Nonprofits need more overhead funding

Nonprofits and foundations are at odds over whether foundations provide enough funding for nonprofits’ overhead costs.

A new study says nearly seven in 10 foundations support nonprofits’ overhead expenses, with nearly half making grants for general operating support and nearly one-third awarding unrestricted grants.

But the study by the Center on Philanthropy at Indiana University and the Nonprofit Sector and Philanthropy Program at the Aspen Institute also says two in three nonprofits surveyed say they lack adequate funding for overhead, with three in four reporting they do not rely on foundation funding to pay for core operations.

That “tension” between foundations and nonprofits “lies in the short-term nature of much foundation funding and nonprofits’ resulting hesitancy to use foundation funding for recurring expenses such as overhead,” says Patrick Rooney, director of research at the Center on Philanthropy.

In a separate report earlier this year, saying they were failing to fund nonprofits’ operating needs, the National Committee for Responsive Philanthropy called on foundations to invest at least half their grants and grant dollars in “flexible core operating support grants.”

Overworked, underpaid and under constant pressure to raise money, operate effectively and make a difference, nonprofits need more funds to pay for expenses like rent, administrative salaries, technology and training.

Foundations need to loosen their purse strings, paying out more of their assets in grants and allocating more of those grants and grant dollars for operations.

And nonprofits need to do a better job showing their need for overhead funding and pushing foundations to provide it.