Difference between Private Foundations and Public Charities

Private Foundation

A private foundation is defined as a nonprofit charitable entity that is created by any single benefactor (usually an individual or a business). The benefactor makes an investment using an initial seed donation which is then also dispersed by way of grants to other individuals or charities according to the charitable purpose of the foundation.

The endowment structure of any private foundation also provides a stable, consistent and reliable source for continuing the funds, which is very important as the budgeting as well as funding decisions of an organisation is also made with a greater amount of confidence. This also has an effect towards ensuring timely as well as efficient access to the grant which the foundation seeks to provide for charitable purposes.

One of the main benefits of operating the foundation comes from the actual degree of control that is available with the institution. The person who is responsible for running the foundation has the power to decide on the investment decisions and the charitable causes that they can support. The board of directors of the organisation can comprise entirely of members from a single-family as well. One of the main drawbacks of a private foundation is its operational independence, as their private funding can give them the luxury to ignore public opinion. Also, they may be able to generate a less than optimal outcome if they focus their efforts on areas that will not result in much financial gains.

Public Charity

Public charity refers to solicitation of the periodic donations that they receive from a community. It has to at least receive one-third of the total contributions through the general public, and it uses these funds to support the initiatives like providing medical care, operating a homeless shelter or other such charitable purposes.

Many people consider public charities desirable compared to private foundations as they appeal to the public sentiment. They also have a very important role to play in our society as they help the individual contributions get channelled towards a charitable purpose that ultimately serves all the members present in the community.

There are a number of public charities that operate all around the world, and they help provide the necessary funding to take care of a number of important issues and causes that help the poor and the underprivileged sections of our society.

Difference between Private Foundations and Public Charities

Both private foundations and public charities play an important role. However, it must be noted that there are major areas of difference between private foundations and public charities, and it is important for us to focus on the main points to get a wider perspective of these two instruments:

Private Foundations

Public Charities

Definition

A private foundation is defined as a nonprofit charitable entity that is created by any single benefactor (usually an individual or a business)

Public charity refers to solicitation of the periodic donations that they receive from a community.

Acquisition of Funds

A private foundation is mainly funded with the help of endowments from a single source.

A public charity continually solicits donations from both individuals and organisations.

Disbursement of Funds

Private foundations provide grants to other individuals or charities.

Public charities use the money available with their institutions to carry out direct activities.

Conclusion

There are a number of points of difference between private foundations and public charities. But both of them perform a very crucial role in raising funds for particular funds. They also have a part to play in the overall growth of a nation, both in the short as well as the long run.

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