How to Launch a Grantmaking Foundation or Scholarship Fund (Without the Guesswork)

Key Takeaways: 

• Setting up a scholarship fund or grantmaking foundation begins with a clear mission and defined audience to ensure fairness and impact. 

• Strong guidelines, governance, and consistent processes build trust, transparency, and compliance. 

• Day-to-day operations, including application management, recordkeeping, and funding schedules, are key to long-term sustainability. 

• Legal guidance helps structure the foundation, prevent compliance issues, and turn complex IRS rules into clear, actionable steps. 

Starting a scholarship fund or grantmaking foundation is a powerful way to turn generosity into something lasting. Whether you’re honoring a loved one, expanding access to education, or giving back to your community, these programs help showcase your values in tangible ways. And when they’re set up clearly and thoughtfully, they inspire confidence in your board, trust in your recipients, and long-term strength for your foundation. 

How to Set Up a Nonprofit Scholarship Fund or Grantmaking Foundation

A scholarship fund or grantmaking foundation usually begins with a personal mission or meaningful goal. But to keep them going — and growing — you’ll need more than good intentions. You’ll need a plan that’s structured, clear, and built to last.  

Here’s how to set up a scholarship fund for a nonprofit or grantmaking foundation in a way that feels doable: 

1. Define your purpose and audience. 

Start with the basics: What will your scholarship or grantmaking program actually do? Are you supporting students, funding nonprofits, or doing a mix of both? Will this be part of an existing organization, or are you building something new?  

Then, get specific about who you want to support. For example:

• “Students from X county who plan to study trades.”
• “Organizations in our region working on youth leadership in the sciences.” 

Getting clear on who your program serves improves your selection process and communication with applicants. And it can reduce the number of irrelevant applications your team needs to sort through. 

One important note: Your program has to serve the public, not just people connected to your organization, like board members, staff, or their friends and families. That doesn’t mean you can’t set clear, even narrow criteria. You can — and should. It just means those criteria need to apply equally and fairly, without benefiting insiders. 

2. Establish clear guidelines. 

The way your program runs day-to-day comes down to your guidelines. These shape who can apply, how decisions are made, and how funds are awarded. Here are some key things to include in foundation and scholarship guidelines for nonprofits: 

• Eligibility criteria: Who qualifies to apply? Consider things like GPA, field of study, location, financial need, or community service. 

• Application process: What do applicants need to submit? Essays? Videos? Recommendation letters? Transcripts? What’s the deadline for submission? 

• Selection process: Who’s reviewing applications? Will there be multiple rounds? What’s the timeline for decision-making? How many meetings will committee members need to make their selections? 

• Award amount and disbursement: Is the award a set amount or flexible? One-time or renewable? When will recipients get their funds? 

• Renewal or follow-up: Can recipients reapply? Will they receive support beyond the check, like mentorship or check-ins? 

• Transparency: Is communication clear? Make your process public so applicants know what to expect and how decisions are made. 

Clear guidelines help you stay organized, make decisions consistently, and build trust. They also support legal compliance by showing that your program is fair and unbiased. A vague “we’ll know a good fit when we see it” approach won’t hold up.

3. Set up governance and structure.

You’ll also need to decide how the program fits into your organizational structure. If you’re starting a nonprofit scholarship fund, ask: Will this live within an existing nonprofit, or am I starting a separate foundation? 

If you’re building a new legal entity, be sure to:  

• Draft governing documents (like articles of incorporation and bylaws) that clearly allow for scholarships or grantmaking. 

• Create a board or advisory committee with defined roles. 

• Set up how funds will be managed — whether through an endowment or annual giving — and how decisions around spending will be made. 

If you’re a private foundation awarding scholarships to individuals, you’ll likely need prior approval from the IRS. You can request that when you first apply for nonprofit status (via Form 1023), or later on through Form 8940. Either way, that approval shows your process is objective, fair, and aligned with what the IRS expects.

4. Build your day-to-day operations.

Once you’ve figured out your structure, it’s time to get your operations in place — the real-life systems that keep things running. 

If you’re managing a grantmaking foundation, the process will look a little different from a scholarship program, but the core elements are the same. You’ll need: 

• A clear grantmaking policy: Lay out how organizations can apply, how you’ll evaluate them, and what kind of reporting you’ll require. 

• A way to monitor results: You’ll want to track how grants are used, what outcomes are achieved, and whether you’ll fund again. 

• Checks for fairness: Build in ways to avoid conflicts of interest and make decisions that reflect your goals and values.

5. Decide on funding and timing.

Think through the nuts and bolts: 

• How much funding will be available each year? 

• Will award amounts be fixed, or vary? 

• How many recipients will you support? 

• When will applications open and close? When will awards go out? 

• How will eligible organizations find out about the funding opportunity? Will you post the grant information online, or will you be invitation-only? 

As you map this out, make sure you’re documenting your decisions, especially around how award amounts are set, how funds are disbursed, and how recipients are notified. These details make your program easier to manage and help demonstrate transparency if questions ever come up.

6. Keep records and stay consistent.

This part doesn’t get a lot of fanfare, but it matters — a lot. Keep clear, organized records of your budget, application materials, review notes, board approvals, communications, and follow-ups. 

And most importantly: Stick to your process every time. When people see that you apply your own rules consistently, it builds trust. And if your foundation is ever audited, good recordkeeping is your best defense. 

How Legal Guidance Simplifies the Process

Working with a nonprofit attorney isn’t about adding complex legalese. It’s about getting the clarity to move forward with confidence. 

At Charitable Allies, we help scholarship funds and grantmaking foundations at every stage. That includes: 

• Structuring your program in a way that fits your goals and complies with the law. 

• Drafting or reviewing your bylaws, grant agreements, policies, and selection process. 

• Making sure you avoid issues like private benefit or conflicts of interest. 

• Preparing IRS forms like the Form 1023 or 8940. 

• Navigating investment rules and disbursement requirements.  

• Turning IRS rules into clear, everyday steps your team can actually follow. 

Because we work exclusively with nonprofits, we understand the unique challenges you’re  

navigating. Our job is to help you keep things simple, sustainable, and strong. 

How to Start a Charitable Foundation That Lasts

When you launch a scholarship or grantmaking program, you’re not just making a donation — you’re building something that can grow with you. With clear policies, thoughtful structure, and a little legal support, your giving can do exactly what you hope it will: make a difference that lasts. 

If you’re ready to bring structure and staying power to your program, we’re here to help. At Charitable Allies, we’ll walk with you through every step so you can give with clarity and confidence. 

Let’s build something that honors your vision and serves your community for years to come. Reach out today to get started.