Glossary of Terms

Administrative Fees: A contribution given to cover an organization’s day-to-day, ongoing expenses, such as salaries, utilities, office supplies, etc.

Assets: Cash, stocks, bonds, real estate, or other holdings of a foundation. Generally assets are invested and the income is used to make grants.

Bequest: A sum of money made available upon the donor’s death.

Capital campaign: Also referred to as a Capital Development Campaign, a capital campaign is an organized drive to collect and accumulate substantial funds to finance major needs of an organization, such as a building or major repair project.

Community Foundation: A community foundation is a tax-exempt, nonprofit, autonomous, publicly supported, philanthropic institution composed primarily of permanent funds established by many separate donors for the long-term diverse, charitable benefit of the residents of a defined geographic area. Typically, a community foundation serves an area no larger than a state. Community foundations provide an array of services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent foundations.

Designated Fund: A fund that the donor directs annual distributions to one or more specific charitable organizations.

Donor Advised Fund: A fund held by a community foundation where the donor and a committee of advisors recommend eligible charitable recipients for distributions from the fund. The community foundation’s governing body must be free to accept or reject the recommendations.

Due Diligence: The degree of prudence that might be properly expected from a reasonable person in the circumstances; applicable to foundation personnel who act in a fiduciary capacity.

Endowment: A type of fund subject to a requirement that the principal be maintained intact and invested to create a source of income for an organization or foundation. An “Agency Endowment” is a fund held for the benefit of a specific nonprofit organization.

Fiduciary Duty: The legal responsibility for investing money or acting wisely on behalf of another. Managers of charitable entities have fiduciary obligations to the charity.

Field of Interest Fund: A fund that the donor specifies annual distributions to a particular program area, such as education, health, or the environment.

Financial Report: An accounting statement detailing financial data, including income from all sources, expenses, assets and liabilities. A financial report may also be an itemized accounting that shows how grant funds were used by a done organization. Most foundations require a financial report from grantees.

Form 990: The information IRS form filed annually by public charities. The IRS uses this form to assess compliance with the Internal Revenue Code. The form lists the organization’s assets, receipts, expenditures, and compensation of officers.

Grant: A distribution or award of funds to an organization to undertake charitable activities.

Guidelines: A statement of a foundation’s goals, priorities, criteria, and procedures for applying for a grant.

Investment Manager: An individual, firm, or committee responsible for making day-to-day decisions to buy, hold, or sell assets. Also known as money managers or investment advisors.

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 turn work for the cause of alleviating poverty or social problems, thereby improving the quality of live for all citizens. Philanthropic giving supports a variety of activities including research, health, education, arts, and culture, as well as alleviating poverty.

Portfolio: The total investment pool held by an organization, normally divided into several segments such as equities, fixed income and real estate. The asset allocation of a portfolio will reflect the risk level with which the sponsor is comfortable and will concurrently impact the portfolio’s total return.

Rate of return: The rate of return on an asset or a pool of assets is a measure of investment performance and should always be determined on a total-return basis, i.e., including realized and unrealized changes in market value in addition to earned income (i.e., dividends and interest income). Managers may report returns before or after management advisory fees, but returns are always reported after brokerage and trading costs.

Restricted funds: Assets or income that is restricted in their use, in the types of organizations that may receive grants from them, or in the procedures used to make grants from such funds.

Scholarship Fund: A fund that provide support for tuition assistance, higher education, research, travel, and other kinds of training. These grants are paid to the school for the benefit of the student.

Tax-exempt organizations: Organizations that do not have to pay state and/or federal income taxes. Organizations other than churches seeking recognition of their status as exempt under Section 501(c)(3) of the Internal Revenue Code must apply to the Internal Revenue Service. Charities may also be exempt from the state income tax, sales tax, and local property tax.

Trust: A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations.

Trustee: The person or institution responsible for governance.

Unrestricted funds: Funds that do not specifically designate particular uses. These types of funds offer the most flexibility to serve the changing needs of a community. They are also known as discretionary funds.

Variance: A legal term declaring that all fund assets are considered the property of the community foundation so that should the designated purpose of the fund become impossible, the community foundation may redirect distributions to other charitable purposes that are similar to the donor’s original intent.