What Drives Foundation Expenses and Compensation? Results of a Three-Year Study

by Elizabeth T. Boris; Rachel Elias; Mark A. Hager; Loren Renz; Mahesh Somashekhar

Feb 1, 2008
Foundation type, size, staffing patterns, and operating activities are the key factors that consistently drive foundation expense and compensation patterns, according to a new report issued jointly by the Urban Institute, the Foundation Center, and GuideStar. "What Drives Foundation Expenses and Compensation? Results of a Three-Year Study" shows that even under changing or volatile economic conditions, the administrative expense and compensation patterns of U.S. foundations are consistent and predictable. The report presents final results from the first large-scale, long-term study of independent, corporate, and community foundations' expenses and compensation. Key findings include: Foundations differ greatly in their structures, resources, and operating characteristics and these differences significantly affect their expense levels. Employment of staff is the single most important factor affecting expense levels, followed by staff size and level of program activities. Most foundations do not compensate board members; those that do are most often staffed and independent. There is relatively little year-to-year change in the factors that drive expense ratios and in how foundations allocate their charitable administrative expenses.
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