LACF Glossary of Commonly Used Terms

Glossary of Commonly Used Terms

Glossary of Commonly Used Terms for Nonprofit Organizations

501©(3): Section of the internal Revenue Code that designates an organization as charitable and tax-exempt. Organizations qualifying under this section includes 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 foundations or corporate contributions secure a Section 501©(3) classification from the Internal Revenue Services (IRS).
509(a): Section of the tax code that defines public charities *as apposed to private foundations). 501(c)(3) organizations also must have a 509(a) designation if the agency is to be considered a public charity. (See Public Support Test).
Agency Endowment Fund: A fund established by an agency itself with its own fund to provide perpetual support for the agency.
Bequest: A legal term for a gift of money made to a person or organization in someone’s will.
Capital Campaign: An organized drive to collect and accumulate substantial funds to finance major needs of an organization, such as building or major repair projects. In current practice, a capital campaign may include a number of different needs, such as endowment, operating reserves, and other projects.
Capital Grant, Capital need, Capital Project: A grant or project devoted to building, acquiring, or purchasing longlived assets such a uilding, equipment or vehicles.
Challenge Grant: A type of conditional grant, usually requiring that the agency secure additional donations, either on a matching basis or by some other formula, within a specified period of time, with the objective of stimulating giving from other sources.
Charitable Lead Trust: A planned giving vehicle in which the donor established a trust that benefits a charity, such as the Dallas Foundation, for a specified term, then benefits specified individuals at the end of the term, usually members of donor’s family.
Charitable Reminder Trust: A planned giving vehicle in which the donor establishes a trust that benefits an individual for a period (usually the beneficiary’s lifetime) and then benefits one more charities, such as The Dallas Foundation.
Charity: In it’s traditional legal meaning, the word “charity” encompasses religion, education, assistance to the government, promotions of health, relief of poverty or distress and other purposes that benefit the community. Nonprofit organization that are organized and operated to further one of these purposes generally will be recognized as exempt from federal income tax under Section 501© (3) of the internal revenue Code and will be eligible to receive tax-deductible charitable gifts.
Code: The Internal Revenue Code. The body of federal law, first collected as a separate volume or “code” in 1954, governing the payment and collection of taxes. The Code is enforced by the Internal Revenue Service, which is housed within the Department of Treasury.
Community Foundation: A type of grantmaking foundation formed by donations from broad support from multiple sources: trust, endowments, individual contributions, and private foundation grants. Most community foundations are classified as public charities. Community foundations are hybrid nonprofit because they both raise funds from the public and make grants to other nonprofits.
Conditional Gant: A grant that is awarded on a contingent basis. The donor specifies that the agency must satisfy some conditions, such as meeting a fundraising target, before the donor will be obligated to pay the grant.
Decline: Also referred to as Denial, a decline is the refused o rejection of a grant request. Some declination letters explain why the grant was not made, but many do not.
Designated Fund: (1) Any fund of money given to or held by a nonprofit hat is earmarked for a specific purpose; synonymous with restricted funds. (2) At a community foundation, a fund established by a private donor to benefit one or more named agencies, usually in perpetuity.
Discretionary Grants: At a community foundation, grants awarded at the governing board’s discretion to meet community needs.
Donee: See Grantee
Donor: See Grantor
Donor Advised fund: A fund established within a community foundation that permits he donor to recommend how grants are distributed.
Endowment: A bequest or gift that is intended o be kept permanently invested to generate income for an organization of foundation. The original gift is called the “principal” or “corpus.” Under the traditional rule, the organization that owns the endowment could spend only interest and stock dividends. Modern law and practice permit distribution of percentage of an endowment funds’ market value, including appreciation.
Field of Interest Fund: A fund established within a community foundation that gives grantmaking authority to the community foundations board, but specifies that grants must serve a particular area of charitable activity (such as the arts) or a defined class of people (such as disabled children).
Financial Statements: A body of financial reports produced either by an agency or it’s accountants, providing a snapshot
