What Is Grantmaking?

Grantmaking

A grant is a gift of money that is given to a nonprofit to help them do their good work in the community. Young people may serve on a foundation's youth advisory council that makes decisions on how grants are awarded, and they make a real impact on their communities. This guide defines philanthropy and grantmaking. 

What Is Philanthropy? 

Philanthropy comes from the Greek words – “philos” (love of) and “anthropia” (mankind) = the love of mankind. Philanthropy has action at its heart. A simple definition often used in the youth philanthropy field is “giving of time, talent and treasure and taking action for the common good." Youth act philanthropically in many ways. Sometimes youth will become involved in causes and organizations with which they are familiar, while some youth will be drawn to a new interest or organization. Some youth are invited to serve on grantmaking councils and use their valuable insight and influence to determine how and what needs are addressed in the community. 

Examples

• Gathering a group of friends to clean the riverbank
• Giving change as part of a faith practice
• Speaking up in favor of people whose story isn't heard
• Learning about election issues and informing people of facts or encouraging them to vote
• Organizing a clothing drive for a local women’s shelter
• Serving food at a soup kitchen
• Gathering signatures for a petition to support civil rights legislation

Nonprofit Sector

The Nonprofit Sector is made up of private organizations and people who seek to make changes in society and contribute to their communities. Through nonprofits, people promote the public good. This may include improving health, education, scientific progress, social justice or the freedom of ideas. A nonprofit’s mission statement explains which public good activity is its focus. The Nonprofit sector has six characteristics:

1. The sector is composed of organizations.
2. These organizations are private (like businesses) not public.
3. They do not distribute profits to shareholders or owners but reinvest excess funds into mission-supporting activities.
4. They are self-governing (meaning, they control their own activities).
5. Participation and support of these organizations are voluntary (not mandatory or compulsory).
6. They exist to serve a public benefit (rather than to benefit a small group).     

Source: Lester Salamon, 1999. America’s Nonprofit Sector: A Primer, 2nd edition. New York: The Foundation Center.

Tax Except

Since nonprofit organizations have a public benefit focus, they are considered tax-exempt corporations by the Internal Revenue Service, which means they do not pay taxes. There are more than 27 classifications for these organizations under U.S. tax law, but the most well-known IRS classification is a 501(c)(3) – a religious, charitable or educational institution.

Types of Nonprofit Organizations

There are many sub-sectors of the nonprofit sector in which organizations with similar interests or focuses operate. Nonprofit organizations can be classified into the following seven types (sub-sectors):

1. Arts (e.g., Rock and Roll Hall of Fame, the Shedd Aquarium, New York Symphony Orchestra)
2. Education & Research (e.g., Public Broadcasting Service, Teach for America, Learning to Give)
3. Environment & Animals (e.g., The Nature Conservancy, Humane Society, Chicago Botanic Garden,)
4. Health (e.g., Mayo Clinic, American Heart Association, American Red Cross)
5. Religion (e.g., First Presbyterian Church, Princeton Theological Seminary, congregations)
6. Social Services (e.g., Catholic Charities U.S.A., Heifer International, Gleaners, food banks)
7. Foundations: These include community foundations (focused on particular geographic counties or regions), family foundations, private independent foundations (such as the Bill and Melinda Gates Foundation and Ford Foundation), and corporate foundations (such as the Coca-Cola Foundation and the Wells Fargo Foundation).

Foundations

Foundations are one type of nonprofit organization that brings vital resources to the many issues we care about through grantmaking. Through the following videos, learn what a foundation is and the purpose of community foundations (one foundation type). 

Foundations provide grants to nonprofits that serve the public good. A grant is a gift of money in any amount. Young people may be invited to serve on a grantmaking council at a foundation, and they are involved in the process of grantmaking. Since this money is intended to serve the public good, it is an important responsibility to be thoughtful about the process of grantmaking to make sure the gift goes to good use. 

Thoughtful Grantmaking

These questions may help a young person start thinking about how they want to impact their community through grantmaking.

• What do I care about or want to change in the world? 
• What does my community need and want (based on a needs assessment)?
• What are some nonprofit organizations in your community?

Grantmaking Process

Young people make good grantmakers. They are thoughtful and make careful decisions about what is best for all. In the application review process, youth grantmakers learn how to analyze a budget, assess the feasibility of a project, and develop evaluation questions to determine impact. When needed, they do research on an issue or bring in experts to help them make good decisions about what to fund.

The grants they fund may have specific requirements:

1. must benefit youth
2. must be part of a nonprofit 501c3
3. must not fund hate in any form or be discriminatory against a particular group

Scoring Applications

When reviewing applications, it is helpful to have a scoring sheet (see below) with their criteria. The grant application must:

• have clear goals
• describe an appealing project
• meet community needs
• exhibit a desired activity
• be well planned
• be realistic
• have a clear budget
• make an impact
• be sustainable
• be inclusive

Process

1. After reviewing all the grant applications using this criteria, they discuss each application and listen to the feedback of everyone on the youth grantmaking council. This may take time and lots of discussion of pros and cons. 
2. The youth council may conduct research about the needs or ask follow-up questions of the grant writer or visit the nonprofit. This can be a fun part of the due diligence process, and it helps to build a relationship between the funder and the grant recipient. 
3. As a group, the youth come to a consensus on which grants to fund based on their criteria and budget. They may give partial grants, if desired. 
4. Each foundation has an agreement form and requirements, such as a grant report and timeline. 

Reflection

An important part of the process is reflection. This helps the grantmakers think about what they learned and the impact they made. After awarding the grants, young people can reflect on the following;

• what went well
• what they want to do next time
• what skills they want to develop
• who else they want to include

After the grant recipient has used the gift and completed the project, they share their report of how they spent the money and its effect on young people and the community. This information is valuable to review and reflect on as grantmakers make future decisions.