Credit: Nick Shepherd

How to create a foundation

CRASH COURSE: Got a spare million to give away? Follow the likes of Bill Gates and Mark Zuckerberg and start your own philanthropic fund.

by Alexander Garrett
Last Updated: 22 Jan 2016

Bill and Melinda have one; Warren’s parked his money in Bill’s; and now Mark and Priscilla have set aside an estimated $45bn for their own philanthropic enterprise. Yours may be more modest, but if you’d like to follow in the steps of Messrs Gates, Buffett and Zuckerberg and give something back, here's where to start.

What is it? ‘The terms ‘trust’ and ‘foundation’ are often used interchangeably,’ says the Charities Commission. A charitable foundation is a trust, which only qualifies as a ‘foundation’ if it is formally endowed via a trust deed with assets that will provide an income to fund causes. You’ll need a sizeable amount of money to set one up – £1m is a reasonable starting point. That would generate £50k per year in income to dispense. 

It may be more than a charity. Cathy Pharoah, co-director of the Centre for Charitable Giving and Philanthropy Research at Cass Business School, explains, ‘Many foundations have related bodies with different structures to allow for different kinds of activities, including making profits to gift back to the charity, or investing in social businesses which are profit-making but you believe can deliver important social gain.’ That’s the route taken by Chan and Zuckerberg.

Consider alternatives. It’s a lot easier to just write out a cheque for any cause that attracts your attention from time to time. ‘People who want to create a foundation are generally the type who are passionate about a cause but want to do their own thing and have a direct relationship with beneficiaries or those who are working on the ground,’ says Neil Sandy, a trustee of philanthropy platform GivingWorks.

Have a plan. Philanthropy Action, a network for donors, advises a five-step approach: set objectives, develop a strategy, give efficiently, select charities and assess impact. ‘Finding and selecting effective organisations to support is the key to rewarding philanthropy.’

Be focused. Are you targeting ‘global poverty’ or ‘causes of malnourishment in the Sahel region’? ‘Many say you need to start with a strategic vision of what you want to achieve, and then work out a logic of options, what you can do/achieve with the kind of money you’ve got,’ says Pharoah. ‘My view is that generally funds are relatively small in relation to social/global need – so be as narrow and specific as you can.’

Make it viable. Is your foundation well enough endowed to support staff or even one paid administrator? Just accounting, legal and other costs can easily eat up £5,000 a year. Consider plugging in to an organisation that takes care of the administration, such as GivingWorks, or the Charities Aid Foundation. ‘We take care of the boring bits, leaving you free to decide where to direct your money,’ says Sandy.

Have an exit strategy. If you have a direct relationship with beneficiaries, it is all the more important not to turn off the tap without warning. ‘Before you enter into the relationship you should be clear how you will exit,’ says Sandy. One foundation built a school, but on a 60-acre plot that could provide income to support the school going forward.

Share the load. A foundation can be a great engagement tool for employees. But if you want it to be seen as more than an egotistical project be prepared to share some of the decision-making – and the fulfilment.

Do say

‘This foundation will generate investment income to make grants to in keeping with our clearly stated purpose.’

Don’t say

 ‘Hey, I’ve got my own foundation with my name on it. How cool is that?’


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