Author: William Sandy

Last Updated: 26^th June 2024

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There are multiple types of charitable entities - charitable foundations, public charities and non-profit organisations to name a few. All of them play essential roles in addressing societal needs. However, each operates in distinctly unique ways, with different structures, funding sources and methods of impact.,

This article delves into the definition, structure and purpose of charitable foundations, shedding light on their significance in modern society and the charitable sector.

Introduction

Charitable foundations - or sometimes referred to as private foundations - are a distinct and vital segment of the UK’s philanthropic landscape and play a crucial role in funding and supporting various charitable activities and organisations.

They are typically funded by a single primary source such as an individual philanthropist, a family office or a business. Unlike public charities, which rely on broad public fundraising, charitable foundations are usually endowed by their founders and use this endowment to make grants to other non-profit organisations, support charitable activities, or operate their own programmes. However, they are not prevented from raising funds from the wider public to help expand their impact.

Types of Charitable Foundation

Foundations in the UK can be broadly categorised into two main types:

1. Grantmaking Foundations: These foundations primarily focus on making grants to other non-profit organisations, projects, or individuals. They do not directly run their own charitable programmes but instead support external initiatives that align with their mission.
2. Operating Foundations: Unlike grantmaking foundations, operating foundations use their funds to directly run their own charitable programmes or services. While they may also make grants, their primary focus is on conducting their own activities.

These types of foundation are not mutually exclusive.

Structure and Governance

Charitable foundations in the UK are governed by a board of trustees, who are responsible for overseeing the foundation's operations, setting policies, approving grants, and ensuring alignment with the foundation's mission. The board may include the foundation's founders, family members, or other appointed individuals.
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Key elements of a charitable foundation's structure include:

• Endowment: The foundation's endowment, often provided by the founder(s), is invested to generate income that supports its charitable activities.
• Grantmaking: For grantmaking foundations, the primary activity is the disbursement of grants to other organisations or individuals. This involves reviewing grant applications, conducting due diligence, and monitoring funded projects.
• Programme Management: Operating foundations manage their own charitable programmes, requiring staff and resources to implement and oversee these initiatives.

Legal and Regulatory Framework

Charitable foundations in the UK operate under a specific legal and regulatory framework that ensures transparency and accountability. They are regulated by the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator (OSCR) in Scotland, and the Charity Commission for Northern Ireland.

​​Key regulatory requirements include:

• Charity Registration: Foundations must register with the appropriate charity regulator and comply with charity law to maintain their charitable status.
• Annual Reporting: Foundations are required to submit annual reports and financial statements to the Charity Commission, detailing their activities, governance, and financial performance.
• Public Benefit: Foundations must demonstrate that their activities provide public benefit, which is a key requirement for maintaining their charitable status.
• Trustee Responsibilities: Trustees must act in the best interests of the foundation, comply with legal requirements, and avoid conflicts of interest.

A Charitable Foundation with GivingWorks

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We’ve helped countless other philanthropic individuals and businesses such as Schwarzkopf, Boardmasters Festival and Action for Charity achieve this very goal.

Get in contact with us today to start your philanthropic journey.