Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

March 13, 2007

Call to action on operating support

Like the emperor with no clothes, U.S. foundations have no cover for their failure to address the operating needs of nonprofits.

And yet, while that failure hurts nonprofits, few of them are willing to push foundations to invest more of their assets in helping nonprofits strengthen their internal operations.

But now, as PJ reports today, the National Committee for Responsive Philanthropy is calling on foundations to allocate at least half their grants and half their grant dollars in the form of “flexible core operating support grants.”

And for all remaining grants that are specific to a project or program, the National Committee says in a new report, foundations should include “indirect costs or an overhead rate that is calculated to be appropriate to the nonprofit and the project.”

The report also calls on individuals planning nonprofit conferences and convenings, on national nonprofit and philanthropic bodies, on academics and researchers and, above all, on nonprofits to focus on the lack of operating grants and its impact on nonprofits.

Foundations control a tax-exempt base of over $500 billion, and the combined assets of organized philanthropy total nearly $1 trillion in tax-exempt funds, but relatively little of those assets reach nonprofits, the report says.

Yet because they are tax-exempt, it says, those assets “are basically equivalent to public resources to serve the public interest.”

Nonprofits serve as the “essential delivery system for foundations to realize their missions,” the report says.

So nonprofits need to recognize that they can “propel change” in the foundation sector.
But fearing it could cost them the funding they do receive, many nonprofits are reluctant to speak bluntly to foundations about their need for operating support.

Delivering the message about the need for operating support, the report says, “depends on nonprofits coming together and being willing to stand up and speak truth to philanthropic power.”

This is an important report, and nonprofits and foundations alike need to read it and move quickly to address this critical problem in the charitable marketplace.

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