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Foundations Fund Operating Costs After All

By Kate Golden on May 10, 2007One Comment

Foundations fund program, not overhead, right? 

Not so, according to a new study conducted by the Center on Philanthropy at Indiana University.  The study, Paying for Overhead, found that 69% of the 710 foundations surveyed support expenses such as rent, salaries, and accounting systems.  Nearly 50% make grants toward general operating support.  Almost 1/3 award unrestricted grants. 

So why do so many nonprofits struggle to cover their operating expenses?  According to Patrick M. Rooney, director of research for the Center on Philanthropy, the discrepancy lies in the “short-term nature of much foundation funding and nonprofits’ resulting hesitancy to use foundation funding for recurring expenses such as overhead.”  Nonprofits are choosing to pursue other sources of revenue to keep their lights on and their staff paid because these costs will continue long after the life of a grant – even a multi-year one.  Unfortunately, other sources of revenue aren’t easy to find.  2/3 of the nonprofits surveyed said they lacked adequate funding for their operating expenses.

If foundations are willing to pay for overhead, should nonprofits start applying more of these grant monies toward operating expenses?  Or will this make them more dependent on foundation funding; funding that can be sporadic and unpredictable? 

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