By Jessica Bearman on behalf of Exponent Philanthropy

According to a new report, one in eight American donors has participated in a giving circle—nearly half under the age of 40—and participation in a giving circle can both strengthen social connections and help turn participants into committed philanthropists.

Creating a giving circle—a collaborative philanthropy in which individual donors pool their money and other resources, and decide together how and where to give them away—is a creative and fun process. Although there is no one right way to organize a giving circle, considering certain factors will help ensure good leadership, thoughtful processes, and sustainability.

The following guidelines, adapted from the Forum of Regional Associations of Grantmakers’ Giving Circles Knowledge Center, can be a useful checklist for decision making when creating and running a giving circle:

Set Goals and Structure

The group or individual organizing the giving circle may want to make decisions about the composition of the circle in advance of an initial meeting. It can, though, be highly motivating to involve founding members in shaping the circle.

• Who will be responsible for setting the schedule, communicating, and steering the group? (This responsibility can fall to an individual or a small group.)
• What is our mission?
• What specific goals do we want to achieve?
• What is our giving circle’s name?
• Will we use a small circle, formal organization-type giving circle, or loose network approach?

Some groups change over time, so these decisions might not be final. Set up an initial operating structure that works for you.

Make Decisions About Membership and Commitment Level

Giving circles are “do-it-yourself” (DIY) philanthropy in which members get to decide on a structure and annual (or event-based) level of giving that is right for a circle’s donors. Financial commitments for circles vary, starting at $50 or less annually and reaching $100,000 or more per year. The group decides what is reasonable and whether to fix the minimum contribution or make it flexible.

Many circles set one contribution level for everyone. Others find that a tiered giving structure or anonymous giving meets their needs. In most cases, all donating members have an equal voice in decision making, regardless of how much they have contributed.

• How many times each year will the giving circle meet?
• What is our goal for number of participants?
• What is the size or range of the financial contribution each member will make?
• What is the time commitment expected from members?

Decide Where to Hold Funds

In most giving circles, members contribute their donations to a pooled fund at the beginning of a year or grantmaking cycle. That money then needs to “live” somewhere before it is granted. The giving circle can:

• Open a joint bank account. Check with a professional advisor on the tax implications.
• Partner with an organization that can act as a financial administrator of the funds. Sometimes a mission-aligned nonprofit is willing to serve in this host role.
• Establish a donor-advised fund at a community or public foundation host to allow donations to be tax deductible. This option also may give the circle access to other services and expertise.
• Go through the process of creating your own 501(c)(3) organization with a board and bylaws.
• Make decisions together but write individual checks to each chosen nonprofit.
• Explore other creative options that interest the group.

Aside from incidental expenses, including a post office box or website hosting service, small circles generally have very little administrative overhead. Other circles find it useful to pay for administrative services and receive support from a host organization, such as a community foundation.

Establish an Issue or Focus Area

Some giving circles choose a focus, for example, issues facing women and girls, and stick with it over time. Others may define their focus broadly or geographically and select more specific funding priorities each year. Because this step may involve significant discussion, consider inviting experts to educate the group on issues related to the circle’s region before making decisions.

• What are the issues the giving circle will tackle?
• What types of programs and organizations will the money support?
• In what geographic area will this giving circle focus?

See additional guidelines in Exponent Philanthropy’s complete tear sheet “Creating and Running a Giving Circle”

See also Exponent Philanthropy’s tear sheet “An Introduction to Giving Circles”

Related posts

Growing Philanthropic Leaders Through Giving Circles

Giving Circle Practices Hands-On Grantmaking

Related resources

GivingCircleConnector Network (Association of Baltimore Area Grantmakers)

Giving Circle Knowledge Center (Forum of Regional Associations)

Giving Circles Network

Jessica Bearman, principal of Bearman Consulting, loves working with philanthropic and other mission-based organizations, providing facilitation, planning, and program R&D to help them become more effective and responsive to the communities they serve. As a consultant, and in her prior role as deputy director of the New Ventures in Philanthropy, she has written and spoken widely about new and established philanthropy and is the author of several studies on giving circles and shared giving. Follow Jessica on Twitter @jbearwoman.