LESSON 1 Who Am I? (and What in the World Do I Want to Do?)


More than 20 years ago, the U.S. Department of Education announced that it would fund innovative parent centers to be housed in public school buildings. These centers were supposed to be developed and run by parents, and the types of activities available to parents would be chosen by—you guessed it— parents. To apply for this grant, applicants had to be not-for-profit organizations, not schools. I was a beginning grant writer at the time, and I was assigned to write a proposal for a small parent organization whose name I can’t remember. As I was completing the grant application and getting ready to mail it to Washington, D.C., I noticed that it asked for proof of not-for-profit status. I knew nothing about this. I figured these parents surely weren’t making a profit, so they obviously had not-for-profit status. What proof did I need except my word? I was wrong. My proposal was disqualified by the Department of Education. No one even read it.—EK


Who Am I?

It is important to know who and what you are before you start trying to raise money. Organizations come in all shapes and sizes, and they raise money for a wide variety of purposes, from beautifying city blocks or fielding a Little League team to providing services for elderly people with Alzheimer’s or creating shelters for victims of domestic violence. Organizations fall roughly into three categories, with a few subcategories, though there’s a lot of overlap. Who you are and what you want to do pretty much determine where you need to go for money.

Grassroots organizations usually are small, very local groups like block and tenant associations, neighborhood improvement groups, and merchants’ associations. Many do not bother with a formal organization structure or have a minimal structure—a leadership committee or maybe elected officers. Their interests may involve block or building security, neighborhood beautification, activities for local preschoolers, or bringing neighbors together for a holiday party. The kinds of things they want to get funding for might include walkie-talkies for a block- watchers’ group; uniforms, equipment, and perhaps rental of a field for sports activities; buses to take kids on trips to a museum, a ball game, or the Statue of Liberty; or money for decorative planters, benches, or other street furniture.

Small grassroots organizations may be able to raise the few hundred or few thousand dollars they need through dues, door-to- door collections, raffles, bake sales, block parties, flea markets, or local business donations. As they grow, they may start looking for foundation or government grants to help support their expansion, and to do this they may need to become officially recognized nonprofit organizations (the parents in our opening remarks were a grassroots group). Sometimes new grassroots organizations make the mistake of seeking grants before they are quite ready. Although certain fundraising activities (such as bake sales) may be appropriate at an early stage in an organization’s life, successful proposals for foundation and government grants must come later.

We should note that in times of economic turmoil, many of the smallest organizations are likely to find funding scarce. If you are just starting out, you may have to continue relying on volunteers for another few years, or you may want to consider merging with one or more like-minded groups to create an organization with greater capacity to carry out your mission (we’ll talk about capacity in Lesson 14).

Social service agencies and other service providers are either not-for-profit (also called nonprofit) organizations, local government agencies, or for-profit businesses set up to address the needs of groups of people of all ages and types: children (day care, education, after-school programs, literacy, arts, recreation); teenagers (education, violence prevention, pregnancy and substance-use prevention, sports, arts and cultural activities, preparation for high school or college entrance exams, employment readiness and placement); older adults (senior centers, home care services); families (citizenship education and immigration counseling, legal services, domestic-violence prevention, services to families with children returning home from foster care, employment training and placement, adult education, language training); communities (police, sanitation, health, environmental protection, disaster planning, housing/shelter); or the city or region (transportation, water, sewage). These organizations range in size from a volunteer or paid staff of one or two, serving a very small neighborhood area, to huge, citywide, regional, or even national agencies. They may be government agencies, not-for-profit organizations, or for-profit businesses.

Within the social service category, community-based organizations are groups of any size, whether incorporated or not, whose mission is to serve the particular geographic or ethnic community in which they are located, rather than an entire city. Cultural institutions (libraries, museums) are one type of service provider and also may vary dramatically in size. Universities and hospitals may be among the largest nonprofit, for-profit, or government-run service providers in a community.

Some not-for-profit social service organizations may operate one small program (say, caring for a few young children); larger nonprofits and government agencies may run dozens of programs for all ages and needs. Their funding needs may range from a few hundred to many millions of dollars, and they need to raise money from a number of different sources, including individual donors, private foundations, corporations, and government funding agencies.

