There is one thing community foundations have
in common—when it comes to administrative
fee structures, no two are alike. While there is not
one right answer, it is important to review and compare your foundation’s fee structure to other foundations
of comparable size. Many community foundations
are doing just that in order to streamline their
own fee calculation and collection processes. In this
edition, we have provided the tools and statistics
you’ll need to get started.
The differences among most community foundations
are how fees are assessed and calculated.
Some foundations design their fee structures based
on the type of funds or services they offer. For example,
a fee structure might be organized by any or all
of the following:
- Fund type: These include donor-advised,
designated, field-of-interest, and/or unrestricted
- Fund longevity: Is the fund temporary or is it
- Stratified services: Is there a tiered level of
service with various fees per level?
- À la carte: The community foundations may
offer special services and assess donors on a
fee-per-service basis (e.g., if the donor wants
to fund-raise for the event).
In general, most community foundations
charge donors a percentage of the fund size for
administering the fund, which is calculated by using
basis points.1 In addition to that percentage, some
foundations charge minimum fees and/or
To determine the appropriate percentage on
permanent funds, community foundations can refer
to their spending policy and the payout allowed for
each fund. For example, if a foundation’s payout is
5.5 percent per fund, it might allocate 4.5 percent to
grants and 1 percent toward administrative fees.
Other funds may not be subject to a spending
policy. In these cases, a community foundation can
determine the fee by the level of support the fund
requires. The foundation may also charge a separate
investment fee for the fund (from .25 to 1 percent),
which covers a mix of managed accounts, fixed
income and equities, custodian, and/or consultant fees.
Community foundations can also calculate fees
at different times—on a monthly, quarterly, or annual
basis. However, keep in mind the amount of time
foundation staff members are spending on calculating
fees because this activity consumes more staff
time. In lieu of staff periodically calculating fees, the
fees for some funds can be calculated according to
activity. For example:
- fees assessed on the front end of the fund
(i.e., when the fund is established)
- fees assessed by transaction—at contributions
- fees for pass-through funds
The method of calculating also varies and can
be based on any of the following:
- average daily balance (calculated weekly or
- current market value at the beginning or end of
the month or quarter
- labor and overhead costs for separate services
(e.g., fees may be charged at the time special
services are rendered)
Most foundations calculate payout on a rolling
quarterly average and administrative fees on a
monthly basis based on the average daily balance.
Foundations may or may not collect fees monthly
(e.g., some collect quarterly).
There are many choices—how do you decide
the best model for you? Again, the best way is to
look at what other community foundations of similar
sizes are doing and then discuss and weigh your
options. There are no recommended guidelines, but
you do need to consider varying factors when
establishing an administrative fee pricing structure.
When considering your administrative fee structure, ask yourself the following questions:
- What is the best way to determine our
administrative fee methodology and rates?
- What administrative fees do our competitors
charge for similar services?
- How often should we revisit our administrative
- What costs are associated with taking on additional
- What is our existing capacity? Would it be
more cost effective to hire additional in-house
staff or outsource some processes?
- Is interdepartmental coordination needed to
set a reasonable policy on fees? (e.g., often the
finance and development departments set fees
Trends on Administrative Fees
In 2001, two community foundation colleagues conducted
a survey on administrative fees, issues, and
trends (see the Resources section for more information).
The survey was sent to community foundations
and 104 financial officers responded. The
responses were segmented based on the size of the
community foundations’ assets as follows:
- 15 percent in the $0–$25 million range
- 45 percent in the $25–$100 million range
- 25 percent in the $100–$500 million range
- 10 percent in the $500 million and above range
The survey results were presented at the Fall Conference for Community Foundations in October 2001. Below are some survey highlights. Review this information and compare it with your community foundation’s current practices.
- Most community foundations surveyed (75
percent) based their fees on fund type. Smaller
community foundations were less likely to use
a different fee per type of fund.
- Almost half of those who responded used a
tiered-fee structure, charging a different fee for
each tier. A tiered structure refers to price-break
points (e.g., 1 percent on the first $1 million;
.75 percent on the next $1.5 million, etc.).
- Seventy-five percent of respondents kept their
investment fees separate from their administrative
fees. Those who assessed an all-inclusive
fee, which included investment management
costs, found that it affected their operating
budget because the investment management
fees were then paid from the operations budget.
- Most community foundations (59 percent)
used a different fee for endowed funds than for
- For endowed funds, more community foundations
assessed administrative fees quarterly (60
percent) as opposed to annually (15 percent)
or monthly (20 percent) or other timeframes
- For non-endowed funds, most community
foundations assessed administrative fees
quarterly (45 percent), followed by monthly
(25 percent), annually (15 percent), or some
other method (15 percent).
- Of those surveyed, 21 percent charged fees on
deferred gifts: most assess an ongoing fee (92
percent), while some charged a fee when the
deferred gift was created (36 percent).
- Seventy-five percent of community foundations
kept the interest earned on the account
balance of funds segregated for payout.
- It is uncommon for community foundations to
offer consolidated fees for donors with multiple
funds—only 14 percent of foundations did so.
Frequently Asked Questions
What factors should we consider when
determining our administrative fee structure?
Administrative fees can be established by examining
your local market conditions and competitive forces,
as well as the cost of doing business. Ask yourself:
- Who are our competitors? What do they
charge for products and services?
- How can we communicate the value added for
our administrative fees? (Contact the Council
on Foundations for samples of what other
foundations charge for administrative fees.)
- How much does it cost us to provide these
services (including fixed and variable costs,
such as labor, overhead, facilities, marketing,
When determining a fair and equitable fee
structure, you should study the complexity of
specific fund types and the support they require.
Keep in mind—administering fees can consume a
significant amount of staff time. As one community
foundation colleague said, “Sometimes foundations
make deals (i.e., exception pricing) to bring the
dollars through the door, but they’ve got to be sure
they have the in-house ability to administer them.” If
you don’t have the staff capacity, consider keeping
your fee structure simple.
How do community foundations
charge based on fund activity?
According to the 2001 survey, only 9 percent of
community foundations charged administrative fees
based on activity (or in other words, by transaction).
For example, a community foundation might charge
based on the number of grants or number of
Eighteen percent of community foundations
charged for enhanced services, such as:
- offering unique investment management
- developing a Request For Proposal (RFP) for
- administering an S-Corp
- managing committees
- administering scholarships
- assisting with fundraising or technology
- researching or evaluating grants
Enhanced services, while expensive, are an
opportunity to earn additional revenue for service.
When offering enhanced services, community foundations
often charged donors based on the actual
time they spent on each activity.
According to a recent Foundation Strategy
Group (FSG) study of community foundations, some
services are more costly than others. For example,
the average annual cost to community foundations
for scholarships was almost $20 per every $1,000 in
assets—the most costly of any fund type.
To“break even,” how much
should we charge on our funds?
Many community foundations maintain a traditional
fee ceiling of one percent. Below are some factors to
consider when determining what fee you’ll need to
charge to cover your costs—
- Degree of customization allowed or encouraged
by the foundation—unique processes in
response to one-time donor requests add significant
costs to all funds and divert staff attention
from activities that serve a broader base of
- Average fund size in each product category—in
some foundations, the fees from exceptionally
large funds may subsidize many small funds.
- Level of transactions associated with funds in
each product area—higher levels of gift and
grant activity can lead to additional costs
unless processes are streamlined, automated, or
- Degree of enhanced services provided by the
foundation—such as managing committee
processes, creating special RFPs for certain
funds, or offering unique investment management
options. While foundations can use
enhanced services to earn additional revenue,
few foundations generate revenue from these
services in a systematic way.
- Pricing and discounts from published pricing—
higher effective fees, particularly for large
funds at or above one percent of assets, are
often necessary to earn enough revenue to
Do most community foundations
charge minimum fees on funds?
Community foundations charge minimum fees to
avoid losing money on smaller funds. Some foundations
charge minimums only on donor-advised,
non-endowed funds, or other funds where the donor
may spend money out of the fund on a quick turnaround.
Rather than establishing a minimum fund
size, some opt to charge a minimum administrative
fee per fund.
In the 2001 survey, less than half of survey
respondents (46 out of 104) charged a minimum
fund fee. Minimum fees ranged from $100 to $700—
the most common being between $100 and $250.
Should we charge additional fees for
pass-through or spend-down funds?
A pass-through fund is a non-permanent fund
established by a donor, agency, or an organized
fundraising group. It is a short-term fund that often
involves a fundraising campaign or event. Such
events result in generating numerous gifts.
A spend-down fund is also a temporary fund,
established with the intent of spending it within a
certain timeframe. Spend-down funds can be a valuable
service to the community; yet, these types of
funds may demand the same, if not more, time and
effort to administer as permanent funds. Therefore,
some community foundations assess pass-through
and spend-down funds with a higher fee structure
(such as 3 or 5 percent), a minimum fee (such as
$500), or transaction-based price.
To determine the appropriate fees for such
funds, examine how much support your foundation
must give to administer the funds and conduct a
How should we charge fees for
administering supporting organizations?
The purpose and activity of supporting organizations
can vary greatly, making it difficult to set one
fee across the board. Some community foundations
incur greater costs than they receive in fees. For this
reason, they offset costs by charging higher fees than
other funds, such as—
- market value plus activity fee
- market value plus minimum fee
- a customized fee schedule based on the service
Almost half of the community foundations surveyed
in the 2001 study charged fees to supporting
organizations based on market value. For those that
did not charge based on market, they based their fee
schedules on activity or time worked.
Should we charge fees on endowment funds if
the value drops below the original principal?
In the survey, community foundations agreed that
they should continue to charge administrative fees,
even if a fund’s market value dropped below the
contributed amounts. Below are three quotes from
financial officers at community foundations:
"Administrative fees aren’t based on performance
of the fund. We don’t increase fees when the
market is good and can do ourselves harm by not
charging what our services are worth.”
“Even though fund values decrease, there are
still administrative costs associated with them, and
those costs are not going away.”
“A fee is a fee is a fee. They are what keeps us
open and providing the service we do.”
Community foundations should indicate in
their fund agreements whether fees (e.g., investment
fees and administrative fees) will be charged on
endowment funds that are below their historic dollar
value. If such a provision is not part of a fund agreement, community foundations must engage their
legal counsel to determine whether their state’s version
of the Uniform Management of Institutional
Funds Act (and the revised Uniform Prudent
Management of Institutional Funds Act) allows
spending for fees from underwater funds (individual
endowment accounts whose market values are below
their historic dollar value).
Should we allow a grace period to
let the fund grow before we charge a
fee on new and/or small funds?
Community foundations offered some caution about
omitting fees on certain funds. “Not charging fees on
new or small funds can cause problems down the
road,” said one financial director. “It’s hard to explain
to a donor or agency why your services used to be
free (had no value), and now they’re not.” It may be
better to make the case from the start that the
community foundation is providing valuable services
and should be compensated accordingly.
There’s something else to consider: if you don’t
charge fees on all funds, it essentially means that
some funds (those with fees) are essentially subsidizing
others. This may be difficult to explain to those
donors whose fees are paying for other funds.
Then, what’s the bottom line? “Be consistent,”
said one community foundation colleague. “Factor
in the long-term needs of your foundation and be
able to make a case for what you decide.”
Administrative Fees, Issues, and Trends.
conducted by Jack Pohl of the Saint Paul
Community Foundation and Michael Cheney,
formerly of the Cincinnati Foundation. Available in
the Student Guide: References section of Financial
Administrative for Community Foundations, Center
for Community Foundation Excellence course.
Council on Foundations, 2005. Visit www.cof.org.
Community Foundation Cost-Revenue Model—
Group, 2006. This tool helps community foundations
understand what it actually costs them to
provide their products and services.
Foundation Management Series.
Foundations. Visit www.cof.org.