A charitable foundation is an organization that is created to provide financial support and assistance to other charitable organizations or toward some community based solution, such as education, workforce development, social justice, etc. A charitable organization, formed under the provisions of I.R.S. section 501(c)(3), may be one of three types: private operating foundations, exempt operating foundations, and grant-making foundations.
In 2013, Americans gave more than $335 billion to charity, according to Giving USA. Of this amount, charitable foundations provided 13.8% of this total or $46.34 billion in contributions. This amount is second only to individual giving, which amounted to nearly $231 billion in 2013. The amount given by charitable foundations, which was 6% more than in 2012, goes to aid many different groups, agencies and organizations doing good works in the communities where we live.
The Importance of Charitable Foundations
The amount given by charitable foundations represents a significant portion of total charitable giving in the U.S. The money given by charitable foundations, in combination with individual, corporate, and other types of giving such as charitable bequests from wills and trusts, went to a wide array of supporting organizations and community based causes.
Again in 2013, the money given by charitable foundations and others went to support religious groups and organizations (31.4% or $106 billion), educational organizations (15.5% or $52 billion), and human services organizations such as shelters and food distribution centers (12.4% or $42 billion), among the top three areas of giving.
How Charitable Foundations Benefit Communities
Many charitable foundations are established either through the bequest of a single benefactor or through the efforts of a group or family that is seeking to provide funding to a specific cause or issue. Although there are tax benefits associated with establishing a charitable foundation, many of these organizations are mission-driven, understanding that the money they contribute helps impact the lives of families and individuals within a community.
Charitable foundations gave nearly 30% more in contributions to other organizations than what they received in 2013. While foundations gave a little more than $46 billion, they only received $36 billion in donations. This suggests that charitable foundations not only derive their funding from outside donors, but they also rely on their own established endowments as the basis of their charitable giving and community support.
The Difference Between Public Charities and Charitable Foundations
Public charities, such as the American Red Cross and United Way of America, rely on the support of individual donors, corporate contributors, private foundations, and others for financial support. Charitable foundations may also receive public support, but many are established with little or no public funding support. Charitable foundations may be required to provide a larger percentage of support to their communities or stated cause than public charities, but they may also operate with less bureaucratic restraints in order to direct those funds where a need arises.
It is clear that charitable foundations fulfill an important role in our communities and for our families. The amount of funds that they provide help to sustain the activities of those essential services that help feed and clothe the poor, provide educational opportunities for disadvantaged youth through programming support and scholarships, and give a home or safe haven for a family in need. The support charitable foundations provide are important part of building self-sufficient families and stronger communities.