Archive for April 2012

As we all know, it is possible for an individual to give directly to a charity. So why do certain wealthy families choose to give via a family foundation rather than directly writing a cheque to the charity? The answers vary from one family to another but the following reasons are common to most:

• To establish a legacy. The act of creating a permanent vehicle for their giving says a lot about an individual’s or family’s commitment to a particular cause, and with increased commitment comes increased recognition. This desire to be remembered also extends to deceased loved ones with foundations set up “in memoriam” being the perfect example.

• “Institutionalizing” a culture of giving within the family. Family foundations are often important family affairs with various family members sitting on the board along with trusted advisors. This encourages the education of the younger generation in matters of giving and creates a culture of philanthropy within the family.

• Benefiting from tax credits. Foundations are registered charities under the Canada Income Tax Act, which means they do not pay tax on their investment income and they can issue a tax receipt for donations received.

• Maximizing the impact of their giving. Although it is possible for philanthropists operating as individuals to have a significant impact, the structure, focus and permanence of foundations make them especially effective at bringing about change in those areas they were set up to address.

While there might be some differences in How philanthropists who choose to set up family foundations give, the Why is the same as for any donor: they give in order to bring about a better tomorrow for their communities and the world at large.

Ligia Peña, M.Sc., CFRE, President of Diversa Consultants, has more than 10 years of experience in fundraising and communications and has collaborated with a variety of charitable and non-profit organizations ranging from the community to international development groups. Ligia’s company, Diversa, specializes in helping small and mid-sized charities with their fundraising and communications.

(Cross-posted at Diversa.ca)

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Approximately half of the 10,000 foundations in Canada are family foundations. They differ from public foundations in two important ways. Firstly, unlike public foundations, family foundations are not established to raise money from the public at large. Instead, the capital used to establish the foundation comes from one person or one family. Secondly, the majority of board members can be, and often are, related through blood or marriage. Conversely, trustees in public foundations must absolutely be at “arm’s-length” from one another meaning they can’t be related.

There is a wide range of family foundations. Some are small organizations with no staff, almost no endowment and who make donations based on yearly transfers of wealth by a family member. Others have significant endowments, numerous staff and run their own programs in addition to their granting activities.

Donations from family foundations can either come from the investment income generated by a large endowment or from annual or periodic transfers of money from the family to the foundation. Many of the today’s largest private foundations were established by a large initial endowment. The foundation’s philanthropic interests will typically reflect the values and personal interests of the founder(s) who endowed it. Although the foundation’s focus can change over the years, it seldom happens.

For various reasons, most family foundations tend to keep a low profile. Many won’t have a website, so knowing what they fund and obtaining granting information can be challenging. Furthermore, some tend to take a more proactive approach to granting, meaning they will not accept unsolicited applications. Instead, they prefer to conduct their own research on charities and will invite those which interest them to submit a grant proposal. Obviously, this poses a challenge for charities that want to obtain funding from these foundations. They will have to invest a significant amount of time and effort in order to get on the radar screen of family foundations active in their sector. Exactly how you identify which family foundations to approach and how you go about approaching them will be the topic of future blog posts.

Ligia Peña, M.Sc., CFRE, President of Diversa Consultants, has more than 10 years of experience in fundraising and communications and has collaborated with a variety of charitable and non-profit organizations ranging from the community to international development groups. Ligia’s company, Diversa, specializes in helping small and mid-sized charities with their fundraising and communications.

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