How charitable foundations work: registration, funding sources, development

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Today there are a large number of organizations whose activities are aimed at gratuitously solving the problems of a vulnerable category of the population. How do charities work? Where do they get the funds from and on what basis do they provide assistance? How do they interact with the state and what obligations do they have? We will talk about everything in detail below.

History of Charity

The first facts of charity existed several millennia ago. Churches and monasteries acted as patrons, providing poor families with food and clothing. Also in some countries there was a system of tithing - a form of donations to temples and clergy. These funds were then distributed among the poor in a particular region.

The new stage dates back to the 15th century. In 1741, the English merchant T. Corem founded the so-called Foundling Hospital. And in Russia, Ivan the Terrible gaveorder to provide the poor with the necessary means of subsistence at the expense of the state treasury.

But in general, state institutions have not been particularly successful in this field. At the same time, in the West, charity has somewhat changed its forms. The American industrialist and philanthropist E. Carnegie came up with a proposal that turned out to be to the liking of many other countries. He criticized charity in the classical sense. He believed that it was unreasonable to provide targeted material assistance to the poor, instead he called for eradicating poverty in the bud.

Carnegie himself set an example of a modified charity: now all donations and aid funds went to libraries, museums and other similar institutions. And the poor were only given the opportunity to visit these places.

New stage

Despite the antiquity of this phenomenon, there is no exact historical data on the first charitable organization. In general, history shows that the development of charity originates simultaneously in almost all corners of the Earth.

But the foundation of the E. Ford Foundation, which owned more than $1 million in funds, was a new stage in the development of charity as such. This was in 1936. E. Ford for these purposes used the funds of his father, the auto industry monopolist of those times, Henry Ford. It was an international foundation. He provided assistance to many countries. In particular, special attention was paid to the fight against HIV.

Views

In order to understand how charitable foundations work, it is necessary to determine belonging to a particular species. To date, there is the following classification:

• Private foundations - the founders are private individuals. Funds are formed according to the 1/3 principle, where a third is provided by the state, the rest is provided by a private person. The founder himself has the right to manage the fund.
• Non-profit organizations are created by businesses or individuals. Management is carried out by the Board of Trustees. They decide to whom and how much money to allocate. Also, a non-profit charitable foundation can be founded by a group of enterprises. In this case, they must pool their funds.
• Commercial funds. Despite the name, such organizations themselves do not conduct commercial activities. The main activity is holding various events and exhibitions that bring funds. The funds received are directed to the needs of the citizens who applied to them.
• Public funds are organized by combining several companies or individuals engaged in different activities.
• Operating funds choose a specific problem and dedicate their activities to solving it. The solution of the problem is carried out through the introduction of large-scale, long-term projects covering a wide range of the population. For example, programs can be aimed at eliminating unemployment or in the educational direction.
• Non-operational funds are committed to providing funds for the operation of operational funds.

How to open a charitable foundation?

When an entrepreneur reaches certain heights in his field, he often decides to provide large-scale, systemic financial assistance and open his organization in this direction. But in order to successfully carry out our plans, you need to understand how charitable foundations work.

One of the important conditions is an understanding of how any organization conducts its activities in general. The principles of organizing a charitable foundation are similar to managing an ordinary commercial company. From this point of view, the organization of a charitable foundation has the same algorithm as when creating a new product or brand.

Administrative planning

In order to start the activities of the fund, you need to consider the following points:

• Name of organization. The name of any new organization must be unique. In addition, it should clearly reflect what the company does. If it is not possible to do this through the name, then it is necessary to think over a slogan by which any person can immediately understand the purpose of the organization.
• Preparation of a package of documents. The list of required documents for registration depends on the type of organization. Some are direct fundraisers, others are commercial activities.
• Registration. If the entire list of documents is provided and they are genuine, then registration does not take much time. In Russia, this period is from 1 week to 1 month maximum.
• Rent of premises. It all depends on the number of employees and on financial capabilities. Everyone wants to get the best option, but in the interior it is better to stick to calm and modest solutions.
• Recruitment. The required staff should include a manager, accountant, marketer, visitor manager, etc.
• Marketing. The organization must make itself known so that people can contact it.
• Strategic planning helps to plan for a period of 1 to 5 years. It should address financing issues, crisis plans and the fund's development vector.
• The activity itself - when all of the above is ready, we can assume that the organization of the charitable foundation has come to an end and it is time to start the activity.