If service providers are nonprofit groups—as opposed to government agencies—they usually are incorporated under state laws (like any other corporation) and receive tax-exempt status from the Internal Revenue Service. You may hear the term 501(c)(3), which refers to the section of the Internal Revenue Code that authorizes this type of organization, or the term determination letter, which is the document from the IRS stating that you’re tax exempt. You use state incorporation papers or an IRS determination letter to prove you’re a nonprofit, because most foundations and government funders only give to such organizations. (By the way, the terms "nonprofit" and "not-for- profit" are used interchangeably in common discussion, but the latter is the technical term in the law and recognizes that the purpose of an organization is "not for profit," although the organization could show a budget surplus or—in its dreams— maintain financial reserves.) As the footnote indicates, many kinds of not-for-profit corporations are defined under the Internal Revenue Code. Nevertheless, 501(c)(3) is the section that covers most social service organizations, and the one you most need to be aware of. Contributions to 501(c)(3)s are tax deductible, so individual donors as well as foundations and government entities are more inclined to fund this type of organization. So—if you do not represent a 501(c)(3)—before you think about getting a grant, you need to think about whether you want to spend the money for lawyers and go through the organizing effort and the paperwork required to form a nonprofit corporation. Although it is possible for an organization to do this on its own (start with your state’s secretary of state or department of state and the nearest IRS office), we strongly recommend that you use a lawyer. In many communities a private attorney may provide the service at low cost or for free ("pro bono"). There also are organizations like the Legal Services Corporation or Lawyers in the Public Interest that have local offices and can either advise you on the process or refer you to an attorney who can help. It may take quite a while to prepare the paperwork necessary for a 501(c)(3) application and for incorporation. It can also take a few months for the Internal Revenue Service to begin to review the documentation, so you should allow enough time for the process to be completed. But we should remind you that, especially in these times, you should think twice about incorporating just to get grants. Because governments and foundations are likely to continue cutting back on their giving and contracting—at least for a few more years—they are becoming more strategic in their approach—and a new organization may not be well positioned for this. It will be cheaper and perhaps smarter to focus on working with other organizations that have been around awhile and have a track record. As we said earlier, just because an organization has completed its paperwork and receives its designation as a 501(c)(3) doesn’t mean that winning grants will suddenly become easy. Grantmakers look very hard at potential grantees, and the vast majority of them expect to see a significant track record, a committed board of directors, fiscal health, talented leadership, a clear vision, the capacity to implement programs, and the ability to sustain projects, activities, staff, and programs that are grant funded. New 501(c)(3)s have a way to go before they can count on winning grants.

Advocacy groups may be local, regional, citywide, national, or international. They are interested in specific issues, such as trying to convince government agencies to provide more funding for after-school education or charter schools or children with disabilities, or trying to protect the environment, or prohibit abortion, support gay marriage, or make marijuana legal for medical purposes. They may be incorporated as not-for-profit organizations but usually are not 501(c)(3)s, because this section of the law specifically prohibits tax-exempt organizations from lobbying the government in most situations. Some foundations will fund their activities, but many will not. Advocacy groups usually need to raise money from individuals and other organizations that care about their causes. They do submit proposals for grants but are more likely to use mailings, the Internet, social media, telephone solicitation, and other individual approaches for their fundraising.

Advocacy groups normally do not receive funding from government agencies either, but there may be exceptions. Each funding agency makes its priorities clear, and you should seek out funders who want and are able to give grants to the type of organization with which you’re involved, and the type of project you want to implement. We will talk again and again about how important it is to target appropriate funders based on both what kinds of projects and programs you want to get funded and what kind of organization you are.

Individuals—for example, artists, writers, filmmakers, scholars—are generally interested in getting grants that will fund their projects. They may be associated with a university, research hospital, or cultural institution, which is likely to be the grant recipient although the individual prepares the proposal. Other individuals seek support for independent projects. Research is costly and time-consuming. Shooting a film (and editing it) costs a fortune. We will talk about specific grants for individuals; how some artists form not-for-profit organizations so they can become eligible for a range of grants; and how others connect with existing not-for-profits that can act as the fiscal conduit (we’ll talk about this later too) for foundation and government grants.

Who Gets the Grant?

Grants generally are directed to specific types of organizations. Some federal grants, for example, may be awarded only to a local or state government agency, local education agency (LEA: a board of education, school district, etc.), or institution of higher education. If these are the only eligible applicants for a specific type of funding, other organizations need not apply.

Most private foundations that require a 501(c)(3) do not fund government agencies, although some government agencies have set up their own not-for-profits or work closely with existing not-for- profits in order to accomplish shared goals. In New York City, for instance, the Police Foundation is a 501(c)(3) that raises money for the police department. The city’s Parks Department works closely with the nonprofit Central Park Conservancy to raise supplementary funding for Central Park. Some cities have their own not-for-profits that raise money for special initiatives and for agencies that don’t have their own 501(c)(3)s or are not closely associated with local not-for-profit organizations.

There are many legal ramifications for this kind of operation, not the least of which is a real or perceived conflict of interest. For example, a conflict may arise if the 501(c)(3) of a municipality or a government agency receives funds from a corporate source that it is expected to regulate, or if the 501(c)(3) is perceived by the public as a way of getting around the city’s own funding rules in order to help political allies. This means that the option must be explored thoroughly with attorneys before it is pursued. If you work for a municipal government agency and want to raise private dollars, check with your budget office or legal department to see how it can be done.

Pop Quiz

Throughout this book we will be giving you brief quizzes to let you check what you’ve learned in each lesson. Answers to the pop quizzes are found in Appendix 7.

Multiple Choice

Select the best answer for each of the following questions:

  1. Which is the best example of something that a small grassroots organization might be likely to get a grant or donation to pay for?
    1. uniforms for the local Little League team
    2. a neighborhood day-care center
    3. a community science and technology museum
    4. a citywide literacy program for immigrants
  2. A document known as a 501(c)(3) is:
    1. a license to raise money
    2. proof of not-for-profit status
    3. a description of a certain kind of government grant
    4. a way for individual donors to hide their true identity
  3. Most foundations give grants only to:
    1. not-for-profit organizations of all kinds
    2. cultural and arts institutions
    3. municipal and state governments
    4. social service agencies and organizations
  4. Why is it so important to "know who you are" before writing a proposal?
    1. because not every person or organization is eligible for every grant
    2. because you may not be eligible for any grant at all
    3. because you may need to do a few important things before applying for a grant
    4. all of the above are good reasons

Essay Questions

Take 15 to 30 minutes to mull over the following questions. You may want to write out a paragraph or two and save the brief essay to develop in later lessons.