New Operating Cost Benchmark Established for Private Foundations

Business Wire, Sept 18, 2007

Recently completed study confirms significant reduction in operating costs for foundations outsourcing their back-office, technology and support service requirements

FAIRFIELD, Conn. -- Foundation Source, the nation's leading provider of support services for private foundations announced today the results of a new study on operating and administrative costs of private (non-operating) foundations. The objective of the study was to determine the most efficient and cost-effective approach to operating private foundations.

The research compared the operating costs of two groups of private foundations, each reflecting a different operating model:

1. All 35,728 private foundations that reported annual operating costs to the IRS on their foundation tax returns(1)in 2005 (the "IRS Foundations"), over 90% of whom are believed to manage their foundations in-house(2).

2. 273 private foundations that were clients of Foundation Source prior to December 31, 2005, all of whom outsourced their back-office, technology and support services to Foundation Source for the entire 2006 tax-year ("Foundation Source clients").

The study found that foundations outsourcing their back-office administration, technology and support services to Foundation Source consistently report lower operating costs than the IRS Foundations. Among the findings:

Operating Costs as a percentage of Total Foundation Assets(3) were lower across the board for foundations choosing an outsource services model than for the IRS Foundations at large.

* All Foundations: operating costs for foundations outsourcing to Foundation Source were 26% lower than that reported by all IRS Foundations - 0.51% of foundation assets vs 0.69% for the IRS Foundations.

* Foundations with assets over $50 million (2.9% of the IRS Foundations(4)): operating costs for larger foundations outsourcing to Foundation Source were 22% lower than that reported by comparably-sized IRS Foundations - 0.43% vs 0.55%, respectively.

* Foundations with assets under $50 million (97.1% of the IRS Foundations(4)): operating costs for smaller foundations outsourcing to Foundation Source were 50% lower than that reported by comparably-sized IRS Foundations - 0.54% vs 1.08%, respectively.

The study indicates that by outsourcing their back-office, technology and support services to Foundation Source, the 273 foundations included in the study saved more than $4 million in operating expenses in 2006 relative to their peer foundations. Were the percentage savings realized by the 273 foundations applied to all foundations reporting to the IRS, it is estimated that the nation's private foundations would save nearly $1.0 billion in annual operating costs.

"We were very pleased by the research results which underscore the value of an outsource services model for operating private foundations," said Daniel M. Schley, Foundation Source chairman & CEO. "Through outsourcing, foundations are able to shift the operating burden of their foundations to professionals such as Foundation Source, and turn their focus to what matters most: their philanthropy. The cost savings they realize are significant and accrue directly to the benefit of the charities the foundations were created to support. The result: better run foundations with greater social impact."

"The integration of technology and best business practices for foundation administration has reset the bar for the efficient use of foundation resources," added Andrew C. Bangser, Foundation Source COO and author of the report. "Although industry groups such as the Council on Foundations advise keeping foundation expenses under 15% of charitable disbursements, it is now possible to stay under 10% while maintaining the highest standards of foundation management. While there are many different approaches to managing private foundations, the study indicates quite clearly that the outsourced model is the most cost-efficient for a broad swath of the private foundation universe."

About Foundation Source (www.foundationsource.com)

Foundation Source is the nation's leading provider of support services for private foundations. The company's back-office, online and support services ease the administrative burden, freeing foundations to focus more on mission, strategy and family priorities and less on back-office administration and compliance tasks. The result: better run foundations with greater social impact. Foundation Source was recently named 2007 Philanthropic Group of the Year by the editors of Private Asset Management.

Today, Foundation Source provides its full range of award-winning services to over 600 family, corporate and professionally-staffed foundations representing over $2.5 billion in foundation assets. Foundation Source provides its services through partnerships with the nation's leading private wealth management firms, trust and estate attorneys and CPAs. The company is headquartered in Fairfield, CT with regional offices in Atlanta, Boston, Charleston, Chicago, Denver, Los Angeles, New York City, Philadelphia, Salt Lake City, San Francisco and Seattle