Foundations play a significant role in philanthropy, funding programs that make social transformation and community development a reality. However, not all foundations operate in the same way. Public and private foundations differ in funding sources, governance structures, and grant distribution processes.

Understanding these differences is important for funders, nonprofit groups, and philanthropists wanting to make effective grantmaking a reality. In this article, we break down private and public foundations, comparing and contrasting them, explaining the types of grants they offer, and highlighting why both can benefit from grant management software like Fluxx.

What Is a Private Foundation?

A private foundation is a nonprofit institution most frequently supported through a single source, such as an individual, a family, or a corporation. Unlike public foundations, which rely on external donations, private foundations manage their own endowments and distribute grants based on the donor’s philanthropic intent.

Key Characteristics of a Private Foundation

  • Single Funding Source: Funded by a single family, individual, or corporation and not backed through public offerings.
  • Investment-Based Growth: Operates off an endowment, distributing grants from investment earnings.
  • Limited Public Fundraising: Does not actively seek funding from the general public.
  • More Control Over Grantmaking: Full discretion over fund distribution rests with the board or donor.
  • IRS Regulations: Must distribute at least 5% of assets annually to maintain tax-exempt status.

Private foundations are designed to support long-term philanthropic goals, focusing on initiatives that align with the founder’s vision.

What Is a Public Foundation?

A public foundation, sometimes called a public charity, is a nonprofit institution that raises funding from multiple sources, including private citizens, companies, and government grants. Public foundations provide grants for community programs, research, education, and social initiatives.

Key Characteristics of Public Foundations

  • Broad Funding Base: Maintained through public contributions, grants, and corporate gifts.
  • Community-Centered: Often works with national or regional programs to serve a broad audience.
  • Government and Donor Compliance: Must meet IRS requirements to maintain public charity status.
  • Flexible Grant Distribution: Can adjust grantmaking strategies based on fundraising success.
  • Direct Program Implementation: Some public foundations operate their own initiatives alongside their grantmaking activities.

Read the full article about public and private foundations at Fluxx.