Charitable foundation

Charitable foundation (also a foundation) is a category of a non-profit organisation or charitable foundation that usually provides funding and support to other charitable organisations through grants, but can be directly involved in charitable activities. and private foundations that are usually provided by an individual or family. However, the term "foundation" may be used by organisations that are not involved in public grants.

Foundations are non-profit organisations created specifically to finance charitable activities. Foundations are an important source of funding for newly established NPOs and new programmes within established NPOs, as many prefer to support new, innovative initiatives. With this in mind, the foundations provide only 9.8 percent of the $200 billion of the $200 billion donated annually from private sources to non-profit organizations.

Definition set by R. Jenkins says that charitable foundation currently face double lower pressures returns on investment and higher requests from beneficiaries as public funding is reduced in the new and a more stringent economic environment.

Foundation characteristics

Private foundations have several characteristics that make them different other charities:

• are usually dependent on a single donors (or families) for their funds and do not receive any financial support from wider public fundraising;
• have exceptional independence because they often retain the contributions received as a capital fund and spend only the income that the capital fund earns;
• instead of acting, the charity schemes or research activities themselves grants to other charities, institutions or individuals to carry out such work.

Foundations versus economic downturn

The charitable foundations responded in several ways to because of declining stock values:

• Many foundations try to minimise their subsidy cuts by concentrating the necessary cuts in their operating budgets (e.g. redundancies, staff freezes, travel restrictions).
• Some foundations have used the reserve funds to maintain or increase the level of grants, as the economic downturn has resulted in an even greater demand for the programmes offered by their scholarship holders.
• Some foundations are reducing the number of organisations they serve and maintaining this level of support, while others have cut the full range of each grant.
• Others limiting new donations.

Charitable trust

Philanthropic trust has existed in Australia for over a century. While such funds were generally exempt from income tax, it was only in 1963. With the introduction of additional services Funds, which in the form of charity trust allowed for donations to be deducted for tax purposes. These funds required the control of the majority of "responsible persons" and were obliged to raise public funds. Until 2001 Private or family philanthropy was not as efficient as similar structures in other parts of the United Kingdom and the United States.

After the 1999 report on the promotion of philanthropy, ensuring the creation of a new form of philanthropic structure, Prescribed Private Fund (PPF).

The most important features of PPF were as follows:

• tax relief for donations;
• exemption from current income tax;
• No requirement for public fundraising.

Key management requirements included:

• approved accumulation plan;
• Grant limited only to eligible organisations in the DGR;
• one independent 'responsible person' as a trustee/director;
• annual audit of financial statements and annual information. Return to ATO.

Examples of Charitable foundation

• Bill & Melinda Gates Foundation: This foundation was founded by Microsoft co-founder Bill Gates and his wife Melinda in 2000. Its mission is to bring innovative solutions to some of the world's toughest challenges, including poverty, health, and access to education. The foundation has contributed billions of dollars to global health and development initiatives, including supporting the development of vaccines for infectious diseases such as malaria, tuberculosis, and HIV/AIDS.
• The Ford Foundation: The Ford Foundation is one of the oldest and largest foundations in the United States. Founded in 1936 by Henry Ford II, the foundation supports projects in education, human rights, social justice, and culture. It has invested billions of dollars in initiatives such as promoting access to higher education, fighting poverty, tackling climate change, and supporting economic development in developing countries.
• The David and Lucile Packard Foundation: Established in 1964 by HP co-founder David Packard and his wife Lucile, the foundation focuses its grant-making on conservation and population, health, and education. It has contributed more than $9 billion in grants to various causes, including tackling climate change, preserving ocean health, and improving education in the U.S. and around the world.
• The Rockefeller Foundation: Established in 1913, the Rockefeller Foundation is an international philanthropic organization that supports projects in areas such as health, education, and economic development. It has invested more than $3 billion in initiatives such as fighting extreme poverty, promoting global health, and advancing sustainable development.
• The Andrew W. Mellon Foundation: The Mellon Foundation was established in 1969 by banker and philanthropist Andrew W. Mellon. It is dedicated to advancing higher education and the arts, and has provided more than $6 billion in grants to universities, libraries, museums, and other educational and cultural organizations.

Advantages of Charitable foundation

Charitable foundations provide a powerful avenue for philanthropists to make a positive impact in their community and beyond. They offer a variety of advantages, including:

• Flexible giving options: Charitable foundations can be set up to provide a variety of giving options, from unrestricted giving to giving specifically for a particular cause. This allows donors to tailor their giving to their specific goals and interests.
• Tax benefits: Donations to charitable foundations are generally tax-deductible. This provides an incentive for individuals and organizations to give generously to charity.
• Long-term impact: Donations to charitable foundations are often invested and can provide a source of income for the organization for years to come. This enables the organization to have a lasting impact on its beneficiaries.
• Increased visibility: Foundation philanthropy can often result in increased visibility for the donor and the organization they are supporting. This can be beneficial in terms of awareness and fundraising.
• Accountability: Foundations often have strict rules and regulations that must be adhered to, which can lead to increased accountability and transparency. This can help donors feel more confident in their giving.

Limitations of Charitable foundation

Charitable foundations have several limitations, including:

• Limited resources: Charitable foundations are typically funded by donations and grants, meaning their resources are often limited. This means they can only provide so much financial support to other charities, leading to a limited number of organizations that can be supported.
• Funding restrictions: Charitable foundations are usually restricted in which types of organizations they are allowed to support. This is typically determined by the donor's objectives, which can limit the scope of the foundation's support.
• Administrative costs: Charitable foundations must cover administrative costs, such as salaries and office space, which can take away from the amount of money that can be provided to other organizations.
• Complexity: Charitable foundations must comply with a variety of regulations, such as filing taxes and maintaining records. This can be complex and time-consuming, reducing the amount of time available for grant-making activities.
• Lack of transparency: Charitable foundations are not always transparent about how they make decisions on which organizations to support. This can lead to questions about how decisions are made and whether funds are being used appropriately.

Other approaches related to Charitable foundation

Charitable foundations can take a variety of different approaches to achieving their goals. These approaches include:

• Grantmaking: Foundations provide support to other charities and organizations with grants, which can be used to fund projects or programs.
• Endowments: Foundations create endowments, which are investments that are used to generate income for the foundation. This income can be used for the foundation’s operations or donated to other charities.
• Direct Charitable Activities: Foundations can be directly involved in charitable activities such as providing services to individuals in need or sponsoring events.
• Advocacy: Foundations can also be involved in advocacy work, such as lobbying for policy changes or supporting specific social causes.

In summary, charitable foundations can take a variety of approaches to achieve their goals, such as providing grants, creating endowments, engaging in direct charitable activities, and advocating for social change.

Footnotes

Charitable foundation — recommended articles

Caisse populaire — Principles of organization of public sector entities — Third sector — Etatism — Community development corporation — Employers association — European regional development fund — Public tasks of local government — Land banker

References

• Developing a fundraising plan: Foundation, (2019)
• Foundation basics, (2019), "Council of Foundations"
• Jenkins R. (2012), The Governance & Financial Management of Endowed Charitable Foundations, p. 3
• Stone. L.M. (1975), The Charitable foundation: It's governance, p. 57
• Ward D. (2009), Private Ancillary Funds Trustee Handbook, "Philanthropy Australia", p. 4

Author: Anna Syjud