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This study presents the findings of a three-year study to analyze the expense and compensation patterns of the 10,000 largest foundations in the United States. It finds characteristics such as foundation type, size, and operating activities are important factors for understanding differences in foundation finances. Despite the economic downturn and the volatility of the stock market during the study years (2001 to 2003), the patterns of foundation expenses and compensation are clear and consistent over time. This is the first large-scale, long-term, and systematic study of independent, corporate, and community foundations’ expenses and compensation patterns and the factors behind them.
This report presents final results from the Foundation
Expenses and Compensation Project—the
first large-scale, long-term, systematic study of
independent, corporate, and community foundations’
expense and compensation patterns and
the factors behind them. Documenting the
varying characteristics of the 10,000 largest U.S.
grantmaking foundations, the study finds these
differences—including foundation type, size, and
operating activities—essential for understanding
foundation finances. Not surprisingly, hiring
staff and taking on staff-intensive activities raise
charitable administrative expenditures relative to
charitable distributions, while relying on unpaid
board and family members and engaging in lessstaff-
intensive activities lower them. Most foundation
operations, however, are somewhere
between these poles.
The study focuses on 2001, 2002, and 2003, the
latest years for which data were available when
the research was initiated. Despite the economic
downturn and the volatility of the stock market
during these years, the patterns of foundation
expenses and compensation are clear and consistent
over time. A longer time frame would have
been preferable, of course, but this three-year
study is the most robust analysis to date of nonprofit
finances, and it confirms and extends the
findings based on 2001 data, as reported in Foundation
Expenses and Compensation: How Operating
Characteristics Influence Spending (2006).
The study’s goals are to inform public policy
debates and foundation practices by documenting
administrative expenses reported by foundations
for their grants and other charitable
activities, examining compensation levels of
their executive staff and board members, and assessing
the factors that drive both types of
expenditures. The focus is specifically on charitable
administrative expenses, those expenses that
relate exclusively to programs and count as
qualifying distributions toward the 5 percent
payout requirement for private foundations.
Expenditures for investment-related activities
are not part of this study, except insofar as compensation
levels of individual staff and trusteesare based on total compensation, and are not
broken down by functions.
For years, discussions of appropriate levels of
foundation expenses and compensation have
been hampered by insufficient empirical data.
This study is large and rigorous enough to answer
basic questions about existing practices. The
hope is that this report will inform government
oversight, sector self-regulation, and individual
foundation administration. In particular, foundation
managers and board members can use the
data to compare their expense levels over several
years with those of similar foundations.
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