Tax aspect

Along with business entities, charitable foundations are also required to pay taxes and report to regulatory authorities. The main types of reports are as follows:

• Balance sheet.
• Tax reports depending on the chosen taxation system. Usually there are two types: BASIC - general system and STS - simplified system.
• Report on insurance premiums.
• Statistical reports.

In addition, the activities of charitable foundations are also taxed. They can choose one of the following types:

• Income tax is a share of income received minus all expenses.
• Unified soci altax - almost all such organizations pay. The exception is funds directed to education or science.
• VAT - Rarely applies to charities. But, depending on the way the organization receives income, it can be applied. There is no reason to pay this tax directly when providing material assistance to those in need.

Administrative matters

According to Russian law, the launch of legal entities is subject to a single algorithm, whether it be a non-profit organization, a charitable foundation or a typical company. It consists of the following steps:

• Registration with the Ministry of Justice. To do this, you should collect a package of necessary documents (passports of the founders and a protocol of the decision to create a fund) and contact the local branch of the Unified State Register of Legal Entities.
• After receiving a registration certificate, you should register with the tax authorities at the location of the organization.
• Opening bank accounts for an organization.
• Appointment of the head and his deputy.
• Appointment of the board of trustees and its chairman.
• Recruitment of other employees and distribution of responsibilities.
• Starting an organization.
• Launch marketing campaigns.

Ways to make money

A logical question arises: how do charitable foundations work if their main activity is aimed at distributing resources, and not at earning? The question of the source of funds must be resolved before the organizationregistered.

In practice, it often happens that some funds are actually created to raise funds for their own interests. They start as ordinary charities, hold events, make themselves known, gain public confidence, raise solid funds and close.

The law does not prohibit charitable companies from conducting commercial activities, earning funds and using some of them for their own purposes. This part should not exceed 20%. These funds are usually used to cover current expenses such as rent of premises, staff salaries, transportation and other expenses.

Common sources of funding for a charitable foundation are other commercial organizations and patrons. But in order for them to start cooperating with the new fund, the latter must convince them of its honesty and transparency of work. This may take time. One such organization in Russia is the Alyosha Foundation.

Alyosha Charitable Foundation

Alyosha Foundation was founded in 2009. The main activity is to help children with serious illnesses in raising funds for treatment. On their website, you can see pictures of children who are in need of fundraising. The required amount and the amount of funds already collected are also indicated there.

Many organizations cooperate with this fund, regularly transferring money. However, there are also statements on the Internet by people who doubt the transparency of the fund's activities. If afor someone the question of how to apply to a charitable foundation is relevant, then the site has their phone number and email address. If you are a philanthropist and you are interested in the fate of the transferred money, then you have the right to demand from any fund a report on the distribution of funds. Funds usually provide it easily.

How to promote the new fund?

In any society there are always social problems. Organizations of social bias should be able to solve these problems. If you managed to create non-standard methods or systems, the chances for the prosperity of the fund immediately increase.

The first step is to open a fund, the second is to raise funds. Where to get money for a charitable foundation, in particular, for its promotion? After all, marketing and advertising services are not cheap.

In this regard, the standard method of work will be useful - fundraising from large organizations and rich people. Among them are those who spend millions of dollars on donations. But they also have their own interests - so that the public knows about it. Therefore, most charitable foundations include marketing and advertising costs in the amount of the collection. As a result, you can get a mutually beneficial exchange: money for those in need, public recognition, loy alty and image improvement for patrons.

What is the most important thing?

How to develop a charitable foundation so that everyone in need receives the necessary assistance, and the money goes easily? Every founder asks this question. Taking into account the specifics of the activity, it can be said thatthat the success of an organization depends entirely on its employees. They must clearly understand the vector of their activities, the specifics of working with their audience, whether they are wards or sponsors.

Employees are required to be able to solve non-standard tasks: to be able to negotiate with the most unexpected people, organize effective events and the ability to stable interaction with various sectors of society.

There is an opinion that the non-profit sector pays little. In general, this is close to the truth. But if the fund decides to adequately pay for this hard work, then its chances for development will increase, as it creates the possibility of hiring highly qualified personnel.