Moved by widely publicized human suffering and increased disaster aid requests, foundations and corporations are becoming more active in the disaster relief field. Grantmakers have a distinct role to play in disasters because of their ongoing relations with grantees, long-term perspective, flexibility and convening capacity.
The Council on Foundations defines a family foundation as one whose funds are derived from members of a single family, though this is not a legal term and has no precise definition. The Council on Foundations suggests that family foundations have at least one family member serving as an officer or board member of the foundation and, as the donor, that individual (or a relative) must play a significant role in governing and/or managing the foundation. Most family foundations are run by family members who serve as trustees or directors on a voluntary basis. In many cases, second- and third-generation descendants of the original donors manage the foundation.
Family foundations make up over half of all private (family, corporate, independent, and operating) foundations, or 40,456 out of approximately 73,764 foundations (Foundation Center, 2011). Family foundations make up approximately one-third of the Council’s membership.
Family foundations range in asset size from a few hundred thousand dollars to more than $1 billion. The holdings of family foundations total approximately $294 billion, or about 44 percent of all foundation holdings of $662 billion. Despite this, three out of five family foundations hold assets of less than $1 million. Family foundations gave away approximately $21.3 billion in grants in 2011 (The Foundation Center, 2011).
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Americans may disagree about various aspects of war, but there is broad support for helping the men and women who are fighting in wars and the families they have left behind. Dedicated assistance groups are working to provide aid to military personnel and their relatives. This article surveys the different purposes for which charitable grants can be made and discusses the role that grantmakers can play in those efforts.
Ideally, grantmakers will work with an existing charity or other well-established organization to provide disaster relief. But in the months after a disaster, it is not uncommon to see new charities cropping up in efforts to meet the immense and diverse needs of the affected communities. The problem is that it may take many months before a new organization is officially eligible to receive charitable contributions. Generally, an organization is not considered to be a public charity until it has a determination letter from the IRS stating that its public charity status has been recognized.
The private foundation executive director was concerned. Members of her board were going to make grants to promote public housing and economic development but none of the groups involved were the typical 501(c)(3)s to which the foundation normally made grants. One possibility seemed to be making a grant to a local government agency, but the agency had no IRS tax-exemption letter. Would the foundation have to exercise expenditure responsibility?
For many foundation managers, meeting community, regional, or even global needs is a primary aspect of everyday business. But when disaster strikes, foundations may find the need to quickly provide relief while accurately navigating a new set of grantmaking rules. These guidelines outline the basic legal considerations of a variety of popular giving options for managers of public and private foundations and corporate giving programs.
In international grantmaking, private foundations often make grants to organizations (“Initial Grantees”) that, in turn, re-grant those funds to other non-public charity organizations or individuals (“Secondary Grantees”).
Since the terrorism attacks of September 11, 2001, grantmakers and other charitable organizations have become quite familiar with the work of the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) in the area of anti-terrorism concerns. OFAC has been one of the key U.S. government agencies seeking to shut down terrorism funding around the world and, in conducting that activity, has focused considerable attention on charities.
Private foundations wishing to make a cross-border grant must ensure that:
- The grant is clearly for a charitable purpose, and
- The grant counts as a qualifying distribution for the purpose of meeting the foundation’s annual distribution requirement.
The easiest way for a private foundation to satisfy both of these requirements is to choose a grantee that is recognized by the IRS as a public charity.
Since the November 7, 2002 publication by the United States Department of the Treasury of its “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-based Charities,”1 grantmakers have grappled with the problem of how to comply with their legal obligations under Executive Order 13224, the USA Patriot Act, and other laws and regulations that prohibit financial transactions with terrorists and their supporters.2 The Treasury Guidelines map out one route to compliance, but both grantmakers and operating charities have criticized them for failing