Information for OCF-Hosted Groups who would like to issue out grants to recipients.
Open Collective Foundation is excited to offer our Collectives the opportunity to give grants to individuals in furtherance of their mission. For all of the details of how it works, make sure to take a look at our Grantmaking Policy.
Nathan gives a brief overview of OCF's Grantmaking Policy and Process
The OCF grantmaking policy is very narrowly scoped to enable grants that:
- Won't be taxable income to the grantee, and
- Enable us to pay people upfront instead of needing receipts beforehand.
This is because if these two aspects aren't a barrier for the payee, you can already pay people via normal expenses without all this extra process.
If receipts are available, they can submit a reimbursement expense. If it's okay for them to get a 1099 for this income, they can submit an invoice expense.
If those options aren't a good fit and they fit the criteria for a grant, you can proceed to make a grant.
Grants must fit the IRS definition of charitable purposes, fit OCF's defined charitable purposes, and be aligned with the overall mission of your Collective.
OCF only accepts Collectives that fit within this remit, so if your Collective is hosted by OCF you can safely assume your activities are covered. OCF's purposes are quite broad and are detailed here.
You have a responsibility to ensure that all funds donated to your Collective go toward your Collective’s mission, including grants. If you have an idea for something completely different, consider expanding your focus or start a new Collective.
Generally, grants by our Collectives have to fit within the exempt purposes set forth in Internal Revenue Code section 501(c)(3): charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals.
The term charitable can be confusing. The IRS uses the term in its generally accepted legal sense, and it includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
In emergencies, rapid response can make a tremendous difference.
The policy we have developed for grantmaking streamlines the process for applicants and Collectives. One added benefit of this is that Collectives can respond quickly to their community's needs. If all the info is submitted and the contract is signed quickly, we can turn around grant payments within a few days.
Traditional grantmaking by large foundations can drag on for months, and usually requires everything about the intended impact and budget be known upfront. OCF's approach to grantmaking enables a lower up-front barrier because we hold the funds as you spend the grant and check each expense instead of requiring a detailed budget ahead of time.
Traditionally, grantmaking is an arena of the rich and powerful. OCF's grantmaking policy allows communities to distribute money to individuals in a way that is compliant with the tax code and also centers the on-the-ground needs of those communities. We respect and trust your relationships with and understanding of your own communities, and put you in the driver's seat when it comes to making grants. We streamline the process as much as possible, and handle the IRS reporting side for you, and try to create a system that encourages equitable grantmaking practices.
As the Whitman Institute has written, "efforts to create social, political, and economic equity will be more successful if funders proactively work to alleviate power imbalances in the sector by embedding trust, dialogue, and relationship-building in its practices with grantees." By using certain practices, and centering equity, humility, and transparency, grantmakers can build trust with their grantees.
While our hosted Collectives may not be huge foundations, there is still an inherent power imbalance between a grantmaker and its grantees. Our platform and processes minimizes that imbalance: many aspects of trust-based philanthropy are baked into the grantmaking process through Open Collective Foundation:
- All transactions are transparent by default (but grantees can keep their real names private if they wish)
- The platform makes it easy for grantees to request payouts of funds
- The application and final reporting processes, defined by the rules IRS, minimize administrative burden for grantees as much as possible, placing Collective admins in a supportive role alongside grantees
- Grantees have the opportunity to update the grantmaker and the public on their work through Updates
- It's easy for grantees to extend or adjust their project as required
The ability to make grants is just one piece of the puzzle. While OCF holds the line on the outer bounds of compliance, you and your team still have to work together on creating a grantmaking practice that centers equity and justice, and accounts as much as possible for the power imbalance inherent in the grantmaker-grantee relationship. Thankfully, there is a great deal of information out there to help you cultivate an efficient and equitable process.
- Offer multi-year grants and/or the option to renew funding
- Offer grants for general support, rather than for a specific project (NOTE: this is only possible for grants to individuals in cases of poverty relief)
- Limit the amount of information requested and the length of the grant application as much as possible (or use something like JustFund’s common proposal). This is something we do by default!
- The burden of researching a potential grantee (i.e., due diligence) would then fall on you, the grantmaker
- Accept applications online (yes, some foundations still request applications by mail)
- Be open and transparent about their decisionmaking process, and solicit feedback
- Offer ways they can support grantees outside of just financial assistance
Even with all of the above practices in place, there is still a significant power imbalance between the grantmaker and the grantee.
Participatory grantmaking is an essential tool of the solidarity economy. More than just consulting your community, or involving community members, participatory grantmaking is a form of co-creation. By distributing your grantmaking power to your community, you can turn patronage into solidarity and cultivate a tight-knit network of mutual support.
Participatory grantmaking takes many forms:
- Inviting grant applicants to vote for which applicants should be funded
- And much more!
Open Collective Foundation fully supports Collectives' exploration of participatory grantmaking. We invite you to explore available guides and tools to cultivate a process that works for you: