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501(c)(3)

The IRS designation for tax-exempt charitable organizations eligible to receive tax-deductible donations. This is the standard designation for most of the orgs you’re likely to have heard of or support. The golden ticket of the nonprofit world that comes with serious strings attached.

501(c)(4) 

The IRS designation for tax-exempt social welfare organizations that can engage in unlimited lobbying and limited political activity. Where advocacy meets action, minus the tax deduction for donors.

A

Additionality 

The genuine new impact created by an intervention that wouldn't have happened otherwise. The gold standard question: "Would this have occurred anyway?" If yes, you're not creating additional value—you're just taking credit for it.

Advocacy 

Organized efforts to influence public policy, legislation, or public opinion on social issues. Often more cost-effective than direct service, yet chronically underfunded because donors prefer tangible outputs over systemic change.

Annual Fund 

A nonprofit's yearly fundraising campaign for unrestricted operating support. The unsung hero of organizational sustainability that rarely gets the love it deserves.

Attribution 

The thorny challenge of determining which outcomes can be credited to a specific intervention. Spoiler alert: it's almost always more complicated than funders want to admit.

B

B Corporation 

For-profit companies certified to meet rigorous social and environmental standards. Capitalism with a conscience, verified by third-party assessment.

Beneficiary 

The individuals or communities intended to benefit from a program or intervention. Increasingly (and appropriately) being replaced with terms like "program participants," “clients,” or "community members" that better reflect dignity and agency.

Best Intentions Trap

The comfortable delusion that caring deeply about a problem is the same as solving it. The philanthropic equivalent of thoughts and prayers—where donors prioritize their own emotional satisfaction over actual outcomes for the communities they claim to serve. Best intentions philanthropy chooses heart-warming narratives over hard data, funds programs that sound good over those that work, and mistakes the donor's feelings for the beneficiary's results. It's the reason we have a thousand wells that don't work in Africa while local water systems go unfunded, why we ship our old clothes overseas instead of supporting local economies, and why charismatic founders get millions while effective but unglamorous programs scrape by. The road to ineffective (or harmful) philanthropy is paved with best intentions. At Altruous, we believe the people facing real challenges deserve better than your good feelings. See Moral Hazard and Perverse Incentive.

Blended Finance 

The strategic use of philanthropic capital alongside commercial investment to achieve both financial returns and social impact. When done right, it multiplies impact. When done wrong, it's just subsidizing private profit.

Board-Designated Funds 

Unrestricted funds that a nonprofit's board has earmarked for specific purposes. More flexible than donor restrictions but still requiring strategic discipline.

C

Capacity Building 

Investments in strengthening an organization's infrastructure, systems, and capabilities. What every nonprofit desperately needs but few funders want to support because it's not "sexy." See “Unrestricted Funding.”

Catalytic Philanthropy 

Strategic giving designed to trigger broader systemic change by mobilizing multiple stakeholders and resources. Think dominoes, not direct impact.

Causation 

The gold standard proof that your intervention actually caused the observed change—not coincidence, not external factors, not wishful thinking. Establishing causation requires controlling for other variables, using comparison groups, and often longitudinal data that most funders won't wait for. It's the difference between "graduation rates increased after our tutoring program" (correlation) and "graduation rates increased because of our tutoring program" (causation). In the nonprofit world, everyone claims causation but few prove it, which is how we end up funding feel-good programs for decades without knowing if they actually work. The inconvenient truth: determining causation in complex social systems is extraordinarily difficult and expensive, which is why most organizations just point to correlation and hope nobody asks hard questions. See Randomized Control Studies (RCTs).

Charity 

Direct relief addressing immediate needs. Important for crisis response but often criticized for treating symptoms rather than root causes. Not to be confused with strategic philanthropy.

Client 

Traditional term for individuals receiving services from nonprofits. Increasingly viewed as outdated because it implies a passive, dependent relationship rather than recognizing agency and dignity.

Collective Impact 

A structured approach where multiple organizations commit to a common agenda for solving complex social problems. Requires backbone support, shared measurement, and egos checked at the door.

Community Foundation 

Place-based philanthropic organizations that pool donations to support local nonprofits and initiatives. Your local experts who actually know what's happening on the ground. Community Foundations are also often DAF custodians, and risk the same moral hazards and perverse incentives as their for-profit counterparts.

Constituent 

A more respectful alternative to "client" or "beneficiary" that recognizes people as stakeholders with voice and agency in programs affecting them. Because people aren't just passive recipients of charity.

Contribution 

A more nuanced alternative to "attribution" that acknowledges multiple factors contributing to outcomes. The honest approach to impact measurement.

Corporate Social Responsibility (CSR) 

Business practices integrating social and environmental concerns into operations and stakeholder interactions. Ranges from genuine commitment to sophisticated greenwashing—due diligence required.

Correlation 

When two things happen together often enough to notice a pattern, but without proof that one causes the other. The statistical relationship that launches a thousand misleading headlines and dubious grant proposals. In philanthropy, correlation is everywhere: test scores rise when a new program launches (but also when the economy improves), crime drops after an intervention (and also when demographics shift), health outcomes improve with your wellness program (and with better weather). Correlation is the gateway to claiming impact you didn't create. It's why rigorous evaluation matters and why "our participants showed improvement" means almost nothing without a control group.

Cost Per Outcome 

The total program cost divided by the number of successful outcomes achieved. A crucial metric that too few organizations actually calculate.

Counterfactual 

What would have happened in the absence of an intervention. The comparison point that separates real impact from feel-good stories.

D

DAF (Donor-Advised Fund) 

A charitable giving account that provides immediate tax benefits while allowing donors to recommend grants over time. Revolutionized giving flexibility but sparked debates about warehoused wealth.

DALY (Disability-Adjusted Life Year)

The inverse of QALY—measuring years lost to disability, illness, or premature death. One DALY equals one lost year of healthy life. Developed by the WHO to quantify disease burden globally, it's become the preferred metric for comparing interventions across different health conditions. DALYs let you argue that preventing malaria in children generates more impact per dollar than treating rare diseases in wealthy countries. Technically correct, morally complicated, and the reason your local children's hospital won't get funding from Effective Altruists.

Data-Driven Decision Making 

Using empirical evidence rather than assumptions to guide philanthropic strategies. Novel concept, we know.

Deadweight Loss 

The inefficiency created when resources are allocated suboptimally. What happens when ego, politics, or poor planning override evidence-based decisions.

Direct Service 

Programs that provide immediate assistance to beneficiaries. Essential work that addresses urgent needs while (ideally) longer-term solutions are developed.

Disbursement Quota 

The minimum percentage of assets that foundations must distribute annually. In the U.S., it's 5%—a number that hasn't changed since 1969 despite dramatic shifts in investment returns.

Double Bottom Line 

Measuring both financial performance and social impact. Because profit without purpose is so 20th century.

Due Diligence 

The systematic investigation of a potential grantee's capacity, track record, and alignment. What separates strategic philanthropy from wishful thinking.

E

Earned Revenue 

Income generated through fees, sales, or services rather than donations. The holy grail of nonprofit sustainability that's harder to achieve than most board members think.

Effective Altruism 

A philosophy and movement using evidence and reason to determine the most effective ways to improve the world. Where utilitarian philosophy meets philanthropic practice, sometimes controversially.

Effective Philanthropy 

Strategic giving that maximizes impact through evidence-based approaches, continuous learning, and adaptive management. What we should all be doing but often aren't.

Effectiveness 

The degree to which a program achieves its intended outcomes. Not to be confused with efficiency, though both matter.

Endowment 

A permanent fund where the principal remains intact while investment income supports operations. Long-term stability that requires short-term sacrifice.

Environmental, Social, and Governance (ESG) 

Investment criteria considering sustainability and ethical impact alongside financial returns. The alphabet soup trying to make capitalism more conscientious.

Evidence Base 

The accumulated research and evaluation demonstrating a program's impact. Ranges from "promising" to "proven" with most interventions falling somewhere in between.

Exit Strategy 

A planned approach for concluding funding relationships responsibly. Often discussed, rarely executed well.

F

Family Foundation 

A private foundation funded and governed primarily by family members. Where dynastic wealth meets (hopefully) social good.

