A new working paper released in June calls into question a key assumption that many proposal writers have made for years–that foundations don’t want to pay for administrative costs.
The paper is titled “Paying for Overhead,” and it’s based on research conducted by Patrick Rooney, the director of research at the Center on Philanthropy at Indiana University, and Heidi Frederick, the assistant director of research at the same institution.
According to its abstract, the paper “examines the impact of foundations’ overhead funding policies on educational and human-services organizations.” The authors surveyed foundations and educational and human-services organizations and collected data from these surveys and from six case studies. For the purposes of this study, “overhead funding” describes such budget line items as personnel costs, rent, utilities, office supplies and equipment, technology, staff training, board development, strategic planning, legal fees, accounting fees, marketing, and fundraising.
For a long time, many individuals in the development field have believed that foundations do not offer sufficient funding to cover the costs of overhead expenses. As a matter of fact, 53 percent of the nonprofits responding to this study’s survey agreed that “foundations want to pay for program, not administrative, costs.” In a 2006 study conducted by the Center for Effective Philanthropy, the findings indicate that most foundation grants are “restricted, small, and short-term program grants.” Proposal writers have been trained not to include overhead expenses in their project budgets–especially salaries and benefits–but rather to include only the costs directly associated with the implementation of a new project or program.
Few of us, then, ever consider submitting a grant proposal that also includes a request for funding to cover the associated overhead expenses of the project–or, for that matter, submitting a proposal to a foundation to fund our day-to-day operating expenses. It has been understood that funding for overhead costs has to come from “other sources.”
However, the results of Rooney’s and Frederick’s study show that 69 percent of the foundations they surveyed fund all types of overhead costs. Nearly half of the foundations responding to the survey said they make general operating grants, and 3 percent said they offer unrestricted grants. Twenty-seven percent of the foundations said they would fund a particular type of administrative expense if it were part of a program budget. And, anywhere from 7 percent to 28 percent of the foundations would consider making a grant for administrative expenses if the request were submitted as its own proposal, and not a part of a larger program or project budget, depending on the type of expense.
Of particular interest to eSchool News readers are technology expenses. Sixty-five percent of the foundations responding to the survey said they would fund technology if it’s submitted as a program cost–and 25 percent would fund technology if submitted as a separate request.
What do the results of this working paper mean? I would suggest that proposal writers adjust some of their assumptions about foundation grants. Consider having conversations with foundation staff about the inclusion of general overhead costs in project budgets before submitting your proposals. You might be pleasantly surprised to learn that the foundation will consider these expenses as a part of your request. It might also be a good idea to research and identify foundations that fund technology for its own sake, rather than as part of a larger project, to add to your possible pool of funding resources.
Link: “Paying for Overhead” http://www.philanthropy.iupui.edu/Research/WorkingPapers/PayingforOverhead.pdf
Deborah Ward, CFRE, is an independent grant writing consultant.