Foundation Management Survey Reveals Governance and Expenses of Foundation Boards

March 7, 2011

The Council on Foundations, a nonprofit membership association of grantmaking foundations and corporations, on March 4th released its three-part 2010 Foundation Management Series, which provides a view of governance practices and administrative expenses. The findings enable foundations to benchmark their practices against peer organizations in the field.

More than 500 foundations provided information, on their boards’ demographics, compensation and reimbursement practices, ethics and diversity policies, and fiscal and administrative activities through 2009, the most recent date for which the data is available.

The Management Series comprises three reports: “Board Composition and Compensation,” “Administrative and Investment Expenses,” and “Fiscal Oversight.”

Findings

Board Composition:

  • The median number of board members is 12. Community foundations indicated the most (16), and family foundations the fewest (7).
  • Three-quarters of board members (74%) are over age 50, followed by 18% who are age 40-49. Family foundations reported the largest share of board members under age 40 (16%).
  • The majority of board membership is male (nearly 62%). A significant majority of board members are white (85%), with African-Americans making up 7%, Hispanics 4%, and Asian/Pacific Islanders 2%.
  • Survey participants were asked to share, to the best of their knowledge, how many of their board members are lesbian, gay, bisexual, or transgender. Sixteen percent reported having at least one LGBT board member.
  • Twenty-nine percent reported that their foundations have a written policy on board diversity.

Board Compensation:

  • Most foundations do not pay their board members (76%).
  • Among respondents who do compensate their board members, most (65%) provide all board members with fixed fees, such as annual, committee-based, or per-board-meeting fees.
  • The median amount of compensation paid to the board as a whole is $50,750.
  • The median annual fee for board chairs is $18,000 ($10,000 for other board members), the median board meeting fee is $1,000, and the median committee meeting fee is $650.
  • For other board members, the median annual fee is $10,000, and the median board meeting fee is $1,000.

Administrative and Investment Expenses:

  • Among 234 staffed independent and family foundation respondents, administrative expenses represent a median 15.8% share of qualifying charitable distributions. Qualifying distributions include all expenses that qualify toward meeting the IRS payout requirement for foundations.
  • Larger foundations reported lower expense ratios due to economies of scale.
  • Median investment expenses total 0.6%of net noncharitable use assets for independent and family foundations.
  • For community foundation respondents, program expenses represent a median 12.4% share of their overall qualifying distributions.

Fiscal Oversight:

  • Nearly all foundations used independent accounting firms in 2009, and nearly three out of five require full board approval for the use of such firms.
  • Only one-third of foundations strengthened their internal management controls in 2009 based in the findings of their 2008 audit. Most took no action or made no changes to policies and practices.
  • Nearly nine out of 10 foundations provide directors and officers liability insurance.

The Foundation Management Survey included responses from independent and family, community, and public foundations of various asset and giving levels. Survey participants included Council on Foundations members and nonmembers. For further information see www.cof.org.

McGuireWoods Nonprofit & Tax-Exempt Organizations Group

Our nonprofit and tax-exempt services lawyers provide advice and guidance that enable charities and other nonprofits to operate more efficiently and effectively in today’s increasingly complicated, regulated and competitive environment.

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