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What is a Charitable Foundation?

Some charitable foundations help the homeless.
Charitable foundations often offer direct support to those in need in their community.
Some people choose to donate spare change to charitable foundations.
People participating in a food drive.
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  • Written By: Veronica Pamoukaghlián
  • Edited By: Lindsay D.
  • Last Modified Date: 17 August 2014
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A charitable foundation is a type of organization that is defined by law systems around the world in different ways. As early as 1601, charity was defined by the British legal system in the Charitable Uses Act. It was in this document that a specific legal framework for these organizations was first developed.

The Act sought to gain some control over the way that money destined to charity was spent, in order to prevent “Fraudes breaches of Truste and Negligence” (from the text of the Charitable Uses Act, England, 1601). After listing a number of charitable purposes, which included the marriage of “Poore Maides,” the relief of wounded soldiers, and material aid to the poor, the document went on to grant local Bishops jurisdiction over the charities in their counties. It was not until the 21st Century that a new comprehensive legislation was put in place to substitute the Charitable Uses Act, and its subsequent interpretations in the regulation of charitable foundation activities.

Typically, charitable foundations have a mission of helping underprivileged individuals, or even countries, in different ways and situations. Their scope is wide, encompassing anything from helping people who can´t afford an education in securing one, to providing food and shelter for the homeless, or supplying medical treatment for patients suffering from a specific condition.

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The laws that regulate the functioning of charitable foundations around the world usually provide them with fiscal benefits and tax exemptions. Charitable foundations fall into the category of non-profit organizations. Contrary to popular belief, this doesn´t mean that they do not want to generate profits, but only that whenever they have a profit, it must be reinvested into the foundation´s projects, as opposed to shared between its partners or members.

Although the concepts of non-profit organization, non-governmental organization (NGO), and charitable foundation often overlap, they are not the same. For example, a foundation created to support children with cancer in an undeveloped country could be an NGO, if the government is in no way involved in its functioning, and it would be a non-profit organization as well. But non-profit organizations and NGOs have to fulfill certain requirements in order to achieve the status of foundation.

Charitable foundations are often started with a donation from an individual or group of individuals. It is then the Foundation´s members´ job to make sure the funds are renewed by way of fundraising activities, and to monitor that the way the foundation´s money is spent is in alignment with its mission.

Although ideas of what falls into the legal category of a charitable foundation are varied around the world, globalization is showing a tendency to minimize the gap between regional regulations. The Internet has also made it possible for charitable foundations to find contributors directly, without intermediaries and with a minimum advertising expense. In today´s world, almost anyone with a noble purpose can start a philanthropic project and gain adherence. Nevertheless, not all of these endeavors will be legally recognized as foundations, unless they comply with local regulations.

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