Unlocking the Mystery Surrounding Foundations

Whether you’ve researched grant opportunities, written a grant application or received funding from a foundation, you know that foundations play an important role in supporting and sustaining the nonprofit community. But, how much do you actually know about foundations? Do you know what distinguishes a private foundation from a public foundation? Or, how many foundations are located in Minnesota?

No? Neither did I, so for May’s Emerging Leaders Network Lunch, Stephanie Jacobs from the Minnesota Council on Foundations joined us to help clear up a little of the mystery that seems to surround foundations. Here's the scoop.

The basics:

  • A Foundation can be established by an individual, family, community or corporation. It can either be established as a 501(c)3 or a charitable trust. Foundations are primary established to make grants to unrelated (see below for a brief explanation) organizations, institutions, or individuals.
    • Legally foundations can only give to “disinterested parties”. This has historical roots in the Tax Reform Act of 1969 and is meant to ensure that individuals don’t set up foundations and use the tax shelter to benefit family members or friends. 
  • According to the Minnesota Council on Foundations Minnesota Grantmaking: Giving in Minnesota 2010 editionMinnesota has 1,467 active foundations—in which 85% are private foundations, 9% are corporate foundations and giving programs and 6% are community or public foundations.

What’s the difference between a private foundation, a corporate foundation, and a community or public foundations? 

  • A private foundation is typically founded by an individual, family or group (e.g. The McKnight Foundation, Northwest Area Foundation and Bush Foundation). Giving decisions are typically based on the experiences and values of the founding group. The important thing to remember, Private Foundations are legally required to give 5% of the income they receive from their investments.
  • Corporate Foundations are formed by companies as separate legal entities (e.g. The Target Foundation, General Mills Foundation, and Best Buy Foundation). Giving decisions are driven by corporate values, and their donations are funded through corporate profits.
  • Community or public foundations are created to benefit a specific community, population or region, and their giving decisions are driven by the group they serve (e.g. The Minneapolis Foundation, Minnesota Community Foundation & The Saint Paul Foundation and Central Minnesota Community Foundation). Unlike private and corporate foundations, most community and public foundations engage in some type of fundraising activity. In order to maintain its public foundation standing, the foundation must seek funding from a variety of sources.

Here are some vital foundation stats from the Giving in Minnesota 2010 Edition–the most recent statistics available:

  • In 2008, foundations in Minnesota made a total of $1.4 billion in grants.
  • Of that number, 52% of the grants were given to organizations located in Minnesota.
  • In 2008, private foundations gave out 40% of the total grants made in Minnesota, corporate foundations gave 47% and community foundations gave 13%.
  • The Human Services and Education sectors received 51% of the grants given in 2008. Religious and international affairs organizations received only 5% of grants. 

Want to know more? The Minnesota Council on Foundations has some great resources, or check out the Minnesota Council of Nonprofits Grant Making Directory. What questions do you have about foundations? 

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