A New Pay-What-it-Takes Grantmaking Approach

June 22, 2016

trees overheadYou know that sinking feeling. Your programs are securely funded, but when your printer needs servicing, you’re faced with a depleted operations budget. You’ve spent half your day Googling “printer self-service tips” in an effort to avoid accruing overhead costs.

On average, 40% of a nonprofit’s budget is made up of indirect costs — costs not attributed to a specific program or service. That’s significantly more than the 15% rate of reimbursement that many foundations provide.

It’s clear. A 15% cap on funding for indirect costs does not provide adequate coverage for most nonprofits. And funding for programs, yet not for operations, sets nonprofits up for something know as a starvation cycle.

If nonprofits committed to understanding their true cost of operations, and funders shifted to paying grantees what it takes to get the job done, the starvation cycle would end. – From Pay-What-it-Takes Philanthropy, Stanford Social Innovation Review

Identifying the costs of achieving a desired outcome shifts the emphasis from what it takes to fund a program to what it takes to achieve impact, the essence of the “pay-what-it-takes” approach to grantmaking. This policy also eliminates the “shadow economy” where some nonprofits feel pressured to obscure data to work around overhead cost caps imposed upon them.

CNE wants your programs to succeed, but also wants you to be able to fix that printer. Read more about the forward thinking pay-what-it-takes approach to grantmaking in the Stanford Social Innovation Review.

 

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