There can be various forms of cooperation between foundations and NPOs depending on partners’ key function(s) as well as the way the partners manage their relations. They can range from funding arrangements to wider cooperative schemes.
Grantmaking
The most usual type of relation is a grantor-grantee relation, where local, national or international NPOs receive grants from foundations to finance specific limited-duration projects initiated by these NPOs.
The overall contribution of foundations to NPOs' income should not however be overestimated. A 2003 global survey of civil society in 32 countries indicates that private philanthropy (including foundations, as well as individual and corporate donors) accounts for 12% of NPOs' total revenue[1] against 35% from government; and 53% from fees. NPOs' revenue structure varies considerably among countries, while support from public authorities is higher in some West European countries (over 60% in Ireland; Belgium, and Germany), philanthropy is more prominent in some new Member States (26% in Romania, 23 % in Slovakia; 18% in Hungary). The survey also underlines that philanthropic/ private giving is the largest income source in two areas, namely international work and religion, and very significant in supporting civic/advocacy work and the environment (56%).
The EFC has developed a series of European grantmaking guidelines to document good practice in fields such as 
Disaster Grant making (2001) and Funding Vocational Training and Employment for People with Disabilities (2003).
On the grantseeking side, in an effort to assist its members in receiving more targeted, relevant applications for grants, the EFC has produced a brief guide for grantseekers ”Advice to Grantseekers” on how to approach foundations and corporate funders for support. Indeed, a high number of funding requests, estimated at 90 percent, are declined immediately because they fall outside a funder’s stated interest areas or because they are inadequately prepared and do not reflect an organisation’s strengths and its ability to carry out a proposal’s objectives. The “Advice to Grantseekers” document aims to facilitate access to funding information. The funding research process is time consuming and involves hard work. Research is only one of the many steps of this process. Although good research does not immediately guarantee successful fundraising, it is a worthwhile investment as it will certainly contribute to building successful and lengthy relationships with foundations.
Funding core costs
Core costs, the costs of running an organisation, are essential, long-term and too often not attractive to funders. However, there has been a movement from some foundations to provide core cost funding, either by providing the full project funding (including staff time and office cost related to the project), by offering development funding (funding professional development); or by giving strategic funding to the organisation[2]. It can cover capacity-building support, or investing in non-profit effectiveness.
Indeed, a key argument to fund core costs is that the best way a foundation can effect change is by funding the core costs of an organisation whose work meets the foundations’ objectives. What are the benefits of core funding for the funder? It gives the foundation an opportunity to get to know its grantee well over a period of time, help gain a deeper understanding, and be confident about its impact or assess where funding would be more effective.
Social investment
Social investment can take various forms, including making loans, providing micro-credit, taking equity, offering loan guarantees, quasi-equity, and is sometimes referred to as Programme-Related-Investments (PRIs). It also includes socially responsible investment (SRI) were investments are made from capital with the primary aim of producing income or appreciation with positive or negative screens used to help select appropriate investment vehicles. It can also cover share-holder actions to encourage more responsible business practice.
The EFC has identified in a preliminary survey[3] conducted in 2006 some 65 foundations and corporate funders in 17 European countries employing one or another form of social investments.
Foundations engage in programme-related investments to support NPOs, for the following reasons:
- It increases foundations’ impact, i.e. they achieve more with the same amount of money
- They believe that it helps develop stricter financial and management disciplines and can help NPOs build financial and human capital, or develop an income-generating venture.
- On the other side it can help NPOs by offering pre-funding, working or development capital; maintaining liquidity or providing leverage through loan guarantees enabling the NPOs to access greater sums or better conditions from mainstream credit institutions.
NGO contracting
In some cases foundations can request and fund the development and implementation of a specific project by other local and international non-profit organisations.
So overall, foundations' funding practices can offer a varied set of opportunities for NPOs in a wide range of areas, bearing in mind that:
- Foundations operate and fund according to the public benefit mission for which they were set up. This can set some restrictions concerning the field (culture, social affairs, health, local development etc.), as well as the geographical scope (local, national, international) or the beneficiaries (organisations or individuals) the foundation can support.
- There is unavoidable tension arising from the amount of resources that a foundation is able or willing to allocate and the needs of NPOs.
Cooperation can also take a more formalised and integrated approach on a short-term project basis or a longer collaborative scheme as follows:
Project partnerships[4]
Foundations and NPOS can be partners in the design and delivery of a project or in matching their resources. NPOs can be attractive partners for foundations because they are easily approachable, relatively flexible, and usually less bureaucratic than public partners. They have local knowledge and grass-roots hands-on expertise in their respective communities and sectors of operation and/or can reach out to specific population groups, which they represent or serve e.g. young people, older people, minorities, disadvantaged groups etc.
NPO collaboration
The foundations can be involved in NPO working alliances which address NPO sector issues or coordinate NPO efforts. This type of cooperation can be found in advocacy efforts at national and at EU level to mobilise a voice or a concerted role of the non-profit sector. Coalition-building is also developed in specific fields e.g. in the social sector at the national level between foundations and NPOs to have a greater say and role, for example in the management and disbursement of EU structural funds for social cohesion and regional development.
Project partnerships and collaboration can be of interest for grantmaking as well as for operating foundations that do not give grants to external parties, but can run or join collaborative ventures. These types of partnership are usually formed to respond to a need, to fill a gap where other actors - private or public - may not be able yet or willing to act. For example, they may deliver training, credit opportunities in specific localities, or provide emergency relief. The partnership is usually dissolved when its objectives have been met.
When entering into partnership with NPOs, foundations will have to consider a series of factors, among which are the governance, staff, and resources of the partner NPO(s); to whom is it accountable; and whether it is open to a broader alliance with other partners etc.
Opportunities for partnership with NPOs lie in the areas where their defined priorities overlap with those of foundations. The partnership should be clearly determined; activities should be jointly determined and acknowledge mutual needs, priorities and potentials.
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[1] Source: L. M. Salamon, S. Wojciech Sokolowski, R. List, in Global Civil Society, an Overview, The John Hopkins Comparative Nonprofit Sector Project, pp. 29-30, figures 9-10, ed. The John Hopkins University, 2003.
[2] Source: Association of Chief Executives of Voluntary Organisations (ACEVO) 2002
[3] Foundations and Social Investment in Europe, Margaret Bolton, EFC Social Investment Group Brussels 2006
[4] Source: Building donor partnerships / Terrice Bassler, Mabel Wisse Smit. - New York : Open Society Institute, 1997.