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Foundation expenses tied to activities

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Expenses and compensation vary greatly depending on how a foundation operates, and the group’s mission and operating style should be considered when analyzing costs, a new study says.

The study, “Foundation Expenses and Compensation: Interim Report 2005,” was conducted by GuideStar in Williamsburg, Va., and the Foundation Center and the Urban Institute, both in Washington, D.C.

The study, which analyzed 2001 giving data from the 10,000 largest independent, corporate and community foundations in the U.S., found that almost three in 10 report no administrative expenses related to their charitable activities, and almost two in three pay no compensation.

Overall, charitable operating and administrative expenses accounted for 7 percent of qualifying distributions, while 90 percent of the federally mandated payout was made up of charitable grants.

More than one in four foundations reported having no charitable operating or administrative expense, the study says, with the median expenses of almost $17,000 for those that do.

Expenses accounted for anywhere from 5 percent to of qualifying distributions to more than 50 percent, with unstaffed foundations generally at a lower ratio than staffed foundations.

Only one in four foundations report having paid staff, the most significant factor affecting operating costs, the study says, with larger foundations spending proportionally less on administrative expenses, likely due to economies of scale.

Of the foundations with paid staff, the median compensation for foundation heads is $100,209, the study says, with the median for trustees at $7,750, including reimbursements.

Foundations’ missions also affected expenses, with those giving internationally experiencing higher costs, as well as those providing direct services, such as operating facilities for charitable programs.

Given the study findings, the authors say a foundation’s mission, type and size must be considered when evaluating expenses in relation to giving.

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