A charitable organization, or charity, is an organization whose primary objectives are philanthropy and spreading social well-being (e.g. educational, religious or other activities serving the public interest or common good).
The legal definition of a charitable organization (and of charity) varies between countries and in some instances regions of the country. The regulation, the tax treatment, and the way in which charity law affects charitable organizations also vary. Charitable organizations may not use any of their funds to profit individual persons or entities. However, some charitable organizations have come under scrutiny for spending a disproportionate amount of their income to pay the salaries of their leadership.
Financial figures (e.g. tax refunds, revenue from fundraising, revenue from the sale of goods and services or revenue from investment, and funds held in reserve) are indicators to assess the financial sustainability of a charity, especially to charity evaluators. This information can impact on a charity's reputation with donors and societies, and thus the charity's financial gains.
Charitable organizations often depend partially on donations from businesses. Such donations to charitable organizations represent a major form of corporate philanthropy.
To meet the exempt organizational test requirements, a charity has to be exclusively organized and operated, and to receive and pass the exemption test, a charitable organization must follow the public interest and all exempt income should be for the public interest. For example, in many countries of the Commonwealth, charitable organizations must demonstrate that they provide a public benefit.Jonathan Garton (2013), Public Benefit in Charity Law, OUP Oxford.
History
Early systems Until the mid-18th century, charity was mainly distributed through religious structures (such as the English Poor Relief Act 1601), almshouses, and bequests from the rich. Christianity, Judaism, and Islam incorporated significant charitable elements from their very beginnings,Note, for example, Acts 2:44–45: "And all that believed were together, and had all things in common; And sold their possessions and goods, and parted them to all men, as every man had need." Zakāt (charity) ranks as one of the Five Pillars of Islam. and dāna (alms-giving) has a long tradition in Hinduism, Jainism, Buddhism, and Sikhism. Charities provided education, health, housing, and even prisons. Almshouses were established throughout Europe in the Early Middle Ages to provide a place of residence for the poor, old, and distressed people; King Athelstan of England (reigned 924–939) founded the first recorded almshouse in York in the 10th century.
Enlightenment charity
During the Enlightenment era, charitable and philanthropic activity among voluntary associations and affluent benefactors became a widespread cultural practice. Societies, gentlemen's clubs, and mutual associations began to flourish in England, with the upper classes increasingly adopting a philanthropic attitude toward the disadvantaged. In England, this new social activism led to the establishment of charitable organizations, which proliferated from the middle of the 18th century.
This emerging upper-class trend for benevolence resulted in the incorporation of the first charitable organizations. Appalled by the number of abandoned children living on the streets of London, Captain Thomas Coram set up the Foundling Hospital in 1741 to care for these unwanted orphans in Lamb's Conduit Fields, Bloomsbury. This institution, the world's first of its kind, served as the precedent for incorporated associational charities in general.
Another notable philanthropist of the Enlightenment era, Jonas Hanway, established The Marine Society in 1756 as the first seafarers' charity, aiming to aid the recruitment of men into the navy.N. A. M. Rodger, The Command of the Ocean: A Naval History of Britain 1649–1815 (New York: W.W. Norton & Company, 2004), 313. By 1763, the Society had enlisted over 10,000 men, and an Act of Parliament incorporated it in 1772. Hanway also played a key role in founding the Magdalen Hospital to rehabilitate prostitutes. These organizations were funded by subscriptions and operated as voluntary associations. They raised public awareness about their activities through the emerging popular press and generally enjoyed high social regard. Some charities received state recognition in the form of a royal charter.
Charities also began to take on campaigning roles, championing causes and lobbying the government for legislative changes. This included organized campaigns against the mistreatment of animals and children, as well as the successful campaign in the early 19th century to end the slave trade throughout the British Empire and its extensive sphere of influence. (However, this process was quite lengthy, concluding when slavery in Saudi Arabia was abolished in 1962.)
The Enlightenment era also witnessed a growing philosophical debate between those advocating for state intervention and those believing that private charities should provide welfare. The political economist, Reverend Thomas Malthus (1766–1834), criticized poor relief for paupers on economic and moral grounds and proposed leaving charity entirely to the private sector. His views became highly influential and informed the Victorian laissez-faire attitude toward state intervention for the poor.
