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Ending the Nonprofit Starvation Cycle


It is no secret that nonprofits, even the most prominent ones, often scramble to close the gap between the grants they receive and their actual costs of operations. Despite widespread awareness of this “starvation cycle,” funders have been reluctant to address the issue head-on—until now. The lead article in this package describes the two-year collaboration involving five leading foundation presidents who have agreed to apply a menu of solutions to pay grantees’ true costs. Writing separately, several funders, program officers, grantees, and intermediaries affirm the funding challenges nonprofits face and support the presidents’ push for ending the starvation cycle.

Featured Article

Five Foundations Address the “Starvation Cycle”

By Jeri Eckhart-Queenan, Michael Etzel, and Julia Silverman

Presidents of five leading foundations have agreed to experiment with practices and policies to address chronic underfunding of their grantees’ indirect costs. Said one president: “We have engaged because we have a responsibility to put forward solutions. That’s a breakthrough.”

Contributed Insights

Leaders from the sector share their perspectives on how to end the nonprofit starvation cycle.

The Best Solutions Have a Compelling Story Behind Them

By Jeffrey Moore

Many nonprofit leaders don’t know how to talk about their true costs. Making the case for better funding formulas requires nesting the need in a bigger story about the impact of nonprofits in American communities.

The Price of Real Change

By Ellen LaPointe, Sandi Clement McKinley, and Sara Davis

Foundations should provide flexible grants and sufficient overhead funding to cover grantees’ actual costs. The time to lead this movement forward is now.

How Foundations and Nonprofits Can End the ‘‘Starvation Cycle’’

By Andrea Wilson and Hilda Polanco

How can foundations and nonprofits bridge the gap between project funding and actual costs? Foundations need a standardized approach to calculating indirect costs.

How One Nonprofit Prepared for Tough Conversations With Funders

By Josh Solomon and Isa Ballard

Funders can do one simple thing to promote more open conversation with grantees about adequate indirect costs reimbursement: state on their websites and in their grant guidelines their approach to indirect costs.

Why Funders Should Pay for the True Costs of Nonprofits’ Work — Not Just the Direct Project Expenses

By Norma Altshuler and Marissa Tirona

How foundations fund is just as important as what they fund. Coverage of actual costs is critical for grantees’ organizational health, and we need strong organizations to have impact.

Five Nonprofit Survival Skills for Managing Low-Overhead Funding

By Eric Walker

Nonprofits funded by U.S. government grants receive full reimbursement for administrative costs. Those not receiving government grants need to master five low-overhead survival skills.

Learning Strategic Financial Management From the School of Hard Knocks

By Richard Modest and Aidan Eyakuze

The research and advocacy work of an East African NGO calls for flexible, long-term financial resources, something many funders are reluctant to provide. To cope, the organization had to master financial survival skills.