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The Real Cost Project: Going Beyond Overhead at GEO 2016

Monday, May 9, 2016

Northern California Grantmakers along with San Diego Grantmakers and Southern California Grantmakers expanded the reach of our Real Cost Project work at the Grantmakers for Effective Organizations 2016 Conference in Minnesota last week.

During a standing room only session at the conference, Linda Baker, Program Officer, Organizational Effectiveness at the David and Lucile Packard Foundation, David Greco, Project Director of The Real Cost Project, and Ellen LaPointe, NCG's President and CEO led a lively discussion exploring what it will take for funders to adopt grantmaking practices which take into account what it really costs for nonprofits to deliver outcomes. The session aimed at encouraging funders to realize that every organization can do something right now, no matter how small, to move their towards a real cost approach. 

Featured in The Chronicle of Philanthropy article, going "Beyond Overhead Costs" was one of the hot topics of the 2016 GEO Conference. Below is its article about the session.

Speakers at a Grantmakers for Effective Organizations panel said foundations should expand their thinking about the expenses of running a healthy nonprofit that go beyond narrow definitions of overhead, like fixed assets, working capital, reserves, and debt. Foundations often limit the percentage of grant money that can be devoted to costs not directly supporting programs.

The Real Cost Project, a program started by a coalition of California foundations and regional grant-maker associations, has been conducting research and meeting with foundation leaders and program officers across the state to address that issues.

Among the discoveries: The vast majority of grant makers do not have a global policy on what rates to set for "indirect costs," or money to cover nonprogram expenses, often leaving the decision to the "back offices," said panelist David Greco, who directs the project. Sometimes the rates even vary within the same foundation, he said.

Other impediments are cultural, he said. For example, most foundations are organized around programs, and program officers want grant money to pay for "their" programs. The philanthropy world also lacks a shared language to discuss the "real cost" issue and has no established "best-practice" models to follow, he said.

Ellen LaPointe, president of Northern California Grantmakers, one of the groups that is leading the Real Cost effort, said the project had completed its initial phase of consultations and will now explore next steps. Among the questions on the table, she said: "How might we create a sector-wide conversation on this?"

Learn more about The Real Cost Project here

For more on the GEO conference, click here.