j First...Learn About Giving Wisely

Wise giving is smart giving.  Make sure that you educate your members and Board on Wise Giving before you start engaging in the grant-making process.

• Your Donor Bill of Rights
• Tips on Online Giving and Giving Questions
• BBB Giving Wise Guide
• BBB Wise Giving Alliance Standards and the National Charity Seal Participants
• Reports on Charitable Organizations  

1. Annual Fundraising from Your Members:  All Giving Circles generate all or most of their fundraising from its members, requiring a membership fee of anywhere from $25-50/event (such as for a potluck dinner) to on average of $350/yr but sometimes even as much as $1000 or more per year. 

  a. Recruit, Retain, Diversify, & Grow Your Membership and subsequently the funding base available to your Giving Circle;

  b. Annual Giving

     1) Fundraise for Charitable Contributions & Projects/Programs - Typically most Giving Circles fundraise with the sole purpose of donating the funds raised to charities and community programs and projects, so Giving Circles often initially donate 100% of the funds that they raise from members for charities (see How to Channel Your Giving Circle's Money), and host organizations (fiscal agents) typically require the same by law.  As time progresses, Giving Circles sometimes find that operating expenses grow.  See below suggestions for how to fund operating expenses.    

    2) Generate Funding for Yearly Operations - Here are some recommendations from Giving Circles about fundraising for annual giving that can fund and maximize your Giving Circle's operations:

• Use funding from members who give more than the minimum dues (e.g., $25-50/event or $300 - $1000/year) and use the difference for operations (Note: However, if your members are wanting to take a tax credit for those contributions and your Giving Circles is not a 501c3, then you either cannot use those funds for operations legally or that portion of the member donations cannot be tax deductible (hosts who act as your Giving Circle's fiscal agent also typically will not allow your GC to use any portion of the donations for operating expenses, only 100% for granting to 501c3 organizations);

• Set up a yearly contribution for a funding pool for operations to which members can voluntarily contribute;

• If your GC has an umbrella organization (such as a host, foundation or funded program, seek to maximize the expenses that the umbrella entity can absorb your Giving Circle's expenses so as to minimize the burden for the Giving Circle (including to see if that entity’s fundraising staff, if existent, can be leveraged on behalf of the Circle);

• Set a guideline on how much to spend on operations (e.g., 10%) and stay within that (again, see what is allowable/legal by the IRS depending on your Giving Circle status, and that will determine how much your own members will have to pay for operating expenses with our without being able to take a tax deduction);

• Minimize annual operating expenses and operate “close to the belt” (for such necessary items as copies, postage, events, insurance, audit and/or website as needed and appropriate to the size and formality of the circle);

• Maximize use of volunteer staff (e.g., pro bono attorney and accountant).

• Use contracted staff/services on a fee basis/month for any functions that cannot be volunteer;

• If your circle has a lot of funds at its disposal, invest the funds (e.g., in an interest-generating CD), and use the interest from the CD for operations;

• Set up a corporate membership that carries an “administrative fee”, and operations can be funded by that fee (see tax regulations on that for your specific Giving Circle), so as to minimize the burden on individual members;

• Allow corporations to underwrite speakers, travel and events;

2. Planned Giving - Long-Term Fundraising (a.k.a. "Legacy Planning") -  Here are some recommendations on how to generate funding for your Giving Circle over the long term (for charities and/or operating expenses beyond annual giving).   

• Read the publications of the author and speaker, Tracy Gary, who is a leading proponent of “Inspired Legacies";
• Conduct "Legacy Planning Outreach":  Educate members and reach out to the larger community about philanthropy that goes beyond simple annual contributions. Long-term “Legacy Planning” will help individuals integrate their values into their estate planning. Both high net-worth individuals and those with more modest means are often interested in leaving a philanthropic legacy after their death. Conducting Legacy Planning outreach will likely benefit your Giving Circle by recruiting people who have capital assets but cannot afford to give much from annual income. In any case it will encourage philanthropy in general.  You can do this via Legacy Planning Seminars.
• Learn about commercial, charitable investment accounts such as Donor Advised Funds and Charitable Pooled Funds, which typically carry an administrative fee. Although they serve the same ends as Personal Foundations and Charitable Remainder Trusts, they can be established with contributions as low as $5,000 and $20,000 respectively. Their lower entry thresholds make planned giving available to people who would not otherwise be able to take advantage of it;
• Position your Giving Circle as a Community Asset - Because traditional nonprofit organizations like hospitals are beginning to offer Giving Circles, it will be important to position yours as a unique community asset. Distinguish your Giving Circle to generate more fundraising, by positioning it as an “umbrella”, generalist, issue-focused or other unique community asset;
• Collaborate with other non-profit organizations such as churches, temples or mosques on educating their members who might be interested in learning about legacy planning, which would benefit that organization and possibly the Circle as well. You can find out about developing Faith-Based Master Stewardship Plans.

3. Solicit Grant Funding - 501c3 Required:  Your Giving Circle will only be able to apply and receive grants if your Giving Circle is approved by the IRS as a 501c3.  If so, your Giving Circle can apply for grant funding for programs or projects as well as for seed funding, startup, and possibly also operations.

