In 2009, Ann Goggins and Don Howard of The Bridgespan Group published The Nonprofit Starvation Cycle in the Stanford Social Innovation Review. That article made a clear, hard-hitting case for what is now called full-cost funding. The case for full-cost funding argues that by failing to adequately cover indirect costs involved in implementing grant-funded programs, grantmakers weaken the infrastructure of nonprofits and erode their capacity to fulfill their missions.
A quick internet search will turn up numerous publications on the topic. The articles and reports consistently make the case for full-cost funding and advocate that both grantmakers and nonprofits do their part to push the change forward. Nonprofit leaders are certain to identify with the discussions and find themselves muttering, “yes, finally,” elated to have such a bright light blasting on an issue that’s been undermining their capacity for decades. But the elation is likely to dull when they note the dates on the publications. The sector’s been talking about this for a long time.
There is progress. Some foundations have announced changes in their grantmaking policies, groups of grantmakers are studying the issue and promoting solutions, and big-league foundations are wrapping up reports and conferring with each other and their grantees to figure out how to do this right.
Even the federal government has changed policies so that most organizations without a federally negotiated indirect cost rate are eligible to receive a de minimis rate of 10% when applying for grants. That’s certainly progress, but let’s be clear. While 10% is better than nothing, it is certainly far short of indirect resources consumed when implementing a federally-funded program. And nonprofits that do hold a negotiated indirect cost rate can’t always recover their full percentage because some federal grant programs cap what they’ll pay for those costs.
We’re making progress, but for a fragile nonprofit sector, it’s not fast enough. Funders fuel social change with their grant dollars and nonprofits are the boots on the ground to get the job done. The troops are tired, hungry, and discouraged. We know that change takes time, but in the interest of our varied missions, let’s work together to speed this up.