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Assets
Holdings of economic value by a foundation or charity – such as cash, stocks, bonds, buildings or other property, and accounts receivable. Generally foundations invest their assets and use the income generated to make grants.
Capacity building
Investing in the core costs of an organisation, such as its operational capacity and long-term sustainability, rather than supporting specific projects. See core costs.
Capital
All tangible assets which cannot easily be converted into cash. These are usually held for a long period, such as real estate, equipment, and other physical property. Charity law in England and Wales requires capital to be invested or retained and used for the charity’s purposes. Capital may be permanent endowment or expendable endowment. See assets.
Charitable trust
A trust is an arrangement whereby a person or persons (the trustees) is made the nominal owner of property for the benefit of another person or group of people (the beneficiaries). Where the trust is charitable, the beneficiaries are not named and the purposes are public. The trust deed will specify either a wide group of people, any of whom can benefit, or a charitable purpose. See foundation.
Community development finance
Providing debt and equity finance (loans and shares) in communities or markets where mainstream financial services are weak and which are said to be 'undercapitalised'. Community development finance provides financial services for for-private-profit businesses working in disadvantaged neighbourhoods and for social enterprise activity. See CDFI and chapter in A Guide to Giving.
Community development finance institution (CDFI)
CDFIs lend and invest in deprived areas and underserved markets that cannot access mainstream finance. They are independent organisations that provide financial services with two aims: to generate social and financial returns. Some CDFIs offer loans while others provide equity investment – a few offer both. They serve different types of customers including individuals, micro, small and social businesses. See community development finance and Community Investment Tax Relief. (Community Development Finance Association definition)
Community development venture capital (CDVC)
CDVC is a particular type of CDFI that specialises in equity investments as opposed to loan finance. CDVC funds are relatively new to the UK and are usually run for profit, offering a financial return to investors, although sometimes at a lower estimated return than conventional venture capital. For an example, visit Bridges Ventures. See CDFI and chapter in A Guide to Giving.
Community foundation
A grant-making charity established to strengthen local communities, creating opportunities and tackling issues of disadvantage and exclusion. They provide products and services for individual and corporate donors. See chapter in A Guide to Giving. (Community Foundation Network definition)
Community Investment Tax Relief (CITR)
CITR offers a tax incentive to investors in accredited community development finance institutions (CDFIs). The tax incentive is available to individuals and companies. It comes in the form of a tax relief, which reduces the investor's income tax (or corporation tax) liability. See CDFI and chapter in A Guide to Giving.
Co-operative (co-op)
An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. The movement was begun in Rochdale, Lancashire, England, in 1844 by 28 weavers and developed to include manufacturing and wholesale businesses as well as insurance and financial services. (International Co-operative Alliance definition)
Core costs
The overhead costs of an organisation, as opposed to those specific to a project. Whilst these costs do not directly produce outputs of charitable activity, they are necessary to deliver these activities. Examples include general management staff, IT equipment and training, fundraising and governance. See Full Cost Recovery.
Development trust
Development trusts are organisations that are engaged in the economic, environmental and social regeneration of a defined area or community. (Development Trusts Association definition)
Expendable endowment
An expendable endowment fund is a fund that must be invested to produce income. Depending on the conditions attached to the endowment, the trustees will have a legal power to convert all or part of it into an income fund which can then be spent. An expendable endowment differs from an income fund in that there is no actual requirement to spend the principal for the purposes of the charity unless or until the trustees decide to. However, income generated from expendable endowment is no different from income generated from permanent endowment, and should be spent for the purposes of the charity within a reasonable time of receipt. See permanent endowment and spending out. (Charity Commission definition)
Foundation
The terms ‘trust’ and ‘foundation’ are often used interchangeably. All charitable foundations are trusts – that is, they are managed by trustees who may or may not be supported by paid staff. A foundation is a trust whose income derives from an endowment of land or invested capital. Not all foundations make grants; some use their income to finance charitable activity of their own. Not all grant-making charities have an endowment. See charitable trust.