Note: Some Giving Circles have found it difficult to solicit grant funds from foundations and other organizations that they can they use for re-granting.  Typically, donors prefer to donate directly and not through a pass-through organization, which is how they may view your organization.  As noted above, potential grantees must be 501c3 organizations, and not all Giving Circles even hold that status so are not eligible.  However, you may establish partnerships with these other Givers and collaborate with them on a joint venture grant, and give recognition to both you and them.

There are grantmaker associations who have supported and helped Giving Circles through grants. Examples are:

• Grantmaker Associations:

- National Level: FRAG (Forum of Regional Associations of Grantmakers)

- Regional Association of Grantmakers (RAGs), such as the Association of Baltimore Area Grantmakers. 

• National (but Issue-Specific) Networks: Women's Funding Network

4. Leveraging Your Resources (Matching Funds & Pro Bono Assistance)

   a. Matching Funds

• Matching Funds (Among Your Members or Outside Funders): Your Circle might also be able to more easily find matching funds from other funders for similar grantees or programs; in other words, for every dollar your Giving Circle donates to a given charity, another funder might match you dollar for dollar, also giving directly to that same charity or channeling that funding through your agent or host.  While your Circle might not have control over the funding, it can have the same effect and impact depending on your coordination with the other funder.
• Matching Funds (with Other Giving Circles) - Simply put:  You can fund the same organizations, programs or projects!  Even if your GCs feels that the money it can generate for granting is limited by the number of members and/or those members' financial resources, your GC can still consider how it can further leverage the GC's funding and impact by collaborating or coordinating with other like-minded Giving Circles.  More to come on this subject...  

  b. Pro-Bono Assistance  

Remember that there are both organizations and individuals (both experienced and fresh out of college/grad school with skills and expertise to offer who may or may not be able to give of their money but who can provide pro-bono assistance.  

• See our Key to Services.

• Organizations:  There are associations, networks and Giving Circles who have supported and helped guide Giving Circles. These are:

- Grantmaker Associations:  FRAG (Forum of Regional Associations of Grantmakers) and regional grantmaker associations such as the Association of Baltimore Area Grantmakers. 

- National (but Issue-Specific) Networks: Women's Funding Network

- Giving Circles:  Social Venture Partners International & Bread for the Journey. 

• Individuals:  You can find individuals who may be able to assist you with legal issues, finances (a CPA or MBA), programs and even fundraising.  Ask and you will find!

• Tax deductible charitable contributions?  

  If Yes, then your members must give to registered tax exempt charities, even though your GC may not itself be a non-profit charity.   You can achieve this by:  1) everyone writing individual checks to the same charity; or by 2) channeling your money through a community foundation (also known as a "host") which are easy to find locally or at least at the county or regional levels.  Note that you cannot simply set up a joint account (or if you can, it probably is not legal - pleas check with your financial advisor).   

  If No, You can simply give your money to any groups or individuals as you wish.  One example of a GC using this strategy:  Washington Womenade.  It's just not tax deductible for the donor; also, the individual or organization receiving the funding (depending on how much) may be required to report it.  The benefit is you might reach people who otherwise might not have access to grant funding.

• No paperwork of any kind?  Whether or not your contribution can be considered tax deductible, you will want to keep records of it, and the individuals or organizations funded by your GC may be required to report your contribution. 

• To set up a non-profit charity (501c3) itself? This is a time-consuming and lengthy process, although for those GCs who are organized and determined to achieve this status, it is not that difficult.  See the 501c3 quick summary.   

2. Use the Easy-to-Complex Approach - Typically, it is easiest just to start simple and then move into more complex money management approaches as you evolve as a Giving Circle:

• Keep it Simple!  - There are a couple ways to keep your granting process easy and uncomplicated.  These are to:

• Find a Fiscal Agent (Host)  - There are organizations that will serve as fiscal agents for your Giving Circle.  They usually charge a small administrative fee to handle and process the funds.  These include:

a) community foundations - In almost every community - even if it's a county or regional one, there is a community foundation.  Nationwide, there are at leasat 650 community foundations.  Check the Community Foundation Locator.

b) associations of grant-makers; and

c) other non-profit organizations.

What to Expect with a Host:  You will probably be charged a small setup fee (possibly $100 or more) and at least 1% out of every grant dollar.  You will typically not be allowed to use any funds towards the administration or management of your own Giving Circle.  Most agents will require due to tax and legal reasons that, aside from their fee, 100% of the funds channeled through them by your GC must be allocated via grants to 501c3 organizations (i.e., not to be allocated to pay for your Circle's expenses), although under some circumstances, some hosts may handle the funds for a special program or project performed by the Circle members (check wtih your host and your financial advisor).  The beauty of this approach, however, is that you can find (and should ensure) that whichever agent or host you use already has grant-making procedures in place so you do not have to re-invent the wheel.

• Channel Your Money through Private Foundations -   For some foundations, these are called "Donor Advised Funds" (DAFs). Such foundations are called hosts or sponsors.  You should research different foundations to determine their requirements.  Some require a sizable starting fund ($5000), while others only require a small amount.  Some others only allow families to pool their funds while others are more flexible about allowing non-associated persons pool their funds.  Whichever type you select, make sure that the restrictions (for both set up and later extracting the funds if you choose to become independent) allow you the flexibility that your GC seeks.

