How Do Charities Operate?
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Defining a charitable organization
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A charity, or charitable organization is defined differently across different countries and states. In the US, a charitable organization is one who's organization and operations are carried out toward goals that are in the interest of the public. As such, charities are not designed to make profit, but to use their operating capital toward assisting their mission in the best way possible. Many, but not all non-profit organizations are charities. Charities may file for tax exempt status under the US tax code, and people donating to charities may also claim qualifying donations as tax deductions.
Charities direct money toward causes
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The main function of a charitable organization is to take in funds and direct them toward causes which they deem of great importance. The way this direction manifests itself can differ greatly from one charity to another. For instance, a certain charity might carry out actual programs and projects which directly assist with the problems they mean to address. Such charities might use most if not all of their capital for the expenses related to their programs. Charitable organizations, especially foundations, may also take in money in order to allocate it toward different goals, or fund other charities which carry out actual ground operations or research. Such feeder charities research different programs and donate to the ones that they feel will serve the needs of the public most effectively.
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Charities require donations to survive
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Charities operate on the funds provided by their donors, and often do not make much money themselves to cover their own expenses. If a charity grows to a certain size based on a given level of yearly donations and the level of donations they receive suddenly drops, the charity is likely to have to shut down parts of its operations or dissolve completely. Since charitable contributions are tax deductible, there is an additional incentive to give to charity, especially for those in high tax brackets, who usually have the most excess income to give. Charities which do not carry out their own ground operations, but allocate funds to other groups are better equipped to handle fluctuations in giving which is part of the reason for the existence of such organizations--the build up a base of investment, and provide constant flow of capital to other smaller projects on the ground. An example of such an organization is the Bill and Melinda Gates foundation, which maintains billions of dollars in operating capital and focuses on sponsoring programs that aim to curb world poverty.
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