What drives foundation expenses and compensation?

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 less- staff-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 non- profit 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).