Foundation guide

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Philanthropy Startups: Pitfalls and Progress

Newly minted millionaires and billionaires looking to start foundations need to be aware of the many challenges that they will face when setting up a non-profit organization or foundation. According to Giving USA, philanthropic giving from foundations increased by 6% in 2017, and corporate giving by 8%. New foundations often headed and founded by startup founders and entrepreneurs need to make sure that they don’t become mired in the process of setting up a foundation and focus instead on making sure that funds reach the organizations where they can do the most good.

Keeping It Simple – The Process of Philanthropy

Far too often, new foundations make things more complex than they should be. Complicated systems do little to ensure adequate stewardship and instead become increasingly chaotic and marred by the process instead of looking for ways to decrease the path to effective donations. Instead, newly founded organizations need to look for systems and processes that benefit the organization instead of doing things the way they have always been done. The role of a foundation board is to lead, not to manage the process. With a clear vision and succinct goals, a foundation’s board should be able to drive the vision of the foundation forward and not get stuck in managing the functions of the foundation.

Lean Operations: Use Your Resources

There is much criticism levelled at charitable organizations that utilize a large portion of donations towards the running of the non-profit. This, of course, is unacceptable, but so too is the idea that foundations can run with no investment in employees, training, technology and development. Trying to do good with no support to be able to expand and actually ‘do good’ is one of the reasons that new foundations flounder.

Keep Learning – Keep Growing

One of the biggest mistakes made by foundations, especially boards of directors, is the inability or capacity to continue learning about the areas in which they operate. Often, once the foundation vision is set, the board does little to enhance their knowledge within key areas. Continual learning is key to growing robust and effective non-profit organizations. The board of a foundation often wields a great amount of power over communities that it serves. This can make for a strained power dynamic at times. Foundation leaders need to ‘keep it real’, examine their own decisions and ensure that they are doing work that serves a greater good.

Learn from the Community

Along with institutional learning, a new foundation must take counsel from the communities and areas in which they work. This is especially important when dealing with at-risk communities and working in regions of the world that are not immediately culturally like one’s own. Something as simple as ongoing feedback from both the ‘boots on the ground’ employees and the end-recipient of a foundation’s donation.

Every new foundation or non-profit will go through a learning curve before they become successful and more importantly, relevant. With forethought and humility as well as a constant reminder of why foundations are crucial in the world these problems can be resolved.

Building a Firm Foundation – Back to Basics

There is much written about popular foundations, the work they do and often the celebrity name behind the cause, but a foundation is more than a charity. It has a specific mandate and is regulated by the laws of the country in which it is incorporated and in the countries in which it may operate. Within this tangle of international law, fiscal commitments and often, bureaucratic red tape, it is important to set up a foundation carefully and with consideration for sustainability.
For donors that are looking for a worthy cause, be sure to examine the structure of your foundation or charity of choice before making a donation. You want to make certain that your money is being spent in the right places and that the lion’s share is going to the people who need it most.
For charitable groups looking for a foundation grant or funding, it is vital that you align with an organization that is solid, sustainable and legally valid.

What is a Foundation?

Ostensibly, a foundation is a non-governmental organization that is either a charitable trust or a not-for-profit corporation. The purpose of a foundation is to make grants, often financial, to other organizations, educational institutions, and even individuals, to continue their work, research, education or charitable endeavors.
Within this definition of a foundation, there are two types of foundation: Grantmaking public foundations and private foundations.

Public Foundations

A public grantmaking foundation may derive its source of income from a variety of sources, often other foundations! It may receive support from government departments, individuals and businesses. Community foundations are a good example of successful public grantmaking foundations. They often engage in direct charitable activities and programs. There are some advantages to registering as a public foundation: There is a higher tax deduction status for donors, to encourage donations, however a public foundation must have a diverse, and unrelated board of directors and governance is often managed by a third party.

Private Foundations

A private foundation will receive most of its support from an individual, a corporation or a family. The Ford Foundation is one of the best examples of an excellent private foundation that offers grants in a range of sectors to groups and individuals. Many of the foundations in this guide are private foundations and are often more able to directly help people and causes that need it most. Private foundations have more control over their assets and may be directly involved in the charities activities, think Bill and Melinda Gates Foundation.