• Set up as a Tax Exempt Organizations (501c3) - This process takes time and requires several legal, organizational and financial steps.  You will need at a minimum to: 

a) prepare a mission statement with basic goals and objectives;

b) incorporate as a non-profit (also sometimes referred to as a "non-stock") corporation (in your State), for which you will need to prepare and submit:

- articles of incorporation; and

- bylaws (while these are not required at the time of incorporation in every state, they will be eventually required when you apply for non-profit status);

c) apply for Federal approval to set up as a non-profit organization, at which time you will need to prepare and submit other basic organizational documents, such as a budget;

d) apply at the State level for the right to solicit for funding.  When you apply to the Federal government for tax-exempt status as a non-profit (501c3), you will need to prepare, as noted above, bylaws and also a budget, among other documents.  If not included in your GC's bylaws, your GC will also need to prepare policies on compensation and conflict of interest and also your GC's procedures for engaging in contracts and grants.

For complete information, see the IRS online information, 1023 application form and requirements for Charities and Non-Profits.

a. Know the Difference Between Grants & Contracts - The difference between a contract and a grant is the funder plays a much more active role in initiating a contract, and the grantee plays a more active role in initiating a grant.  Most contracting is done by government agencies, departments, and institutes; very little is done by foundations. Generally, a contract is a tool used to purchase goods or services, in which the funder identifies a need, outlines the program and then solicits bids from interested and qualified organizations. In the case of a grant, the grantee initiates a proposal based on general guidelines stated by the funder. A proposal defines the objectives of the project and the uses to which the grant funds will be put. Grants are most often made to support services or research.

b. Determine Who To Fund:  

- Research your local community to determine needs.

- Contact a community foundation in your area to receive guidance on who, where and how to fund in the local or regional area.

- Register with The Foundation Center to be able to subscribe to and research their database of Grant Makers.

c. Make a Plan on How To Publicize & Solicit Proposals  - There are various ways to announce and solicit proposals locally.  We recommend that you utilize the media to the extent possible, including your local newspapers, local public radio and relevant publications focusing on your grantee area of interest.  One excellent source for publicizing grants is in the Chronicle of Philanthropy in their New Grants section. Their "New Grants" section is widely read, and reports on large grants of more than $10,000, from around the country.  Therefore, if your organization makes any single grant of more than $10,000, consider notifying the Chronicle. You can do so by emailing them at grants.editor@philanthropy.com

d. Set up a Grant Making Process - Grant Management (Found on "Govern & Grow").  Typically, if your Giving Circles is already a 501c3, the IRS requests this information prior to attaining IRS authorization to engage in grantmaking.

e. Determine if your Grantmaking Process Ensures Optimal Grantee Selection - "Grant Benefit", the web resource for demonstrating grantmaking impact offers advise on how to evaluate your organization's grantee selection process.

Ways to evaluate if your Circle is having its intended impact is to:

• Ensure that Your Circle's Strategy and Your Grantee grants articulate Outcomes, not only Outputs.
• Ensure that the Grantees and Programs that your Circle is funding correspond to your Circle strategic plan and objectives.
• Determine whether or not your grants include measurable targets and deadlines to track Grantee progress.  If not, transition your Circle and Grantees to incorporate targets and deadlines that you can track into your grant-making and operations management process.
• Develop a Giving Evaluation Spreadsheet to Show by Objective or by Grantee, what the measures of success are and by what date they would be expected to be completed as well by which date (if at all) those measures were actually accomplished.
• Check Grantee Progress Monthly - Compare the progress of your Circle's Grantees with their Proposed Plan and budget.  This might include written reports, phone calls, meetings and/or on-site visits.
• Provide Guidance and Support to Grantees who are finding challenges in staying on track, to help them overcome obstacles and ensure success.
• Conduct a Post-Grant Evaluation.  Your Circle can do this itself or pay an independent party or organization to perform one.
• Incorporate Lessons Learned in the next round of the grant-making process and grant requirements as well as in your Circle's next Strategic Plan review.
• Continually Enhance Your Governance Documents to reflect lessons learned.

o The Final Assessment:  How to Continually Enhance Your Giving & Impact:

Ways to Evaluate Your Own Giving Circle Effectiveness (Total Benefits as well as for Grantees and Circle Operations and Governance) are to:

• Utilize Performance Assessment Tools:  The Center for Effective Philanthropy offers assessment tools, including a worksheet on Performance Assessment.   CEP states that: "This worksheet is intended to help foundation staffs and boards establish indicators of foundation performance in four areas: achieving impact, setting the agenda/strategy, managing operations, and optimizing governance."  While Giving Circles are for the most part not foundations, they are nevertheless grant-making organizations that share many of the same effectiveness issues and concerns.
• Evaluate your Circle Progress in Meeting its Annual Strategic Objectives, Measures and Targets.
• Solicit Member Feedback & Education.
• Solicit Grantee Feedback.