An organization or entity in law charged with the administration of assets—be they securities or real estate—designated by a person or institution for the benefit of another person or persons or to provide certain public services. Self-governing and non-profit, foundations are civil society organizations not constrained by membership requirements.
Every foundation has five indispensable elements:
Foundations in History
- The owner of the assets in question (endower),
- The property, securities or source of income that are endowed,
- The person appointed to administer as directed the endowed assets or income source in question (trustee),
- The person, place or service that will benefit from the income stream to be generated under the trustee’s governance,
- The unilateral contract or document where all the above are clearly detailed (foundation charter, deed of trust, pious foundation deed)
Foundations first emerged in the Middle East, Ancient Greece and Rome. In Ancient Egypt, Greece and Rome, they served a single purpose, usually providing financial support to schools, libraries or a local charity. Medieval foundations in Europe usually operated in conjunction with the Church to fund monasteries, soup kitchens, orphanages or schools. Merchants established numerous private foundations during the Renaissance to support education and social aid. Foundations at the time shared a common trait in the close connection between the concepts of foundation, benevolence and almsgiving. This connection that declined in inverse relation to the advance of capitalism has been criticized as a factor preventing social stratification. As legal mechanisms, charitable foundations throughout history have strongly tended to sequester certain assets or sources of income away from the existing property, audit and division systems and from creditors, other stakeholders or confiscation by the state. From the 1750s onwards, foundations confronted increasing allegations of poor governance, outdated purposes and triviality.
Foundations in Islamic Societies and States
The roots of philanthropic foundations providing major social functions in Islamic societies go back to pre-Islamic Arab society. Originally established exclusively for the benefit of temples or venues of collective worship, these foundations in time expanded to cover services that ought to have come from the public purse rather than provided by individuals, such as roads, wells, bridges and inns.
In Islamic jurisprudence vakıf (waqf in Arabic) means the irrevocable retention of a property for the benefit of the public to ensure the permanent availability of its proceeds always for a designated benevolent objective. Where the proceeds are earmarked for religious purposes, the institution is known as a vakf-ı hayrî (charitable foundations); vakf-ı ehlî (family foundations), on the other hand, is one where the income is channeled through the founder or his/her descendants.
A vakıf is only valid if the endowehas donated the assets to the glory of God; the income or entitlement is thereafter given to the servants of God. The principal condition to create a vakıf is for the endower to declare his/her personal intent. The foundation charter called vakfiye enters into effect once its conformance to Islamic rules is certified. The lack of compulsion to name the beneficiaries in the charter would not validate a foundation that benefits solely the wealthy. In environments that offer no security of accumulation or bequest of personal wealth, such foundations did become instruments of safeguarding property especially for the benefit of future generations.
The earliest foundations in the history of Islam are generally dated to the 600s. The need for a public audit for the growing number of foundations first arose under the Abbasids. Soup kitchens and their endowments became popular after the Turks converted to Islam. By the middle of the sixteenth century, there were thousands of foundations in Anatolia.
The majority of foundations in the Ottoman Empire were alleged to have been established with the sole purpose of protecting personal property from the state in order to bequeath it to descendants, or to evade sharia inheritance rules.
In the early twentieth century, prominent foundations emerged from the fortunes of wealthy industrialists in the USA. The two most important were created in the early 1900s by Andrew Carnegie (1905) and John D. Rockefeller Jr. (1913). Just as in Canada and the United Kingdom, several other charities in Europe followed the American examples. Social charities proliferated rapidly in the USA after 1914, and a new wave of foundations developed in the 1940s, supported by individuals, families and companies. While these charities or non-profit entities in legal terms can provide services with their own staff, their principal purpose is to direct those funds to institutions that provide public services or conduct the relevant research. Anyone can bequeath or donate funds to a foundation, and a company or a family can establish a trust to provide a perpetual source of income to a charitable foundation.
Today, large charitable foundations, besides the Carnegie and Rockefeller foundations, include the Russell Sage Foundation (1907), the Commonwealth Fund (1918), the John Simon Guggenheim Memorial Foundation (1925), the Danforth Foundation (1927), the W.K. Kellogg Foundation (1930), Alfred P. Sloan Foundation (1934), the Ford Foundation (1936), the Robert Wood Johnson Foundation (1936), the Lilly Endowment, Inc. (1937), the Pew Memorial Trust (1948), the J. Paul Getty Trust (1953), the William and Flora Hewlett Foundation (1966), the Andrew W. Mellon Foundation (1969), the John D. and Catherine T. MacArthur Foundation (1970), and the Gordon and Betty Moore Foundation (2000). With assets totaling over 40 billion dollars, the Bill and Melinda Gates Foundation, established in 2000, is the largest philanthropic foundation in the world today.