Fiscal Sponsorship 

An arrangement where an established nonprofit provides legal and tax-exempt status to another project. The training wheels of the nonprofit world.

Form 990 

The annual tax return that tax-exempt organizations must file publicly. A treasure trove of information for those willing to dig through the bureaucratic language.

Funding Collaborative 

Multiple funders pooling resources to support shared objectives. Sounds simple until everyone wants their logo biggest on the report.

G

General Operating Support 

Unrestricted funding for an organization's overall mission and operations. What nonprofits actually need versus what most funders want to give.

Gift Acceptance Policy 

Guidelines determining what types of donations an organization will accept. Because sometimes you really should look a gift horse in the mouth.

Giving Circle 

Groups of individuals who pool donations and collectively decide on recipients. Democratizing philanthropy one potluck meeting at a time.

Grant Agreement 

The legal contract between funder and recipient outlining terms, expectations, and requirements. Where good intentions meet legal obligations.

Grantmaking 

The process of distributing funds to charitable organizations or causes. Sounds simple until you try doing it strategically.

Grassroots 

Community-led initiatives emerging from those directly affected by issues. Where authentic change begins, despite being chronically underfunded.

Greenwashing 

Deceptive marketing that exaggerates or fabricates environmental benefits to appear more eco-friendly than reality. The corporate PR sleight of hand that's spawned cousins like impact washing, purpose washing, and every other attempt to paint profit-seeking as planet-saving.

H

High-Integrity Philanthropy 

Altruous's framework for giving that prioritizes transparency, evidence-based decision-making, genuine impact measurement, and honest acknowledgment of what works and what doesn't. The north star for philanthropists who care more about actual change than feeling good.

High-Net-Worth Individual (HNWI) 

Someone with investable assets exceeding $1 million. The traditional philanthropy target audience that's aging out while next-gen wealth seeks different approaches.

Holistic Evaluation 

Assessment considering all aspects of a program's impact, including unintended consequences. Because cherry-picking metrics is so last decade.

I

Impact 

The long-term, sustainable changes in systems, behaviors, or conditions resulting from an intervention. The holy grail that's often claimed but rarely proven. Not to be confused with outputs (what you did) or outcomes (what changed immediately).

Impact Investing 

Investments intended to generate positive social/environmental impact alongside financial returns. The space where capitalism and conscience attempt to coexist.

Impact Measurement 

The systematic assessment of social, environmental, and economic changes resulting from interventions. Harder than rocket science because humans are involved.

Impact Washing 

Exaggerating or misrepresenting social/environmental benefits for marketing purposes. The philanthropic equivalent of greenwashing that's increasingly common as impact becomes trendy.

Implementation Science 

The study of methods to promote systematic adoption of evidence-based practices. Bridging the knowing-doing gap that plagues social programs.

In-Kind Donation 

Non-cash contributions of goods or services. Sometimes helpful, often a hassle, occasionally a tax-dodge disguised as generosity.

Indirect Costs 

Overhead expenses not directly attributable to specific programs. The vital organizational infrastructure that everyone needs but nobody wants to fund.

Intermediary 

Organizations that redistribute funds from donors to end recipients. Adding value through expertise or just adding bureaucracy—results vary.

ITN Framework (Importance, Tractability, Neglectedness) 

The Effective Altruist's holy trinity for prioritizing cause areas. Importance asks "How many people does this affect and how deeply?" Tractability asks "Can we actually make progress?" Neglectedness asks "Is anyone else already solving this?" The framework that explains why EA funds deworming over cancer research and AI safety over local food banks. Logically sound but sometimes leads to conclusions like "Let's ignore local poverty to focus on preventing robot apocalypse." Often misapplied by those who forget that "neglected" doesn't automatically mean "important" and "important" doesn't mean "important to the specific community you claim to serve."

J

Joint Funding 

Multiple funders supporting a single initiative through coordinated efforts. Requires leaving egos at the door and actually collaborating.

K

Key Performance Indicators (KPIs) 

Specific, measurable values demonstrating progress toward objectives. The metrics that matter versus the metrics that are easy to measure.