Growth during the 19th century During the 19th century, a profusion of charitable organizations emerged to alleviate the awful conditions of the working class in the slums. The Labourer's Friend Society, chaired by Lord Shaftesbury in the United Kingdom in 1830, aimed to improve working-class conditions. It promoted, for example, the allotment of land to laborers for "cottage husbandry", which later became the allotment movement. In 1844, it became the first Model Dwellings Company – one of a group of organizations that sought to improve the housing conditions of the working classes by building new homes for them, all the while receiving a competitive rate of return on any investment. This was one of the first housing associations, a philanthropic endeavor that flourished in the second half of the nineteenth century, brought about by the growth of the middle class. Later associations included the Peabody Trust (originating in 1862) and the Guinness Trust (founded in 1890). The principle of philanthropic intention with capitalist return was given the label "five percent philanthropy".Tarn, J.N. (1973) Five Percent Philanthropy. London: CUP
There was strong growth in municipal charities. The Brougham Commission led to the Municipal Corporations Act 1835, which reorganized multiple local charities by incorporating them into single entities under supervision from the local government.
Charities at the time, including the Charity Organization Society (established in 1869), tended to discriminate between the "deserving poor", who would be provided with suitable relief, and the "underserving" or "improvident poor", who was regarded as the cause of their woes due to their idleness. Charities tended to oppose the provision of welfare by the state, due to the perceived demoralizing effect. Although minimal state involvement was the dominant philosophy of the period, there was still significant government involvement in the form of statutory regulation and even limited funding.
Philanthropy became a very fashionable activity among the expanding middle classes in Britain and America. Octavia Hill (1838–1912) and John Ruskin (1819–1900) were important forces behind the development of social housing, and Andrew Carnegie (1835–1919) exemplified the large-scale philanthropy of the newly rich in industrialized America. In Gospel of Wealth (1889), Carnegie wrote about the responsibilities of great wealth and the importance of social justice. He established public libraries throughout English-speaking countries and contributed large sums to schools and universities. A little over ten years after his retirement, Carnegie had given away over 90% of his fortune.
Charities that were founded during this time were often aligned with religion. In 1886, Christians belonging to various Christian denominations launched an ecumenical fraternal order, the International Order of the King's Daughters and Sons, that sought to engage in philanthropic work including "building churches; paying mortgages on those already built; educating the young men and women for the ministry and for the foreign mission field; taking care of orphans and widows, of the old and the sick; building hospitals and infirmaries; sending trained nurses to the homes of the poor; and following the sailors with evidences of loving care." Members are known to wear a "silver cross as the outward symbol of their pledge of love and service and more than one thousand different lines of work upon which they have entered".
Towards the end of the 19th century, with the advent of the New Liberalism and the innovative work of Charles Booth in documenting working-class life in London, attitudes towards poverty began to change. This led to the first social liberal welfare reforms, including the provision of old age pensions and free school-meals.
20th century During the 20th century, charitable organizations such as Oxfam (established in 1947), Care International, and Amnesty International expanded greatly, becoming large, multinational non-governmental organizations with very large budgets.
21st century With the advent of the Internet, charitable organizations established a presence on online social media platforms and began initiatives such as cyber-based humanitarian crowdfunding, exemplified by platforms like GoFundMe.
Criticism The charitable sector has received various criticisms, notably:
It is often biased toward helping beneficiaries that are spatially close, typically in the same country, even when more effective interventions could be implemented elsewhere. Similarly, it tends to focus on current humans, neglecting opportunities to help future generations or other species. Charities are not strongly incentivized to be highly effective, notably due to biases and lack of research from donors. One common issue is scope neglect: emotional responses do not scale linearly with the number of beneficiaries helped. A 2020 study reported that laypeople estimated the most cost-effective charities for saving lives to be between 1.5 and 2 times more effective than the average one, whereas experts estimated them to be 100 times more effective. Charities sometimes give aid conditionally, through eligibility requirements such as sobriety, piety, curfews, participation in job training or parenting courses, cooperation with the police, or identifying the paternity of children, charity models enforce the concept that only those who can prove their moral worth deserve help, motivating citizens to accept exploitative wages or conditions to avoid being subject to the charitable system. Charity is increasingly privatized and contracted out to the massive nonprofit sector, where organizations compete for grants to address social problems. Donors can protect their money from taxation by storing it in foundations that fund their pet projects, some of which have nothing to do with poor people. Leadership of charities can be politically partisan. Economist Robert Reich criticized the practice of billionaires giving some of their money to charity, calling it mostly "self-serving rubbish". Mathew Snow of American socialist magazine Jacobin criticized charity for "creating an individualized 'culture of giving'" instead of "challenging capitalism's institutionalized taking."
Charity fraud
Charity regulators Charity regulators oversee the registration, compliance, and governance of charitable organizations within their respective jurisdictions. Examples include: