Part of our Philanthropy A-Z series
With more than 1.2 million public charities and foundations in the U.S., it can be confusing to sort out the differences between the types of foundations. The term “foundation” is applied somewhat liberally, but the general definition of a foundation is a nonprofit, non-governmental organization set up to donate money to causes chosen by its donors and board of directors. Structural differences in foundations may vary greatly, but most foundations have:
- their own board of directors
- at least a portion of their assets invested in an endowment, and
- grant money on at least a yearly basis.
The different types of foundations include:
- Public foundations, which according to the Council of Michigan Foundations, are nongovernmental public charities that operate grant programs benefiting unrelated organizations or individuals as one of its primary purposes. There is no legal or IRS definition of a public foundation. Increasingly, public foundations have been established to receive funds and make grants for populations with special needs, for specific subject areas, or around other non-geographic communities of interest.
- Private foundations, of which there are more than 120,000 in the U.S., are usually founded by one individual, often by bequest. They sometimes face public scrutiny due to the autonomy of their grantmaking priorities, which do not require public input.
- Community foundations are usually location based, and are set up to support the charitable activities of a town or other geographic area through mutual investment from community members. Community foundations also house donor-advised funds, much like a bank houses accounts. There are more than 1400 community foundations worldwide, with half of those operating in the U.S.
- Family foundations are a type of private foundation whose funds are derived from members of a single family. At least one family member must continue to serve as an officer or board member. Family foundation board members have 100 percent control over their grantmaking decisions. The largest operating family foundation today is the Bill and Melinda Gates Foundation, which has an endowment of more than $36 billion. Many celebrities like to set up foundations to strategically support causes that matter to them, such as the Michael J. Fox Foundation for Parkinson’s Research.
- For the past 100 years or so, the philanthropic sector has been dominated by white males, and grants largely ignored the needs of minority populations. Ethnic foundations were created to change this convention and to put a new face on philanthropy. A great example of an ethnic foundation is The Potlach Fund, which focuses on expanding philanthropy within Tribal Nationals and Native communities in the Northwest, United States.
- Corporate foundations represent the charitable giving arm of a corporation; their funds derive from corporate profits (and employee donations), and their funding priorities often relate to the mission or product of the company. For example, the Newman’s Own Foundation supports nutrition programs for children, appropriate for a company that makes its money selling food products.
Of course, these are only a few types of foundations, and hybrid variations definitely exist – like the Center for Arab American Philanthropy (based on a community foundation model, but focused on supporting an ethnic group). Do you know of any foundations? What causes do they support? Leave a comment below!
- Andrew Carnegie and sustained strategic giving (Philanthropy in AAction)
- The D5 Coalition: Building equity, diversity and inclusion (Philanthropy in AAction)
Photo courtesy QuintanaRoo