Majority of Private Foundations Pay Their Trustees, Survey Finds

More than two-thirds of the private foundations included in a newly released survey pay fees to their trustees.

The 238 foundations

in the survey paid $44.9-million in trustee fees in 1998, of which $31.1-million went to individual board members. Another $13.8-million was paid to bank trustees, which wealthy donors sometimes name as trustees of private trusts. Federal regulators often treat such trusts as private foundations.

The survey was conducted by the Center for Public and Nonprofit Leadership, which is part of the Georgetown Public Policy Institute, in Washington, using the tax returns filed by private foundations in 1998. Release of the survey results came as Congress was debating whether to change the law regulating private foundations, which requires them to distribute an average of 5 percent of their assets annually, but permits them to include trustee fees, officer and employee salaries, and general overhead expenses as part of the required payout. A proposal in the House would have prohibited private foundations from including all such overhead expenses in calculating their payouts, but that proposal was dropped last week in favor of a plan that keeps foundations from counting more than $100,000 per officer and director toward the payout figure.

Foundations with less than $230-million in assets were more likely than larger ones to pay at least some of their trustees, the study found. About 80 percent of the 62 smaller foundations included in the survey paid such fees, while 63 percent of the 176 larger ones did so.

A report on the survey lists the Kimbell Art Foundation, in Fort Worth, as paying the highest fees in 1998, with $750,000 going to Kay Fortson and $747,000 to Ben J. Fortson. However, Mrs. Fortson is also listed on the foundation’s tax return as president of the foundation and Mr. Fortson as vice president. The fund was the subject of a series of articles in the Fort Worth Star-Telegram in 2000, after which the Fortsons announced they would no longer be paid, a change reflected in the foundation’s 2001 tax return.

Among smaller foundations, the Ira and Doris Kukin Foundation, in Livingston, N.J., paid the highest fees, according to the survey, with each of its three trustees receiving more than $225,000.

‘Corporate View’

Pablo Eisenberg, one of three authors of the report and a regular contributor to The Chronicle’s opinion pages, who is a staunch supporter of making private foundations pay more to charities, said the tax returns provide little information on why the trustees are paid. What’s more, he said, foundation officials often refused to provide additional justifications when the authors contacted them.

Those who did respond, Mr. Eisenberg added, offered “the corporate view that you get what you pay for: You can’t get the very best people with the expertise and experience you need unless you pay them. But we know thousands of people who would be good board members who would not demand fees. There are trustees who serve on museum boards or other large nonprofit boards and do not get paid a dime.”

Dorothy S. Ridings, president of the Council on Foundations, a Washington organization that represents foundations, said she had not yet read the report. Still, she said, “one thing the study misses is that there sometimes are valid reasons to provide compensation, especially when a board member has special skills that are needed and make it financially unreasonable to serve without compensation.” She added, however, that the council has “opposed unreasonable, unnecessary, and excessive compensation for foundation executives and foundation trustees throughout our whole history.”

The report recommends that Congress limit private-foundation trustee fees to $8,000 per board member annually. It also suggests that foundations no longer be allowed to count trustee fees as part of their annual payout.

Copies of the report, “Foundation Trustee Fees: Use and Abuse,” by Mr. Eisenberg, Christine Ahn, and Channapha Kham-vongsa, are available free, either in electronic or printed form. For copies, write to Mr. Eisenberg at the Georgetown Public Policy Institute, 3240 Prospect Street, N.W., Washington, D.C. 20007; pseisenberg@erols.com.