L

Learning & Evaluation 

The systematic process of assessing what works, what doesn't, and why, then applying those insights to improve future efforts. The feedback loop that separates adaptive organizations from those repeating the same mistakes.

Legacy Giving 

Donations made through wills, estates, or planned giving vehicles. Where mortality meets generosity.

Letter of Inquiry (LOI) 

A brief proposal summary submitted before a full grant application. The first hoop in the nonprofit obstacle course.

Leverage 

Using initial funding to attract additional resources. The philanthropic multiplier effect when done right.

Logic Model 

A visual representation linking program resources, activities, outputs, and outcomes. The roadmap from intention to impact.

Longitudinal Study 

Research tracking the same subjects over extended periods. The gold standard for understanding lasting impact that almost no one funds because funders want results yesterday.

M

Matching Grant 

Funding contingent on raising additional funds from other sources. Motivational tool or unnecessary hurdle, depending on your perspective.

Mission Drift 

When organizations gradually shift focus away from their core purpose. Often driven by chasing funding rather than impact.

Mission-Related Investment (MRI) 

Foundation investments aligned with charitable purposes while seeking market returns. Having your cake and eating it too, theoretically.

Moral Hazard 

The conflict of interest created when those making decisions don't bear the consequences of those decisions. In the DAF universe, custodians like Fidelity and Schwab face a spectacular moral hazard: they earn management fees (often 0.6% annually) on assets that sit undistributed, creating a powerful incentive to encourage deposits while discouraging disbursements. They'll celebrate your tax deduction today while your dollars generate fees for decades instead of generating impact. It's like hiring a food delivery service that gets paid more the longer they keep your meal in the truck. See Perverse Incentive and Best Intentions Trap.

Movement Building 

Creating coordinated action across multiple stakeholders toward systemic change. The slow burn approach that actually shifts paradigms.

Multi-Year Funding 

Grant commitments extending beyond a single year. What nonprofits need for stability but few funders provide.

N

Needs Assessment 

Systematic analysis identifying gaps between current conditions and desired outcomes. Step one of any intervention worth funding.

Net Present Value (NPV) 

The current value of future impact streams. Bringing financial rigor to social returns.

Nonprofit 

Tax-exempt organizations operating for public benefit rather than private profit. Where passion meets paperwork. Also a more modern and respectful way of referring to impact organizations.

NTEE Code 

National Taxonomy of Exempt Entities classification system categorizing nonprofits by primary purpose. The Dewey Decimal System of the nonprofit world that helps organize the chaos.

O

Operating Reserve 

Funds set aside to cover unexpected expenses or revenue shortfalls. The emergency fund that every nonprofit needs but few have.

Outcome 

The specific, measurable changes in behavior, knowledge, skills, or conditions resulting from program activities. The middle child between outputs (what you did) and impact (what actually changed long-term).

Outcome Evaluation 

Assessment focused on changes in beneficiary conditions or behaviors. What actually happened versus what we hoped would happen.

Output The direct, tangible products of program activities—workshops delivered, meals served, reports published. The stuff that's easy to count but doesn't tell you if anything actually improved.

Overhead 

Administrative and fundraising costs not directly tied to programs. The necessary evil that keeps organizations functional.

Overhead Myth 

The damaging misconception that lower overhead automatically means greater effectiveness. The zombie idea that refuses to die despite mountains of evidence to the contrary. For a quick primer on the Overhead Myth, check out Dan Palotta’s great TED talk from 2013.

P

Participatory Design

A program design methodology that brings beneficiaries into the creation process as co-designers rather than passive recipients of someone else's brilliant ideas. It's the opposite of the traditional "we went to school so we know what's best for your village" approach. Participatory design recognizes that lived experience is expertise—that the single mother navigating food insecurity knows more about the real barriers to nutrition than any think tank ever will. It involves structured methods for gathering insights, testing solutions, and iterating based on actual user feedback rather than donor assumptions. When done right, it produces programs that people actually use because they helped build them. When done wrong, it's just tokenistic "community input sessions" where feedback goes to die in a PowerPoint appendix. The difference between programs designed for communities and those designed with them is usually the difference between good intentions and genuine impact.

Participatory Grantmaking 

Involving affected communities in funding decisions. Revolutionary idea: asking people what they actually need.

