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Grantmaking: Everything new foundations need to know

September 28, 2022

Establishing a new grantmaking foundation is a worthwhile cause that puts funds in the hands of organizations that will make the most of it. Of course, determining who these organizations are, how you’ll assess them, and how to distribute your grant awards properly requires preparation and sophisticated management tools. 

To help your organization get started with grantmaking, this article will review the essentials that new foundations should know, including:

To begin, let’s review the basics of grantmaking. 

Grantmaking FAQ

With specific legal requirements, expectations, and processes, grantmaking can quickly become a complex topic. Before exploring these deeper nuances, it’s necessary to have a solid foundational understanding of grantmaking. 

Here are a few common questions new foundations often have before starting a grant program:

  • What is a grantmaker? Grantmakers are organizations that create grant programs charitable organizations can apply for to receive funding. While many grantmaking organizations are foundations, the term also includes other organizations that award grants, such as corporations with philanthropic giving programs. 
  • What are the different types of grantmaking foundations? Private foundations are grantmaking organizations that operate independently, usually through a family or small group of individuals. Corporations often have two types of charitable foundations: in-house giving programs, which are managed entirely by the company, and corporate foundations, which are separate legal entities that operate independently but are managed by a board of directors composed of members of the corporation. Public foundations are foundations funded for their specific communities and are funded by donations from individual supporters. 
  • What do grantmakers need to get started? Along with the funds necessary to give out an award, new foundations will need to assemble a staff that includes a board, a legal team, financial advisors, and other employees to manage day-to-day operations. Private foundations will need to apply for an Employer Identification Number (EIN), then apply to become a 501(c)(3). Additionally, foundations will likely need the necessary software to manage their internal operations, finances, and external communications. 

Private and corporate foundations should stay up to date with IRS guidelines related to operations, such as tax requirements, how much must be paid each year, and how to maintain and renew their status. 

Grantmaking best practices

Setting up a new grant program is a collaborative effort that requires asking serious questions about your foundation’s purpose, what you’re looking for in potential grantees, and how you will maintain legal compliance. 

To help you kickstart the grantmaking process, here are four core steps your team can follow: 

1. Establish your foundation’s purpose.

To set up your grant program, you’ll need to look in-depth at the hows and whys behind your organization. Your organization already needs to have a solid mission statement to receive 501(c)(3) status, and fleshing out this mission into a fully defined purpose will help your foundation become reputable and allow grantees to tailor their applications to your foundation better. 

Solidifying your purpose will require introspection and thought about how you envision your grants making a difference. You can better clarify your purpose by answering the following questions: 

  • What is your mission? As mentioned, your organization should already have an official mission statement and reviewing it is a solid place to start when developing your purpose. Does your mission statement share specific values about how you want to make the world a better place, such as by taking a more equitable, community-focused, or empowering approach? More open-ended mission statements provide a starting point for crafting your grant program’s purpose.
  • What makes your foundation unique? How is your foundation uniquely qualified to advance your mission? Consider your foundation’s resources, connections, and philosophy towards your mission to answer this question. For example, you might explain how your foundation comes at your mission from a unique perspective, such as prioritizing sustainability or emphasizing diversity.
  • Who can receive your grants? What types of organizations do you intend to award grants to? Consider whether your grant is open to all applicants or if there are restrictions, such as only reviewing solicited proposals or organizations based in a specific geographical area. For foundations with a broader mission, it can be helpful to narrow your program areas to ensure you only receive grant applications from nonprofits with missions closely aligned to your own. For example, if your mission is to support conservation efforts, you might create a grant program specifically for nonprofits dedicated to creating solutions that balance biodiversity and economic concerns.

When writing out your grant description, be prepared to create multiple drafts as you nail down the exact words to get your purpose across. Consider how you can reflect this purpose in your general grant description and your application form to make sure you connect with nonprofits that fit your mission. 

2. Determine your budget. 

Managing your budget should be one of your foundation’s top priorities to ensure you meet your charitable impact objectives. Partner with a financial consultant to help determine how much funding to give away through grants, when funding will be paid out, and how to manage your funding to continue operating your foundation sustainably. 

In addition to funds allocated to grants, consider how much you expect your foundation to spend on other expenses, such as employee salaries, promotion and marketing costs, software licenses, and other overhead fees. Keep in mind that when drafting your budget, it is not a contract but a general guideline. If you need to deviate significantly from your budget, consider the change and work to reshape the rest of your budget moving forward. 

Your foundation must also maintain financial transparency to cultivate trust with your grantees and the general public. Nonprofits will often search for grant opportunities by reviewing different foundations’ past funding projects to determine if they’re a good fit for a grant. By ensuring your public financial reports are accurate, and up to date, you can help exemplary nonprofits find your foundation more easily. 

