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Foundation expenses vary

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With lawmakers giving increasing scrutiny to foundations in the U.S., a new report says they are a diverse group, and that regulations affecting them should reflect their diversity.

The report, “Foundation Expenses and Compensation: How Operating Characteristics Influence Spending,” was conducted by the Foundation Center in New York City, the Urban Institute in Washington, D.C., and GuideStar in Williamsburg, Va.

The study examines 2001 IRS filings and survey data from the 10,000 largest independent, corporate and community foundations, which together represent more than three-fourths of all foundation assets and giving in the U.S.

One in three of the foundations studied reported no operating or administrative expenses, and for those with paid staff, staffing expenses were the greatest factor driving operating expenses, the study says.

Community foundations were most likely to have paid staff, while corporate foundations, which often use company staff to run affiliated foundations, were least likely to use paid staff.

Foundation size is also important, the study says, with larger foundations reporting greater compensation expenses.

But among foundations with paid staff, larger foundations also report their median ratios of expenses to giving are relatively low, the report says.

The study also says that some activities, including international grantmaking, running a facility, or conducting a research program, incur more expenses than giving locally or providing grants to nonprofits.

About four in 10 staffed foundations reported that their charitable expenses accounted for 5 percent or less of the 5 percent of assets the law requires they pay out each year, the study says, compared to a median of 7 percent of the required payout for all foundations.

Almost two-thirds of foundations provided no compensation to staff or trustees for grantmaking activities, the study says, and more than eight in 10 provided no compensation at all for trustees.

Compensation for heads of foundations was related to size, with a median salary of about $100,000 for foundations overall, $200,000 for those with over $200 million in assets, and $50,000 for those with assets of less than $10 million.

The report recommends that IRS filing forms be revised to improve reporting of expenses, direct charitable activities and compensation of staff and trustees.

“The overall picture is one of diversity,” the study says.  “This is a heterogeneous group of institutions that can only be understood by disaggregating the data along the dimensions of size, type, and staffing and program characteristics.”

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