Funders urged to make more operating grants.
[04.13.04] — Funders should do more to meet nonprofits’ needs for core support, and nonprofits should respond by doing more to deliver “top-notch performance,” a leading national nonprofit coalition says.
“Reliable, predictable and flexible support is the lifeblood of nonprofit organizations,” says the statement by Independent Sector in Washington, D.C. “It provides the working capital that every organization needs to carry out its mission and respond to new challenges and opportunities.”
While “working capital” is critical for nonprofits, the statement says, many funders favor making program grants for reasons that range from a failure to recognize nonprofits’ operating needs or to trust them to spend operating grants wisely, to a preference for individual projects, new ventures or individual credit.
“Overhead costs, including the costs of fundraising, are as real to an organization as the costs of activities directly associated with a project, and must come from somewhere,” the statement says.
When they do make program grants, funders should pay the fair share of administrative and fundraising costs related to programs those grants support, says the statement, drafted by Paul Brest, president and CEO of the William and Flora Hewlett Foundation in Menlo Park, Calif.
“Many funders are not aware of the overhead costs incurred by organizations, or believe that they need only pay for the costs directly incurred by a project, not realizing that the organization could not function if every funder paid only its marginal costs,” the statement says.
In giving long-term, multi-year operating support, the statement says, funders should expect nonprofits to perform effectively in strategic planning, financial management, evaluation, development and “ultimate impact.”
It also says “rigid requirements” for grant proposals and reports can “subject an organization to responding to inconsistent demands by multiple funders.”
The statement grew out of the efforts of a working group of foundations and nonprofits at a meeting in 2003 co-sponsored by the Hewlett Foundation, Edna McConnell Clark Foundation, Open Society Institute, Rockefeller Brothers Fund and Surdna Foundation.