Big Foundations Spent 16 Cents on Overhead for Every Dollar Given Away

While most foundations in The Chronicle’s survey reported a growth in assets, many of them plan to keep their

administrative costs trim and maintain hiring freezes they started during the economic downturn.

Grant makers are also feeling pressure from members of Congress to reduce expenses. Lawmakers have criticized how much foundations spend on salaries, travel costs, and other administrative expenditures.

The survey found that, for every dollar given away, big grant makers spent a median of 16 cents on their own administrative expenses, such as travel costs, salaries, and consultants’ fees.

The figures are based on data from the federal tax returns of 253 grant makers for their 2003 fiscal years, the most recent year for which complete data are available.

Foundations spent a median of $2.8-million on operating costs, meaning half spent more than that amount and half spent less. The Michael R. Bloomberg Family Foundation Trust, in New York, spent the least in operating costs: $340.

The grant maker with the greatest disparity between administrative costs and how much it paid in grants was the Mt. Cuba Center, in Wilmington, Del., which made $4,500 in grants, but reported $3.6-million in operating costs.

Stephen A. Martinenza, the foundation’s assistant treasurer, said Mt. Cuba Center’s administrative costs command a big share of its spending because it maintains 600 acres of nature preserves, including a 75-acre garden and horticultural center in Hockessin, Del.

He said in 2005 the foundation plans to increase its grant making significantly thanks to a $250-million bequest it received from Pamela Copeland, the wife of the center’s founder, Lammot du Pont Copeland.

The center expects to provide $6-million this year to horticultural and environmental causes, Mr. Martinenza said.

Other foundations with costs that dwarf their grants operate similar programs. For example, the Samuel Roberts Noble Foundation, in Ardmore, Okla., spent $5.5-million on grants two years ago and more than $40-million on expenses. Its administrative costs are large because Noble operates a 450,000-square-foot facility where researchers study plant biology and agriculture to improve crop production.

Compensation Costs

The survey also found that the median amount spent on executive compensation was 1.6 cents for each grant-making dollar.

The median amount spent on executive compensation for the 253 funds was $333,063, with 57 of them reporting that they do not provide any compensation to their top executives.

In interviews with more than a dozen grant makers, foundation leaders said they expect to have similar administrative costs in 2005 despite investment gains, having decided to keep in place policies adopted a few years ago to reduce expenses.

For example, the assets of the Charles Stewart Mott Foundation, in Flint, Mich., rose from $2.37-billion to $2.5-billion in 2005, but the foundation plans to keep its spending on salaries low by maintaining a partial restriction on hiring staff members.

The foundation has not frozen all new hiring, but it is continuing an informal “hiring slush” by replacing key employees it loses through attrition, but not replacing others, said Maureen H. Smyth, the organization’s vice president of programs. “We’ve lost a large number of staff over the last three or four years,” she said.

Not all foundations are being so strict about their hiring practices. Thanks to a $186-million bequest from its founder, the Jack Kent Cooke Foundation, in Landsdowne, Va., expects to increase its staff of 20 by at least five people.

At the W.K. Kellogg Foundation, in Battle Creek, Mich., belt-tightening efforts involved cutting back on travel expenses.

William C. Richardson, Kellogg’s president, says the grant maker now requires all of its board members and employees to fly coach class for domestic flights at the “lowest reasonable fare.”

Kellogg also decided to reduce travel costs because lawmakers on Capitol Hill have cast a critical eye on such spending.

But most charitable funds are reducing their overhead costs for economic reasons, not in response to criticism of the foundation world, according to Paul Brest, president of the William and Flora Hewlett Foundation, in Menlo Park, Calif.

“I don’t think the major issue is administrative expenses,” he said. “Most foundations have admin expenses that they think are justifiable to achieve the outcomes they want.”