Finally, when setting your award amount for each grant, consider how much your foundation has available to allocate to each grant and how much is necessary to spend on a given project to make a tangible difference. While some projects may be able to make significant progress with just $1,000, others may require $10,000 or more to be worthwhile. 

3. Set up your grant process.

Create a tailor-fit grant process to your organization to provide an organized process for grantees to submit their applications, your team to review applications, and ensure funding is used correctly. 

Work with your decision-makers to determine what process makes the most sense for your foundation and purpose by considering: 

  • Responsive vs. strategic grants. Responsive grants are created to respond to specific community needs. For example, a foundation might create grants for relief or rebuilding efforts after a hurricane. This is a popular approach for new foundations that are still in the process of determining their approach to philanthropy. By contrast, more established foundations often prefer strategic grants, which create grants to achieve a specific, long-term purpose.
  • Review process. How will you determine which grants to award funds to? Decide who will review applicants and create a system to compare various applications. Strive to include reviewers from various backgrounds to ensure you get a wide range of perspectives. Many foundations also create rubrics or rating systems to evaluate each application equally and maintain consistent scoring. 
  • Outreach approach. How will you attract grant applicants? If your foundation already has connections to nonprofits in your field, try contacting members of their leadership team to discuss your grant and extend an invitation to apply. Create a dedicated page on your website for your grant that provides information on your grant’s purpose, how to apply, and who to get in touch with if they have questions. 

When defining these aspects of your grant program, determine who will be responsible for overseeing various parts of your grant process. For instance, who will communicate with applicants? Oversee distribution of funds? Manage follow-up processes? Work with your board and other key stakeholders to assign responsibilities based on each team member’s expertise and availability.

4. Invest in organizational tools.

To stay organized throughout the grantmaking process, grants management tools can provide a framework for your organization and ensure each step in your grant process is completed correctly and on time. 

When reviewing grant management tools, look for solutions with the following features: 

  • Communication tools. Maintain strong communication with both your internal team and external applicants. Look for a grants management platform that allows you to track relationships with grantees and monitor where they are in the process, as well as tools that provide a framework for internal review and communication to ensure your team stays on the same page throughout your review process. 
  • Application creation and management. Design an application that grantees will complete and ensure you have tools in place to receive, assess, and track applications. For grantees you approve, your tools should also allow you to continue monitoring your relationship and review the impact they were able to make with the awarded funds. 
  • Reporting and tracking. Monitor all of your grant rewards to assess your foundation’s progress in fulfilling your mission. Determine when grant payments will be made, if grantees have stayed adequately in touch following their awards, and what has been achieved with your grants. 

While several grants management platforms are available, Salesforce Grants Management stands out for having the comprehensive functionality, customization options, and intuitive features foundations need. 

Salesforce Grants Management Software

Salesforce Grants Management software allows organizations using Salesforce to oversee their entire grantmaking process with comprehensive management tools. The platform is built on the Outbound Funds Module and provides all the same functions, as well as:  

  • Program management: Understand how your grants, programs, and initiatives work together to advance your mission with a management tool that brings them together. 
  • Reporting: Manage your finances by tracking each grant’s stage and schedule when payouts will be made. Use Grants Management’s reporting tools to gain an overview of your funding programs, including data by year, program, and populations served. 
  • Application creation tools: Use Grants Management’s templates to create grant applications easily and customize them based on your program’s unique requirements. 
  • Internal review management: Keep your review process organized by allowing your reviewers to easily access the parts of applications they need to see and submit their scores. 
  • Improved grantee experience: Create a grantee portal that allows applicants to view funding opportunities, manage their applications, and submit follow-up impact reports for grants they have received. 
  • Due diligence tools: Maintain due diligence with Salesforce Grants Management’s preconfigured templates, tax status verification tool, and external review features to collect feedback from external stakeholders. 

To get started with Salesforce Grants Management, your foundation will need to partner with a professional Salesforce consultant like our services at Fíonta. Fíonta is a Salesforce Premium Partner. Our professional UX and development teams can help customize your Salesforce platform and implement Salesforce Grants Management to be user-friendly and integrated with the rest of your technology stack. 

Wrap Up

Grantmaking allows your foundation to make a difference by empowering nonprofits to champion your mission. Develop your grant program by assessing your internal resources and purpose to create a foundation for the rest of your program. From there, determine what grant process will best fulfill your goals and how your grant management tools can aid you in doing so. 

As one of the top grant management tool providers, Salesforce has a diverse range of tools that can help your foundation oversee day-to-day operations. To learn more about how Salesforce can advance your grantmaking process and other parts of your foundation, explore these resources: 

Ready to start the grantmaking process? Find out how your foundation can implement Salesforce’s Grant Management. Contact us today!