Patient Capital

Long-term investments willing to accept below-market returns for social impact. The antidote to quarterly capitalism.

Pay-for-Success 

Funding tied to achieving specific, measurable outcomes. Accountability on steroids, for better or worse.

Perverse Incentive 

A reward system that accidentally encourages the opposite of its intended behavior. For example, DAFs were designed to democratize and simplify charitable giving, but the incentive structure rewards wealth parking over problem-solving. Donors get immediate tax deductions for eventual charity, custodians profit from assets under management rather than assets deployed, and the minimum distribution requirement is... wait for it... zero. The result? Over $234 billion sitting in DAFs while nonprofits struggle for funding. It's a system that literally pays intermediaries to slow down charity—a perverse incentive so perfect it seems intentionally designed.

Philanthropic Advisor 

Professionals guiding donors in strategic giving. The GPS for navigating the complex world of impact.

Pilot Program 

Small-scale implementation testing an intervention before scaling. Where good ideas meet reality.

Place-Based Philanthropy 

Funding focused on specific geographic areas. Because context matters more than most national funders realize.

Pooled Fund 

Combined resources from multiple donors supporting shared objectives. Strength in numbers and shared due diligence.

Power Dynamics 

The inherent imbalances in funder-recipient relationships. The elephant in every grant negotiation room.

Private Foundation 

Charitable organizations typically funded by individuals, families, or corporations. Where tax benefits meet philanthropic intent.

Program Officer 

Foundation staff managing grantmaking portfolios. The gatekeepers with varying degrees of subject matter expertise.

Program-Related Investment (PRI) 

Below-market investments furthering charitable purposes. The IRS-approved way to have impact beyond traditional grants.

Proof of Concept 

Evidence demonstrating an intervention's feasibility and potential. The bridge between good ideas and scalable solutions.

Proximate Leaders 

Individuals with lived experience of the challenges they're working to solve. The experts who actually understand the problem because they've lived it.

Q

QALY (Quality-Adjusted Life Year)

The utilitarian calculus attempt to quantify health outcomes by combining years of life with quality of life on a 0-1 scale. One QALY equals one year in perfect health; a year with severe arthritis might be 0.6 QALYs. It's how Effective Altruists compare saving lives to improving them—helpful for resource allocation but uncomfortable when you realize you're literally putting a number on human suffering. The metric that forces impossible trade-offs like "Should we fund one cancer treatment or fifty cataract surgeries?" At least it's trying to measure what matters, even if reducing human experience to decimal points feels dystopian.

Qualitative Data 

Non-numerical information capturing experiences, perceptions, and contexts. The stories behind the statistics that actually explain what's happening.

Quantitative Data 

Numerical measurements and statistics. The numbers that boards love but that rarely tell the whole story.

R

Randomized Controlled Trial (RCT) 

Experimental evaluation comparing treatment and control groups. The gold standard of evidence that's often impractical in real-world settings.

Restricted Funds 

Donations earmarked for specific purposes. The golden handcuffs of nonprofit finance.

Results-Based Accountability 

Management approach focused on achieving measurable improvements in quality of life. Turning good intentions into actual results.

Return on Investment (ROI) 

The ratio of benefits to costs. Simple in theory, complex when measuring social value.

Root Cause Analysis 

Systematic investigation identifying fundamental sources of problems. Going beyond band-aids to address what's actually broken.

S

Scale 

Expanding successful interventions to reach more beneficiaries.

Social Enterprise 

Organizations using business strategies to achieve social missions. Where impact meets income generation.

Social Impact Bond 

Pay-for-success contracts where private investors fund social programs and government repays based on achieved outcomes. Innovative financing or privatization of public services—jury's still out.

Social Return on Investment (SROI) 

Methodology quantifying social value creation in monetary terms, typically framed as cost-per-outome or cost-per-impact.

Spend-Down Foundation 

Foundations distributing all assets within a defined timeframe. Going out with a bang rather than perpetual drip.

Strategic Philanthropy 

Giving guided by clear goals, evidence, and systematic approaches. 

