanthropic and Nonprofit Knowledge Management Initiative at the Dorothy A. Johnson Center for Philanthropy & Nonprofit Leadership)
• The Council on Foundation's Glossary of Philanthropic Terms (with investment terms) Emerging Issues Glossary.
• The Hawaii Community Foundation Glossary of Philanthropic Terms
• IUPUI University Library Glossary of Philanthropic Acronyms and Terms
• BoardSource board-related glossary
• Independent Sector's Mission and Market: The Resource Center for Effective Corporate Nonprofit Glossary of Terms