Setting up a charitable foundation is a laudable aim – and it’s certainly one that several Americans have embraced in recent years. The total number of nonprofits in the US has now topped 1.5 million – meaning that there are lots of people who have the same idea as you. How can you go about breaking into this sector, and what should be avoided?
From ensuring that you don’t get tangled up in legal problems to making certain that you have a good cash flow and policy structure in place, the jobs list is never-ending. This article will share some tips on how to navigate them and how to ensure that you don’t fall foul of some of the pitfalls that other well-intentioned newbie philanthropists have come across.
Choose your idea well
Some people go into philanthropy with a very clear idea in mind. Often, this idea comes from personal experience – either as a beneficiary, as a victim, or as an observer. Others find themselves looking to make charitable donations after having come into a lot of money, and are unsure exactly where to begin. If you fall into the latter category, then it’s certainly worth looking at lots of different information sources to make your decision. Newspaper reports on cases of people in need are one, while personal research among local organizations to pinpoint precise areas of suffering is another.
On the question of how specialist your all-new charitable organization should be, there’s no strict set of rules governing it. Some charities choose to specialize very strongly, which means that precise needs can be met – though this can sometimes also mean that some beneficiaries are excluded. Some organizations, including the Charles Phillips Charity, pick a number of specialisms. In the case of the Charles Phillips Charity, these include everything from war veterans who have been wounded to single-parent families who require some financial aid. There are plenty of models out there, so you can choose which one works for you.
Get your policies right
Writing and setting up policies to cover every single possible outcome may seem like a drag. After all, it’s a time drain – and it can create an off-putting mountain of files and folders. However, the best-run charities do tend to be those that have a series of policies in place to govern every eventuality. As a charity, things can and do go wrong: you may come across a potential beneficiary with less-than-perfect intentions, for example, and need an anti-fraud policy in place to alert staff members as to how to handle the situation.
Perhaps your charitable foundation will work with vulnerable groups, such as young people or disabled adults. This is where child protection, data management and other policies come in. By making all staff aware of what is or is not appropriate, you’ll be able to ensure that anyone who needs that extra layer of protection can trust your organization to have it.
Acquire some funding
For many new charities, the main method of funding is personal and private – especially if you’re looking to go down the philanthropy route. This could mean using your own funds, or it could mean approaching other individuals to donate. If this isn’t an option for whatever reason, then you may find that your best bet is to look for grants from institutional donors: this may necessitate a somewhat complex application process, but it will be worth it in the end.
Be mindful of the law
There’s a misconception among some people that anyone can simply set up a charity and operate it how they like, given that the organization is doing good in the world. However, there are all kinds of laws that you’ll need to follow if you’re setting up a charitable organization – and if you fail to do so, the penalties can be severe. You’ll need to be sure that you’re following Internal Revenue Service rules, for example, otherwise your tax exemption status might be in jeopardy. If you haven’t done basic tasks such as creating articles of incorporation in order to acquire your 501(c)(3) status, you could be in hot water. There are also a number of guidelines in place that charities are expected to follow, such as ensuring that over 50% of board members aren’t related.
When it comes to setting up a charitable organization, there’s a lot to think about. From ensuring that you’ve got your eye on all the relevant laws to being certain that your ideas, policies and funding streams are all secure and legitimate, you won’t be short of things to do if you embark on a philanthropic project any time soon.