Supportive Accountability

The radical notion that accountability should actually help organizations improve rather than just generate reports nobody reads. In trust-based philanthropy, this means creating mutual responsibility where funders provide resources and support when challenges arise instead of wielding compliance like a weapon. It's accountability that asks "What do you need?" before "What went wrong?"—recognizing that real impact requires honest conversations about failure, adaptive learning, and the messy reality of social change. The opposite of the traditional "gotcha" accountability that makes nonprofits waste time crafting fiction about how everything went perfectly according to the logic model everyone knew was fantasy from day one.

Sustainability 

An organization or program's ability to maintain operations long-term. The question every funder should ask but few want to answer.

Sustainable Development Goals (SDGs) 

The United Nation's 17 global goals for addressing poverty, inequality, climate change, and other challenges by 2030. 

Systems Change 

Efforts to transform root causes rather than symptoms. The long game that requires patience most funders lack.

Systems Thinking 

Understanding how different parts of complex systems interact and influence each other. The antidote to overvaluing “silver bullet” solutions.

T

Technical Assistance 

Expert support to strengthen organizational capacity. Teaching to fish rather than just providing fish.

Theory of Change 

A comprehensive explanation of how and why desired changes are expected to occur. The roadmap from here to impact. Typically phrased as an If statement: If we do X, then our community will receive Y changes or benefits.

Triple Bottom Line 

Measuring performance across profit, people, and planet. Because success isn't just about the benjamins anymore.

Trust-Based Philanthropy 

Funding approach minimizing restrictions and reporting requirements. Radical idea: trusting the people doing the work.

U

Ultra-High-Net-Worth Individual (UHNWI) 

Someone with investable assets exceeding $30 million. The philanthropy whale everyone's hunting.

Unintended Consequences 

The unexpected results of well-intentioned interventions. What happens when we forget that complex systems don't respond linearly to simple inputs.

Unrestricted Funding 

Grants without limitations on use. Unrestricted funds are so important because they allow organizations to invest in their own sustainability and scale, and to conduct more effective strategic planning, make key hires, etc. It’s the oxygen that lets organizations breathe and adapt, which for-profit organizations take for granted, but has been virtually taboo in the nonprofit sector.. 

Upstream Investment 

Addressing root causes rather than downstream symptoms. Prevention versus cure, though both have their place.

V

Vanity Metric 

Impressive-sounding measurements that don't actually correlate with meaningful impact. The philanthropic equivalent of counting Instagram likes—feels good, but tells you very little about what’s actually being accomplished.

Venture Philanthropy 

Applying venture capital principles to charitable giving. High engagement, high expectations, hopefully high impact.

Virtuous Cycle 

The self-reinforcing loop where positive outcomes generate conditions for even greater impact. In philanthropy, it's when effective giving creates measurable results, which attracts more funding, which enables scaling, which demonstrates greater impact—rinse and repeat. 

Volunteerism 

Unpaid service contributing to social causes. The backbone of civil society that's increasingly hard to sustain.

W

WALY (Wellbeing-Adjusted Life Year) 

The newer, more holistic attempt to measure impact beyond just health—incorporating happiness, life satisfaction, and overall wellbeing. If QALYs are about being alive and healthy, WALYs are about lives worth living. It's the recognition that curing someone's illness doesn't help much if they're still trapped in poverty, isolation, or despair. Still experimental and even more subjective than QALYs, but at least acknowledges that humans aren't just biological machines to optimize.

Wealth Transfer 

The intergenerational passing of assets. The $124 trillion opportunity reshaping philanthropy over the next 25 years.

Wellbeing Metrics 

Measurements of quality of life beyond economic indicators. Because GDP doesn't capture human flourishing.

Wicked Problem 

Complex social challenges with no clear solution, multiple stakeholders, and interconnected causes. Climate change, poverty, systemic racism—the problems that laugh at your logic model.

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This glossary is a living document, just like the sector it describes. The definitions reflect our commitment to clarity, honesty, and pushing philanthropy toward greater integrity and impact. Have a term we missed or a definition that needs challenging? Let us know. After all, the best conversations in philanthropy start with agreeing on what we're actually talking about.

Ready to put these concepts into practice? Explore how Altruous can help you navigate the complex world of strategic philanthropy with confidence and clarity.