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With the foundation sector playing a critical role in Spain but facing decreasing income and increasing levels of bureaucracy, Isabel Peñalosa Esteban, director of institutional relations and legal affairs at the Spanish Association of Foundations, provides some insights into the challenges and the key steps the sector must take if the situation is to improve.
The times we live in are testing us. Before we’ve even exited the ravages of the coronavirus pandemic, we have had to face the consequences of the war in Ukraine, not forgetting all the other challenges we’re dealing with, from climate change, to the substantial increase in poverty in our societies, and the rise of authoritarianism. So, what role do foundations have to play in this situation?
A critical role for the sector
At the Spanish Association of Foundations (AEF), we believe it is one of the utmost relevance. Foundations here, as elsewhere, focused on providing an effective response to the social and health consequences of the pandemic, complementing the public sector’s work more than ever. But the pandemic also created great organisational and financial stress, adding to the pressure foundations were already under.
According to AEF studies, the foundation sector has maintained the same level of expenditure since the last crisis in 2008. This is estimated at around 8,499 million euros a year, while income has been somewhat lower. So Spanish foundations have been consuming their own reserves and resources for a long time. This is one of the reasons why, since 2009, the AEF has been asking for support measures, such as tax incentive reforms to encourage more donations.
More support measures needed
This has had some success – in 2015, it resulted in the introduction of ‘micro patronage’, which offers relevant tax deductions – 80% for small donations. It’s been an important measure for reinforcing participation and citizenship, and has seen a slight increase in average donation value. But we need more. Foundations in Spain are currently estimated to number more than 9,000. Yet, while they continue to be set up, by individuals and families, by companies and by other social groups, they face increasing levels of bureaucracy.
According to a study published by the AEF – Strategies of foundations in the post-covid-19 era – carried out by professors Rodriguez Cambrero and Sosvilla Rivero, some key steps must be taken if the situation is to improve.
Task 1: improve awareness of the sector & its role
First of all, foundations must strengthen their presence in society to improve public awareness and perception of the sector.
Secondly, the study recommends a certain reinvention of the sector to develop common structures and strategies that enable foundations to work better together – because without greater cooperation, it will not achieve its maximum social impact. This is where umbrella organisations and philanthropy infrastructure networks such as AEF have an essential role.
Task 2: resist sector fragmentation
In addition, foundations must act against the fragmentation of the sector itself. They do not have to follow the pattern of public administrations that have rigidly set powers according to their location. Foundations can act supraterritorially. They have to maintain flexibility. In this sense, public funding is necessary, but comes with more conditions than that from private sources.
Task 3: achieve financial diversity
Foundations must also guarantee their financial sustainability, and this is where diversity in financing is key. More than 70% of the Spanish sector’s resources come from private sources, so foundations need to look more widely here – at everything from asset management, to donations from companies and individuals, and provision of services. The sector must seek new forms of financing too, from venture philanthropy, to impact investors.
Task 4: reinforce the sector’s role more widely
Finally, we need to reinforce the role that foundations and social initiatives play in our society because it is not yet sufficiently recognised by governments and policy makers. In Spain, this includes working to expand the space for dialogue with associations and foundations and building recognition of the role the nonprofit sector plays in the economy – foundations alone provide more than 270,000 jobs – and as a driving force for citizenship and values such as equality and solidarity. At the AEF, this is one of our most important objectives.
About Isabel Peñalosa Esteban
Isabel is director of institutional relations and legal affairs at the Spanish Association of Foundations, and has a BA and PhD in Law. Active in the Spanish Association of Foundations since 2003, before that she was at the Spanish Confederation of Foundations, which she joined in 2001 as legal advisor. Isabel is also a regular speaker at courses and seminars on legal and fiscal regime of foundations and third sector organisations, and the author of several articles and papers.
Main image by JoEllen Moths on Pexels