Friendly Societies
Mutual organisations that offer members a range of affordable savings, investments, insurances, pensions and specialist annuities. (Association of Friendly Societies definition)
Full Cost Recovery (FCR)
Under FCR organisations and their funders ensure that the price of contracts and grants reflects the full costs of delivery, including the legitimate portion of overhead costs. See core costs. (acevo definition)
Gift Aid
A scheme of tax relief for single outright cash gifts made to charities by individuals and companies. See chapter in A Guide to Giving.
Impact
Broader or longer-term effects of a project’s or organisation’s outputs, outcomes and activities. Often, these include effects on people other than the direct users of a project, or on a broader field such as government policy. See inputs, outputs and outcomes. (Jargonbuster definition)
Indicator
Information that allows performance to be measured. It is a statistical value that links an organisation’s activities to their outputs and outcomes. See inputs, outputs, outcomes and impact. (New Economics Foundation definition)
Inputs
All the resources a group needs to carry out its activities, such as money, people, facilities, and equipment. See outputs, outcomes and impact.
Leverage
A method of grant-making whereby an investment is made in a charity or other organisation with the express purpose of attracting funds or other support from additional sources.
Lifetime Legacies
Lifetime Legacies are a form of split interest trust, much used in the USA (where they are known as Charitable Remainder Trusts). They allow a donor to make an irrevocable gift to a charity during their lifetime, of shares, property or cash, while retaining the benefit of the income or use of the gift for the term of their life. The donor can make deductions against capital gains tax at the time of the gift and its value is not counted as part of their estate for the purposes of inheritance tax. They are not available in the UK. (Charity Tax Group definition)
Microfinance
A term for financial services aimed at micro-enterprises, sole traders and individuals, usually in under-invested communities, including small loans, savings facilities with no (or a very low) minimum deposit and other low-cost financial services such as insurance, money transfers or paying bills. See chapter in A Guide to Giving.
Mission-related investment (MRI)
Making investments from either endowment or income directly in pursuit of an organisation’s charitable objectives. The investments are expected to generate a financial return, although funding may or may not be provided on commercial terms. Examples include low-interest loans and loan guarantees to non-profit organisations or loans to individual beneficiaries, such as for housing deposits. Also known as programme-related investment (PRI).
Objects
Objects is the term used by the Charity Commission to describe and identify the purpose for the which the charity has been set up. They do not say what the organisation will do on a daily basis. A charity’s objects must be exclusively charitable. (Charity Commission definition)
Operating charity
An operational charity, as opposed to a grant-making charity, is one which carries out charitable activities directly, such as helping disadvantaged people or working in some other way to improve society. However, some operating charities make grant as well, whilst some grant-making charities also operate services, such as schools or almshouses. See chapter in A Guide to Giving.
Outcomes
The changes, benefits, learning or other effects that result from what the project or organisation makes, offers or provides: for example, a new job, increased income or improved self esteem. Outcomes can be for individuals, families, or whole communities. See inputs, outputs and impact. (Jargonbuster definition)
Outputs
The direct and tangible products from the activity: for example, the number of people trained. See inputs, outcomes and impact. (New Economics Foundation definition)
Pay-out
The percentage of assets a foundation distributes for charitable purposes in a year. There is no minimum pay-out requirement in the UK. In the USA, the Internal Revenue Services requires most foundations to pay out 5% of the fair market value of their assets to qualifying charitable organisations each year.
Payroll giving
Payroll giving is a way of giving an amount of money each week or month from your pay. It is a tax-effective way for employees, non-executive directors and those receiving a company pension to give a regular amount to one or more charities directly from their income. It can also be used for a one-off gift. See chapter in A Guide to Giving.
