Difference Between Charity and Foundation

Charity vs Foundation

 

Even though, the terms Charity and Foundation appear to be similar, there are certain differences between these two terms. In the world, we come across many organizations that are involved in social causes such as religious organizations and those that work to provide relief to people afflicted with deadly diseases. There are some that work for the uplift of the poor and illiterate while there are many that work to provide relief to people involved in natural disasters such as floods and tsunamis. Charities and Foundations are two such organizations. Charities are organizations that have been set up to assist those in need. Foundations can be considered as organizations that engage in funding different organizations such as charities. A significant difference that can be identified is that while a charity needs to engage in fundraising activities, a Foundation does not. To most of us a charity and foundation look pretty much similar in nature, there are differences in their features and functioning that this article will attempt to highlight.

What is a Charity?

Charities are organizations that are actually involved in fundraising activities all the time and keep on receiving money from the general public, government as well as foundations that have the specific purpose of finalizing charities to distribute grants. A charity is grappling with the eternal paucity of funds to meet its expenses all the time. Out of all organizations involved in work related to public welfare, nearly half are charities. For tax purposes, IRS classifies charities as all non-profit organizations that are not foundations. There are close to a million charities operating in the US at present. Private foundations generally help these charities by giving them grants. They do not interfere with the administration of the programs these charities indulge in. For an example let us take the case of a Charity organization that caters to the welfare of orphan children. In this Charity, there may be a large number of children who have become orphans due to war-related issues. Since it is a charity, it does not have a regular source of income to cater to the needs of the children. Hence, they have to engage in fundraisers. Even the majority of the staff can be volunteers and social workers. This highlights the nature of a charity. Now let us pay attention to a Foundation.

Difference Between a Charity and Foundation- Charity

What is a Foundation?

In general, private foundations have a fixed source of funding and they, in fact, provide money to other charities to carry out noble operations rather than on their own. The money they distribute is in the form of grants to different charities. A foundation is free of worries as it has a regular source of funding, unlike a charity. In sharp contrast to public charities, private foundations can be controlled by a single family or even an individual, for example, Bill Gates Foundation. Let us take the same example to understand the nature of a Foundation. Unlike a charity, a foundation has a fixed source of funding. Hence, it can help Charities such as orphanage welfare systems, disaster-related scenarios and various other instances where funding becomes necessary.

Difference Between a Charity and Foundation- Foundation

What is the Difference Between a Charity and Foundation?

  • Charities and foundations are involved in public welfare programs
  • Charities administer the programs while foundations provide them with funds
  • Charities and foundations are taxed differentially by IRS
  • Foundations have a fixed source of funding while charities are always grappling with paucity of funds and are actively involved in fundraising

Image Courtesy:

1.Charity_work by Karmen cute (Personally taken) [Public domain], via Wikimedia Commons

2.”Bill and Melinda Gates Foundation visitor center” by Adbar – [CC BY-SA 3.0], via Wikimedia Commons¬†