How can annual survey data help strengthen community foundations?

Earlier this year, the Council on Foundations released its latest CF Insights Annual Survey report, looking at the state of community foundations in fiscal year 2024. For the second straight year, the field saw year-over-year asset increases, driven by positive investment returns, and showed that grantmaking from donor-advised funds (DAFs) continued to grow, exceeding the total contributions going into those funds.

The report also provides comparisons between different asset size cohorts across several metrics. Community foundation staff can see where their organizations stand among similarly sized peers. Here, we’ll highlight a few of these data points and discuss how to think about what they may mean for your community foundation.

Community foundations’ revenue mix reflects ability to sustain operations and invest

We looked at how community foundations depend on different revenue sources to sustain their operations and establish or expand special initiatives and other community leadership efforts—like convening local leaders, commissioning or conducting research on community needs, or advocating for policy changeal—l of which require financial and staffing resources. The largest portion of community foundations’ operating revenue will almost always come from administrative fees (69% on average in FY24) for managing the funds in their portfolio, usually assessed as a percentage of those funds’ assets. Community foundations often supplement those fees with distributions from operating endowments or reserves, earned revenue (such as fee-for-service offerings), and fundraising from individuals, to fully cover operating costs.

What’s important is whether your operations are sustainable given your revenue mix, and whether you have the flexibility to invest in new areas of work. The annual survey data shows larger community foundations tend to have a more diversified revenue mix, while smaller and emerging ones may depend more on fundraising from individuals as they build endowments.

If a significantly higher percentage of your operating revenues come from fundraising relative to your size cohort, and you want to reduce that percentage, ask:

• Will our assets grow enough to generate the administrative fees needed to reduce our dependence on fundraising?
• What is the opportunity cost of having our team dedicate time to fundraising?
• Do our administrative fees fully reflect the value our staff bring to our donors? How might we adjust our administrative fees or fund minimums to cover more of the cost of serving them?

Don’t over-focus on expense-to-asset ratios

The expense-to-asset ratio, or total operating expenses divided by total assets, is a shorthand for understanding the overall “leanness” of operations. The conventional wisdom has long been that the ideal ratio is 1%, but as community foundations have begun investing more in community leadership efforts and operating budgets have increased, we’ve seen ratios that go well above that point.

If you wonder whether your operating expenses are too high relative to asset size, you’ll want to reflect on whether:

• You simply made a significant one-time investment that will not be a factor moving forward.
• Your revenue mix makes it possible to cover operations without withdrawing from your operating reserve.
• Your ratio is temporarily inflated due to a decrease in your asset total.

Ultimately, your community foundation’s ratio among your peer organizations’ annual survey data is less important than whether you’re set up to cover operating expenses without dipping too much into discretionary funds.

Funds per full-time equivalent helps track team capacity to serve a growing donor pool

As a community foundation establishes more funds, additional staff may be needed to handle that increase in donors. Larger community foundations have more staff serving specialized roles, so their funds-per-full-time equivalent (FTE) are lower than those for smaller community foundations, which usually have fewer staff members and often need them to hold multiple roles.

If your community foundation’s funds-per-FTE metric is much higher than your asset size cohort’s is, you may want to consider your staff’s capacity:

• How many more donors can you recruit at your current staff size and still be able to provide the services those donors expect?
• Would a proactive investment in additional staff capacity set you up for success as your donor pool expands?
• Are incoming donors “light touch” enough that your current team can continue servicing their growing ranks?

These are some of the more common questions community foundations raise about the CF Insights Annual Survey results and how they compare with peers. The asset size cohort comparisons within the report are designed as a common-sense check for those looking to assess how their revenue mix and team makeup are sustainable—and what shifts they might consider to strengthen their community foundation.

Visit the Council’s website to learn more about the CF Insights survey and how you can contribute to our collective knowledge of how community foundations operate when we open our survey to collect fiscal year 2025 data this summer.

Photo credit: Council on Foundations