Of agency’s financial condition as of a particular date, usually the end of the fiscal year. For nonprofits, the standard set of financial statements includes a statement of financial position(which shows assets and liabilities), a statement of activities (which shows revenues and expenses), and a statement of cash flows (which shows the sources and uses of cash). Some agencies might also produce a statement of functional expenses, which shows how expenses were allocated across the various areas of the agency’s work, like general administration or program services.
Fiscal Agent: A 501 ( c ) (3) organization that acts as the sponsor for an organization that does not have tax-exempt status. Foundations or individuals can make tax-deductible gifts to an approved fiscal agent, which then manages, accounts for, and distributes the funds to the non-exempt organization.
Form 990: The informational tax return field annually by many public charities. Churches and charities That normally receive less than $25,000 per year in donations are not required to file to Form 990. Private foundations file a different form of return, the Form990-PF.
Funding Cycle: A chronological pattern of proposal review, decision-making and applicant notification. The Dallas Foundation awards unrestricted and field-of-interest grants annually. Donor advised funds are awarded weekly.
Giving Pattern: The overall picture of the types of projects and programs hat 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.
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.
Grantee: The individual or organization that receives the grant.
Grantor: The individual or organization that receives the grant.
Guidelines: A written statement of funder’s goals, priorities, funding criteria, and procedures.
In-Kind- Contribution: A donation on the form of goods or services rather than cash.
Lead Gift: A large gift made to an agency at the beginning of a capital campaign in the hopes of setting the pace for other donors.
Matching Grant; Matching Gifts Program: (1) A type of conditional grant in which the donor matches contributions from other sources an a 1;1 basis or some other prescribed formula. (2) A program run by an employer that provides funds to agencies supported by employees.
Naming Opportunities: A list developed by agencies during capital campaigns indicating the size of the gift the agency will require to name a facility (or portion of it ) in honor of the donor of the donor’s designee.
Operating Support: A contribution given to cover an organization’s day-to-day, ongoing expenses such as salaries, utilities, and office supplies. Also, called general operating support.
Pass-Through funds: Contributions that come through a community foundation on a short-term, in-and-out- basis, as distinguished from contributions to endowment. The community foundation generally redistributes the money to another charity quickly after the gifts is received.
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 work for the causes of poverty or social problems-improving the quality of life for all citizens. Philanthropy giving supports a variety of activities, including research, health, education, arts and culture, as well as alleviating poverty.
Planned Giving: Any one of a number of estate planning techniques that provide funds for charity. Examples include charitable lead trust and charitable reminders trusts. Planned giving techniques are complicated and should be undertaken only with professional guidance.
Pledge: A promise to contribute to an organization at some point in the future. For example, some funders give multiyear pledges promising to grant a specific amount of money each year. Individuals also make pledges, such as promising to pay a certain amount per month through a workplace-based campaign like the united way.
Post-Grant Evolution: A review of the results of a grant, with the emphasis upon whether or not he grant achieved it’s desire objective.
Pre-Proposal Communication: A discussion between representatives of an agency and a fonder to discuss whether a formal to discuss whether a formal request to the funder would be appropriate.
Private Foundation: (1) A nongovernmental, nonprofit organization with funds (usually from a signal source, such as an individual, family, or corporation) and program managed by it’s own directors established to support charitable activities serving the common welfare, primarily through the making of grants. (2) An organization that is tax-exempt under section 501 © (3) and is classified by IRS as a privet foundation because it receives its financial support from a limited number of sources. Not every organization that uses the word “foundation” in its name is a privet foundation under the code.
Program Support: Contributions designated for a particular project within an agency, such as a pregnancy prevention initiatives at youth agency, than for the agency’s overall operations.
Public Charity: A nonprofit organization that receives at least one-third of its annual income from the general public (including government agencies and foundations). Some make grants, while others engage in direct services or other tax-exempt, charitable activities serving the common welfare.
Public Inspection: The right of any member of the general

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