Exploratory study on operational costs of Canadian grantmaking foundations in Quebec

Justification of research project

This study is the output of a collaboration between PhiLab’s Quebec Hub and the Béati Foundation. The research project is under the supervision of Jean-Marc Fontan (UQAM, Sociology) and Jacques Bordeleau (Béati Foundation). The purpose of the project is to evaluate the weight of operational costs on a foundation’s global budget.

How to establish if a philanthropic foundation is well-managed? Is it by using the donations it receives in an “optimal and responsible” way, in order to accomplish its mission and bring the public the greatest “tangible advantage”? Often, the media will use financial ratios to judge the management or performance of an organization, the first one being operational costs: what percentage of my donations goes to paying wages, rent or other administrative costs? The media refer to these numbers periodically during investigations of the philanthropic sector, using them to identify model or delinquent organizations, depending on their interpretation of said ratio. In general, the lower the ratio (under 35% usually), more an organization will be considered well-managed, and the opposite if it is high. But what about the facts? What exactly do we mean by operational or administrative costs? Are there foundation-specific characteristics (type, size, mission, etc.) that affect this ratio, and how?