Nonprofit Vocabulary

I’ve found there is a fair amount of jargon if you’re not familiar with the nonprofit world. Even if you are, it helps to have a glossary handy just in case things start getting mixed up.

This is just a starter! If you have some terms you deal with every day in the nonprofit world, I’d love to heard about them.

Nonprofit

This is a legal distinction which means an organization does not operate for profit, does note have shareholders, and operates for either a religious, charitable, scientific, public safety, literary, or educational purpose, or for the purpose of fostering international sports or preventing cruelty to children or animals.

Foundation

An institution whose purpose is to distribute funds to colleges, schools, hospitals, charities and the like. These are the “big guns” that you hear as sponsors of NPR like the Bill & Melinda Gates Foundation.

Community Foundation

Operating similarly to a foundation, community foundations manage the funds of many individual (or group) donors and carry out the charitable interests of those donors. Community foundations are usually geographically aligned with a specific area or state, for example here in the Triangle we have the Triangle Community Foundation.

501(c)(3)

Tax designation for most nonprofits, foundations, universities and nonprofit hospitals. Contributions to these groups are tax exempt, and all of these organizations are exempt from paying income tax. The “brief” description of this designation can be found on the IRS website.

501(c)(4)

These groups have started springing up more and more in the post-Citizens United ruling and are in the news quite a lot in the wake of the accusations against the IRS for targeting conservative political action groups. Technically, organizations under this designation promote “social welfare” and may take part in politics, elections, and lobbying. Unlike their (c)(3) cousins, contributions to these groups are not tax-deductible, and organizations do not have to disclose who their contributors are.

Grant

An award, which does not have to be repaid, usually given to a nonprofit organization but also to individuals. These awards may have certain strings attached, to which the grantee much comply in order to receive the grant and be eligible for future awards.

Matching Grant

This is a common example of a grant with strings attached. Many times for large campaigns, a foundation or grant-making authority will grant an organization money if that organization can match the amount given in other contributions. For example, the Rachel B. Johnson Foundation will award a $50,000 grant to the Ashby is a Cute Kitten Charity once the ACKC raises $50,000 from its other donors.

Endowment

Now we’re getting into the weeds! Once a nonprofit, foundation, etc. reaches the point where it has more than $250,000 in the bank at a time (the maximum the FDIC will insure), usually it will begin investing some of its assets in order to split up the amount into separate accounts which will be insure-able, and to continue growing its wealth.

The total value of an organization’s financial assets is known as its endowment, and can be organized (in legal terms) as a public charity, private foundation, or a trust. Beyond this there are some restrictions of how much money can be held in an endowment, particularly if you are a university, and the weeds start getting deeper. If you’re really really into this stuff, I’d check out the Wikipedia page as a starter.