The Bridgespan Group

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.

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.

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.

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.

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.

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

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

Presidents of five leading foundations have agree 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.”