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Federated Funds for US Nonprofits: What Are They and Who's Eligible?

| Updated May 17, 2018

Learn who's most likely to be awarded support from a federated fund

Federated funds are descendants of early 20th-century community chests, which raised funds for community projects from local businesses and workers. Modern federated funds use workplace and community giving programs to support a broad range of missions through a variety of nonprofits and other recipients.

Here's what you need to know about federated funds — and whether your nonprofit should consider applying for this type of funding.

How do federated funds work?

A federated fund mobilizes a single fundraising effort — often in a workplace — and then distributes the funds it raises to a diverse range of nonprofits or other recipients. Employers may encourage employee donations to federated funds by matching funds and automatically deducting donations from paychecks.

A federated fund is cooperatively owned and managed by its members, who develop a fund's criteria for giving and then make grants or other donations to nonprofits whose missions fulfill that criteria. In theory, any organization or group of people may create a federated or community fund. The combined mission is the reason for the "united" in the names of so many of these funds.

What are some examples of federated funds?

Well-known federated funds include:

  • UNCF (formerly the United Negro College Fund)
  • United Way
  • National Urban League
  • Combined Federal Campaign
  • Combined Health Appeal

There are numerous state and local community funds as well. Examples include:

  • Communities Foundation of Texas, based in Dallas, Texas
  • Omaha Community Foundation, based in Omaha, Nebraska
  • Bread and Roses Community Fund, which supports causes in Pennsylvania, Delaware and New Jersey
  • California Community Foundation, which serves the Los Angeles area
  • Community Chest of Port Washington, based in Port Washington, New York
  • Five Towns Community Chest, based in Woodmere, New York

What are the eligibility criteria for federated funds?

Federated funds often have strict eligibility criteria and elaborate application requirements, especially for new applicants. Receiving and maintaining the support of a federated fund often requires:

  • A detailed proposal
  • Meticulous financial records
  • Systems for tracking efficiency and effectiveness
  • Extensive reporting before, during and after a program's implementation

Who's most likely to be awarded support from a federated fund?

Because the charitable focus of a federated fund is arrived at by committee — and sometimes cultivated over a long period of time — federated funds tend to favor established nonprofits as funding recipients over more unique or potentially innovative organizations.

Large federated funds often have established relationships with similarly large nonprofit organizations, which in turn have been receiving support for years or even decades. Their size, cooperative management and age can make federated funds appear to favor legacy recipients over innovation. Many federated funds are unlikely to take chances on unique or offbeat programs — especially if those programs don't yet have the records necessary for a detailed application process.

However, federated funds may still play a role in support of smaller nonprofits. For example:

  • A local federated fund could be a good match for nonprofits dedicated to community support or development
  • A nonprofit that starts community gardens, rehabs vacant properties or offers environmental education to grade schools might be a strong candidate for a grant from a community fund supported by a state or city government
  • Nonprofits dedicated to administering health care to underserved populations might be good candidates for federated fund support
  • The National Urban League supports, among other causes, entrepreneurship and business development — which might be a fit for nonprofits that support mobile app development workshops or financial literacy education

If you choose to pursue federated funding, prepare for detailed application requirements by keeping thorough records and preparing reliable metrics for measuring effectiveness.

MissionBox editorial content is offered as guidance only, and is not meant, nor should it be construed as, a replacement for certified, professional expertise.

References

U.S. Office of Personnel Management: Combined Federal Campaign (2016)

Community Health Charities: History

The Balance: The pros and cons of federated funds for nonprofits and donors by Joanne Fritz (2016)

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Baltimore-based writer and educator