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Operating support seen as untapped

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While most foundations say they are willing to fund overhead costs for their grantees, many nonprofits are reluctant to depend on grants for their day-to-day operations, a new study says.

Almost seven in 10 foundations say they fund expenses like rent and planning, and almost half award general operating grants, says “Paying for Overhead,” a report released by the Center on Philanthropy at Indiana University.

However, three in four educational and human services nonprofits say they don’t rely on foundations to fund their core operations, even though they need the money.

“We believe the tension lies in the short-term nature of much foundation funding and nonprofits’ resulting hesitancy to use foundation funding for recurring expenses such as overhead,” Patrick Rooney, director of research for the Center, says in a statement.

Some nonprofits use a variety of “predictable, self-generated” funding streams to cover overhead expenses, saving foundation grants for program enhancements or occasional expenses like strategic planning.

Large foundations, defined as those that award more than $6.5 million in grants annually, were more likely to award operating grants, the study says.

At the same time, nonprofits that say they have enough operating support were more likely to receive little or no foundation funding.

The study was funded by the Nonprofit Sector and Philanthropy Program at the Aspen Institute.

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