A recent study from the Urban Institute surveyed the expense and compensation figures of the 10,000 largest foundations in America. They found that 30 percent of foundations reported no operating and administrative expenses, and 66 percent provide no compensation to staff or trustees for managing grantmaking.
Corporate foundations were much more likely to report little or no operating expenses, because they are largely staffed by company employees, whereas average expenses for community foundations were much higher. Among foundations that were independently staffed, the median for overhead expenses was 7 percent. As a general principle, the study found larger foundations have “lower expense-to-distribution ratios, suggesting greater efficiency with size.” Similarly, community foundations had higher compensation-to-giving ratios than independent and corporate foundations, which comparatively gave more and compensated less.
Additionally, the study examined the compensation given to both individual and institutional trustees. Eighty-five percent of individual trustees receive no compensation for the services they render to foundations.
Skeptical, but Generous
While many Americans doubt the ethics and effectiveness of nonprofits, they continue to give generously, a survey from the Harris Institute reports. Thirty-two percent of respondents believe that the nonprofit world has been headed in the “wrong direction,” and only one in ten fully agree that charities use contributions “honestly and ethically.” But in spite of their skepticism, more than nine in ten American households gave financial donations to a charity in the past year.
Nor should American munificence diminish soon. The vast majority, over four in five of those surveyed, expect to maintain or increase last year’s charitable contributions in 2006. Only 16 percent anticipate decreases in their giving.
Among age groups, those 50 and older were the most likely both to donate to nonprofits and to distrust them. Ninety-five percent of older Americans have made a financial contribution in the past year, but almost 40 percent of them believe that the nonprofit sector has gone astray. By contrast, the preponderance of people 18 to 24 harbor “very positive feelings” towards charities, but only 75 percent of them have made a recent donation.
Simon Foundation Prizes
The William E. Simon Foundation recently awarded its 2006 Prize for Philanthropic Leadership to Richard and Helen DeVos, and its 2006 Prize in Social Entrepreneurship to Eunice Kennedy Shriver. The prizes, worth $250,000 each, were presented at a luncheon at the Union League Club in New York City.
Mr. DeVos and his wife were recognized for “their faith-based, education, and community giving, which to date exceeds $365 million.” The Richard and Helen DeVos Foundation is a national leader in policy giving, providing more than $12 million to influential public policy organizations. The DeVoses have also generously supported churches, hospitals, colleges and universities, and art organizations throughout western Michigan and Florida. Upon their marriage, Mrs. Devos advised her husband that they were going to tithe their income, a practice that continues to this day.
Mrs. Shriver, executive vice president of the Joseph P. Kennedy, Jr. Foundation, and founder and honorary chairman of the Special Olympics, has been a leader in the movement to enhance the lives of those with disabilities for over three decades. More than 2.2 million athletes now participate in the Special Olympics, which has grown into a worldwide enterprise.
Estate Tax Repeal
The Joint Economic Committee of the U.S. Congress has issued a comprehensive report on the estate tax, “Costs and Consequences of the Federal Estate Tax.” It estimates the tax has cost America’s economy $847 billion in capital. The report also finds that taxpayers’ costs of complying with the tax roughly match the revenue yield to the government. To meet this cost, people must turn capital into income, retarding economic growth. The tax also discourages saving and encourages consumption, further retarding growth.
Over the next five years, estate tax revenue is projected at only 1 percent of total federal tax receipts. The imposition of the tax (especially its high marginal rates) encourages avoidance and so further reduces revenue. In contrast, the report estimates that repealing the estate tax and offering a limited step-up in basis on property transferred to heirs would net billions more in tax revenues.
The tax falls especially heavily on small and family businesses. Over the last decade, taxable estates have included 24,000 farms, 50,000 limited partnerships, 28,000 noncorporate interests, and 37,000 corporations, with a collective value over $100 billion. In several surveys of family businesses, over two-thirds of respondents say the estate tax makes family business survival much more difficult.
The report also confirms that repealing the estate tax will have little or no impact on charitable contributions (see also “Leaving a Legacy of Care,” Jan./Feb. 2006).