How to Set Up a Grant Giving Foundation
Eventually, many would-be philanthropists start wondering how to set up a grant giving foundation. Not only is this one of the most tax-efficient ways of giving to charity, it’s also one of the most effective and rewarding.
However, this isn’t as simple as sitting down and starting to write cheques.
Running a third sector organisation is much more complicated than that. For one thing, the charity sector is heavily regulated. For another, there are a range of organisational challenges involved in making your foundation as effective as possible.
Today, we’re going to cover exactly how to set up a grant giving foundation. Specifically, we’ll look at how to determine the focus of your organisation, how to formally set up your foundation, and how to assess and approve applications.
Let’s jump right in. Here’s how to set up a grant giving foundation in six steps.
1. Conduct a Needs Analysis
Before you start setting up your foundation, you’ll want to thoroughly analyse the need for funding in your desired niche. There are essentially two components to this:
Deciding if there is a need for funding in your local area for your specific goals,
Determining the specific activities or areas which are most in need of funding.
Say for example that your vision is to set up a grant giving foundation to help support youth work in your community. If youth clubs in your local area are already well funded, you’ll want to think about how your finances will have the greatest impact on young people.
You might then decide to focus on creating a grant program focusing on mental health in young people, or work to create well funded public spaces.
No matter your goal, the key here is to speak to local stakeholders, to figure out where funding is needed the most. Engage with charities who work in the space already, and help to figure out where the greatest need for additional funding is.
2. Draft a Mission Statement and Change Model
Once you’ve narrowed down your focus, you can start to formalise your charity, by creating a mission statement and a change model. The mission statement should be no more than two or three lines, giving an overview of your foundation’s aims, and how you’ll meet them.
To help, it’s often best to begin your mission statement with ‘Our mission is to…’.
Your mission statement covers the same information, but fleshes it out into a more concrete plan. Essentially, this is a document which should include:
Your analysis of the current situation and need for change,
The specific issues you want to tackle to address this need,
The steps you’ll take to do this,
How you’ll measure the impact of your work.
Luckily, it’s much easier to create a change model for a grant giving foundation than it is for many other charitable organisations. This is because the work of giving foundations has a much more limited scope.
That is, no matter what your focus is, the majority of your work is identifying and funding worthy organisations and projects.
3. Choose a Charity Structure
Next, you’ll need to figure out what kind of organisational structure you should opt for. Depending on your goals, resources and background, there are a variety of different structures which can be chosen.
The main categories of grant giving foundations and trusts are:
Family trusts - Family trusts are set up by individual families, drawing funding from their personal estates.
Corporate trusts - Corporate trusts are set up by private companies to distribute funding drawn from their profits. They might also provide volunteers, expertise or other resources.
Private trusts - Private trusts raise funding through commercial activities, such as investments and endowments.
Livery company funds - Livery company funds were originally set up to protect the interests of certain industries, but many have evolved over time to have a more general scope.
Community foundations - Community foundations link up a variety of donors with local community groups, projects and organisations.
No matter what charitable structure you choose, there are a few things you’ll need to consider. One of these is assembling a board of trustees to oversee your foundation’s work. Another is having the human resources to actually deliver your work.
4. Create a Funding Plan
Of course, it’s also important to ask where the money will come from. If you’re thinking about how to set up a grant giving foundation, you may already have some resources in place. For example, you might have a personal estate which you’d like to distribute.
Even so, you’ll need to have a plan in place to maintain sustainable funding. Even the largest personal fortune is a finite resource.
Creating a funding plan is all about finding sustainable, long term financing for your work. This might involve a combination of seeking third-party donors, and smartly investing your existing funds.
Of course, the best way to maintain sustainable funding for any third sector work is to speak to an experienced funding consultant.
5. Set Your Program’s Terms
Once you have your funding plan in place, you can start thinking about eligibility and assessment criteria for your grants. This includes:
The kinds of organisations and projects you’ll fund,
Your funding cycle,
The size of grants you’ll distribute,
The application process and deadlines,
Reporting and monitoring processes.
In essence, the goal here is to create a framework to ensure that only deserving applicants are awarded funding, and that all money is used in the most effective way possible.
Speak to A Charity Consultant About Setting Up a Grant Giving Foundation
Setting up a grant giving foundation is a challenging process. Between meeting the legal requirements, finding sustainable financing, and ensuring the effectiveness of the projects you’ll fund, there are a number of things to keep abreast of.
All the same, it can be an incredibly rewarding process, and an excellent way to make a real difference in your community.
At S3 Solutions, we are experts at all aspects of the grant giving process. If you have any questions about how to set up a grant giving foundation, don’t hesitate to contact us today.