Permanent endowment
Permanent endowment is property of the charity (including land, buildings, cash or investments) which the trustees may not spend as if it were income. It must be held permanently, sometimes to be used in furthering the charity’s purposes, sometimes to produce an income for the charity. The trustees cannot normally spend permanent endowment without authority from the Charity Commission. See expendable endowment and mission-related investment. (Charity Commission definition)
Philanthropy
The word philanthropy is originally Greek and means ‘love of mankind’. Today, it is a broad term used to cover voluntary giving of money, goods, services, time or expertise by an individual, group or organisation to promote the common good. Recipients are often registered charities, but can also be individuals, groups or organisations. Financial donations can take many forms including cash grants, loans, and other types of financing.
Reserves
That portion of a charity’s income funds set aside for essential, but as yet unidentified, future expenditure. The Charity Commission defines reserves as “that part of a charity’s income funds that is freely available”. This definition therefore normally excludes permanent and expendable endowment funds, restricted funds, and any part of unrestricted funds not readily available for spending.
Restricted funds
Assets or income which are restricted for a particular use, such as a donation made to a charity specifically for a bursary or a named project run by the charity. See unrestricted funds.
Social business
A business that integrates commercial objectives (growth, profits) with a social, ethical or environmental mission. See Social Investment chapter in A Guide to Giving. (Clearly So definition)
Social enterprise
A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. See social entrepreneurship and chapter in A Guide to Giving. (UK Government definition, supported by the Social Enterprise Coalition)
Social entrepreneurship
A social entrepreneur is someone who uses the skills to create and develop business, commonly associated with private business, to achieve a social purpose. In the USA, the term has usually been associated with earning income. In the UK, it has wider meanings, referring broadly to using original and entrepreneurial thinking to meeting social need. In the UK, those who practise social enterprise may be described as social entrepreneurs - but not all social entrepreneurs practise social enterprise. See social enterprise and chapter in A Guide to Giving. (School for Social Entrepreneurs definition)
Social firm
A social firm is a business set up specifically to create good quality jobs for people disadvantaged in the labour market. (Social Firms UK definition)
Social investment
Social investment as any type of investment that combines social and financial returns. This encompasses a wide range of activities across the financing spectrum, from lending to charities to investing equity in social businesses to socially responsible investment (SRI). There is overlap with the capacity-building approach that provides grants and management support to charities and social enterprises (but where the investor does not receive a financial return).
Socially responsible investment
Ethical or socially responsible investment (as well as responsible and sustainable investment) are terms used to describe any area of the financial sector where the social, environmental and ethical principles of the investor (whether an individual or institution) influence which organisation or venture they choose to place their money with. It also encompasses how an investor might use their power as a shareholder to encourage better environmental and social behaviour from the companies they invest in. See chapter in A Guide to Giving. (Ethical Investment Research Services definition)
Spending out
Spending out refers to a time-limited foundation spending all or part of its capital assets in furtherance of its charitable objectives. Known as ‘spending down’ in the USA. See expendable endowment.
Third sector
The collective name for charities, voluntary, non-government and campaigning organisations. Also known as the voluntary and community sector (VCS).
Tithe
To contribute a tenth of one's annual income to charity, especially for the support of the clergy or church.
Total return
Total return refers to the overall benefit of an investment. It includes both income and capital growth. By using the total return method, trustees are able to allocate the return between current and future beneficiaries. Income benefits current beneficiaries whereas capital growth benefits future beneficiaries. (NCVO definition)
Unrestricted funds
Funds which can be used for the general purposes of a charity. See restricted funds.
Venture philanthropy
An approach to charitable giving that applies venture capital investment principles – such as long-term investment and hands-on support – to the citizen sector. Its key characteristics are high engagement; tailored financing; multi-year support; the provision of non-financial support, such as strategic planning advice, executive coaching and access to other networks; organisational capacity building; and performance measurement. See Philanthropy UK website resource or chapter in A Guide to Giving. (European Venture Philanthropy Association definition)