Outside the United States some of the wealthiest foundations include the Wellcome Trust (1936) in the United Kingdom, the Robert Bosch Foundation (1964) in Germany, the Li Ka Shing Foundation (1980) in Hong Kong, the Stichting INGKA Foundation (1982) in the Netherlands, the MasterCard Foundation (2006) in Canada and the Mohammed Bin Rashid Al Maktoum Foundation (2007) in the United Arab Emirates.
Foundations in Turkey
The greatest central philanthropic organization in the Ottoman Empire was the Foundations in Mecca and Medina (Haremeyn Evkafı), which underwent restructuring as the Ministry of Imperial Foundations (Evkaf-ı Hümayun Nezareti) in 1826. In 1920 in the Republican era, foundations were first regulated by the Ministry of Religious Affairs and Pious Foundations until this particular department was abolished in 1924 and they came under the remit of the General Directorate of Foundations (Vakıflar Genel Müdürlüğü, VGM). In 1926, the Turkish Civil Code (Türk Medeni Kanunu, TMK) Act Number 743 was passed, intending to prevent the abuses of the foundation system in the past, to audit charitable foundations, to centralize their administration and to dissolve any found to be acting outside their charter. These regulations preferred the term “trust” rather than “foundation” to designate “the allocation of certain properties to specific purposes for a limited period of time.” The choice of terminology was motivated by concerns that vast fortunes of the foundations were denied the economy in Islamic societies, thereby stifling their economic potential, and causing the underdevelopment prevalent in these societies. “Trust” remained in force until the 1967 Foundations Act No. 903. (Also see trust)
The foundations predating the TMK were classified as either hayrî (charitable) or zurrî (family) vakıf; foundations whose income was in part or in whole dedicated to charitable works were classed as hayrî vakıf. They either took the form of institutions serving the community, such as schools or mosques, or provided the funds for public services. The foundations whose proceeds were allocated to the endower’s heirs, on the other hand, were known as zurrî vakıf or evladiye vakfı. The income of these foundations could only be used for charitable works after the death of the endower’s heirs.
According to the most recent Foundations Act No. 5737 of 2008, foundations predating the effective date of the TMK No. 743, and whose administration is entrusted to the descendants of the endower are called mülhak vakıf (entailed trust fund). A mazbut vakıf (reverted foundation), on the other hand, is administrated by the state due to the lack of surviving trustees. Foundations predating the 1935 Foundations Act No. 2762 and administered by a board elected by merchants is known as an esnaf vakfı (merchants’ foundation).
Cemaat vakıfları (community foundations) are established by non-Muslim citizens of the Republic of Turkey, chartered and registered by the VGM in 1936. These benevolent institutions belonging to communities therefore are certified as foundations, legal entities subject to special regulations and administered by elected boards from among their members. As the TMK does not sanction the establishment of a foundation designed to benefit a specific community, no legitimate new community foundation can be formed.
Foundations created after the 1967 Foundations Act are known as “new foundations”. Nearly half of all new foundations are in Istanbul or Ankara, and the majority are active in education and social assistance.
Beyond the abovementioned legal definitions, foundations are classified as family-, group- or company foundations on the basis of their endowers. Those formed by an individual or a family are family foundations; foundations formed by a group of people like the Turkish Education Foundation , the TEGV and TEMA are group foundations, and the Turkish Vodafone Foundation and the Coca-Cola Life Plus Foundation, are classified as company foundations. Company foundations usually receive regular donations from the founding company.
There also are public foundations created by public institutions or organizations to support public services or personnel. Foundations created by charter like the social assistance and solidarity foundations, the Turkish Armed Forces Foundation and the Education Foundation are defined as state foundations.
Virtually all foundations in Turkey are self-governing and conduct their own projects; practically none has channeled the entirety of its budget to other institutions.
Important to foundations from a fundraising perspective is tax relief. Donations to listed charities are deductible at up to 5% of gross profit for individual and business taxpayers, making this a major incentive to donate to the foundations in question. As of the end of 2017, there were 268 foundations listed as tax exempt. The leading foundations in Turkey are the Vehbi Koç Foundation, the Sabancı Foundation (1974), the Anatolia Education and Social Aid Foundation (1979), the Enka Foundation (1983), the Hüsnü M. Özyeğin Foundation (1990), the Aydın Doğan Foundation (1996), the Mehmet Zorlu Foundation (1998) and the Open Society Foundation (2008). Although they are essentially family foundations, the dividends they receive from the companies, owned in whole or in part by their founders, give them the company foundation status.
NUMBERS OF NEW FOUNDATIONS BY YEAR (1980-2018)
Year Total Year Total
TYPES OF FOUNDATIONS IN NUMBERS
(July 17, 2017)
Entailed trust funds 260
Community foundations 167
Merchants’ foundations 1
New foundations 5,158
Social assistance and solidarity
Environmental protection foundations 15
Multi-purpose foundations 4,141
New foundations include
Foundation universities 72
Foundation vocational colleges 5
Tax-exempt foundations 274
For profit organizations 1,425
Pension funds 21