Navigating Charitable Organizations in Ecuador
When many expats retire, giving back, volunteering and getting involved in the community become an even larger priority. As with many things in expatriating, it’s important to be informed how each country categorizes their social organizations, charities and their scope of work and reporting. This means that some of the terminology you might be familiar with in your home country either doesn’t apply in another country or can mean something else entirely.
In the United States, for example, there are 29 different IRS designations for not-for-profits ranging from the most well-known, 501 C3 organizations to some of the lesser known ones such as the 501 C5 which deals with Labor, Agricultural, and Horticultural Organizations. Even within these different not-for-profit designations there are variances in reporting and tax deductibility status. Another great example is between public charities and private foundations with the later usually having a principal fund from a single source that aids charitable, education, religious or other activities serving the public good, primarily through the making of grants to other nonprofit organizations.
In Ecuador, social organizations are loosely defined as a group of people who come together to form an organization that will attend to a local community need. This “need” ranges from more philanthropic activities such as feeding the poor or helping abused women, to groups that come together to create a recreational association that is focused on soccer or handicrafts, or a company that creates a Chamber of Commerce or Union. It is the feeling of the Ecuadorian Government that these social activities should be regulated and controlled and that they must always remain focused on providing a service or membership for social causes or needs and not look for financial benefit.
In Ecuador there are only 4 types of social organizations:
1. Foundations– Are regulated by a formal government institution and by their established bylaws which must be approved by the government. Foundations have the largest scope for the delivery of services and are permitted to engage in fundraising and have no limit on the money they can raise. All the money collected must be used to help people through services and programs as foundations cannot make a profit. Monthly third-party audited statements must be reported to verify the use of funds. There are two different levels of foundations:
Level 1– national or local, allowed to work in any social cause in any area of the country with the ability to become international. Our organization, Fundación Hearts of Gold, is an example of this type of foundation.
Level 2– an outside international organization that establishes a formal Ecuadorian branch, such as UNICEF and has a specific area of work with projects that must be presented and approved by the government before they can be executed
2. Corporations– Are associations of a minimum of five members, either individual citizens who come together or a group of five members from a company that form to carry out a social activity for the benefit of the community. These activities are usually limited and have a very specific service area. This type of social organization usually charges a low fee, either for its services or to be a member, in order to sustain itself and is allowed to make a small profit as long as their yearly total income or money raised doesn’t go over $30,000. There are three different kinds of corporations:
First grade – Corporations run by a minimum of five citizens that have a specific limited area of work such as soccer associations, cleaning groups, knitting clubs, etc.
Second grade – Corporations run by a company that has a specific and limited area of work such as local Federations, local Chamber of Commerce, and local Unions, etc.
Third grade– Corporations run by a company that have a larger but still specific work area such as National Confederations or a National Union.
3. Other National or International Organizations– are types of organizations that function as social projects with a specific start and end date that must always be supported by an Ecuadorian foundation or legal corporation. This organization has its own internal bylaws like a foundation but cannot collect money. They primarily organize interaction spaces such as a free workshop for three months on health where citizens can either share their opinion on this social need or receive health services at no cost.
4. Government Organizational Spaces– are government created and regulated organizations that create a space to facilitate a roundtable table type dialogue for citizens to discuss social issues affecting them such as failing power services to rural areas.
As you can see from the above list, the groupings of social organizations are interpreted very differently in Ecuador.
The very term “foundation”, takes on a completely different meaning in Ecuador than in the United States for example. The majority of foundations in Ecuador do not receive money from a single source, nor are they heavily involved with grant making activities as they are in North America. Foundations in Ecuador serve primarily as the body that does direct service work to help vulnerable members outside of government institutions. This makes the role of foundations in Ecuador vital since they often serve as a way for both citizens and the private sector to get involved with helping the community.
There you have it! Now you know what types of organizations exist in Ecuador. To continue learning about giving in Ecuador check out what simple questions to ask before getting involved with an organization or read our top 5 tips before donating!
To view the registry of social organizations working legally in Ecuador, please visit: http://www.sociedadcivil.gob.ec/directorio