There is no distinct legal definition of a ‘charitable foundation’ in the UK. Most frequently ‘foundation’ or ‘trust’ is used to describe charities with private, independent and sustainable income that fulfil their purposes by funding or otherwise supporting individuals or other organisations.
In that sense ‘foundations’ are identified as much by what they do, as by how they derive their funding. This gives rise to great diversity. For example, the Association of Charitable Foundations (ACF) has over 400 members including many large independent foundations; local and community trusts; family trusts; corporate foundations; and broadcasting appeals.
The core of ACF’s membership is drawn from grant-making trusts. However, increasing numbers are becoming involved in other types of foundation activity, especially research, policy and influencing work, as well as social investment. Although many foundations support the voluntary sector, foundations have never been restricted to funding charities.
So, for example, foundations fund and support universities, research, education, and individuals. They can also support public and private sector bodies to deliver the foundation’s charitable goals. The key aim for trustees has always been to find the best way to deliver their charitable purposes.
Although philanthropists can give in many ways, independent charitable foundations - at their best - provide an efficient, transparent and intentional way of irrevocably transforming private wealth into public benefit. Their annual spending power is small, about 0.4% of UK government expenditure, but foundations often punch far above their weight.
Unlike public sector funding bodies, foundations can take risks, offer long-term support and back causes that may otherwise struggle to gain attention. Crucially, unlike most other types of funder, charitable foundations can work independently of political time-scales, free from short-term market cycles, and counter to received wisdoms, allowing them to respond creatively to immediate need as well as take a long-term approach.
With cuts in public sector funding for the voluntary sector increasing, the contribution of independent foundations to civil society is increasingly becoming recognised. Greater demand for their support understandably also means greater public interest in their activity and ways of working.