More and more voices from within philanthropy are arguing that funders need to stop directing the specific uses of their funds and provide general operating grants. Despite studies that show this to be the most effective type of funding, the percentage of general operating grants has been stagnant for the last 10 years.
The narrow channels for money into our sector cause nonprofits to be underfunding administrative and fundraising staff and infrastructure (finance and HR systems, technology, databases, etc.).
General operating grants allow organizations to build organizational capacity and program effectiveness by improving administrative processes that are essential to program success. Nowhere is the capacity conundrum clearer than with evaluation. Funders increasingly expect organizations to have complex data analysis and impact metrics to demonstrate their effectiveness. However, they are often unwilling to provide funding for the administrative staff, evaluation consultants, databases, and infographics needed for robust reporting.
We are making progress. The federal government is now requiring pass-through entities receiving federal funding and all federal agencies to reimburse nonprofits for some or all of their indirect costs, like administrative personnel. Washington Nonprofits tells you how to take advantage of this change.
What can you do to obtain more general operating support or support for indirect costs?
- Describe the impact a general operating or capacity building grant will have on the stability, quality, or growth of your programs.
- Include the program’s share of office, utilities, and other general operating costs and a percentage for administration and fundraising costs in your program grants.
- Consider presenting funders with a per unit rate for your program services that includes operating, fundraising, and administrative costs.
- Quote results from the 501 Commons survey of nonprofits to show that your need for capacity building is very common.