Field Tip The Case for Operating Grants

Foundations and nonprofits both want impact. But, when it comes to funding overhead costs, perceptions on both sides can be a bit distorted.

Two photographs. Top image is of hippies doing a dance with a conservative looking family viewing them skeptically. Caption reads: What funders really think of nonprofits. Photo on the bottom is of an elderly man from the 1920s wearing a bow tie. He has in front of him about 20 rubber stamps and he's busy stamping some paper. Caption reads: What nonprofits really think of funders. Nonprofits and foundations want the same thing: social impact. But, tension often arises when it comes to funding overhead costs.

Grantmakers—who want a direct measurement of results to know if they’ve invested wisely—give mostly restricted, small, and short-term program grants.¹

Grantees—who provide the results-producing programs—would rather concentrate on their mission than constantly worry about paying the rent.

This issue of “Field Tips” gives you research, essays, and other resources to make the case—whether it’s to your funders, board, or fellow grantmakers—about the strategic benefit of unrestricted operating grants.

Lessons from the Right
Traditionally, conservative foundations have given far more in general operating support than their mainstream and progressive counterparts. Overall, 37 percent of conservative grantmaking dollars were given for operating support, while the 1,000 largest foundations in the United States gave only 13.6 percent of their grants in the form of general operating support.
From Power in Policy

(See Funder's Guides and also Related Resources, #6)

Related Resources

1 Center for Effective Philanthropy
“In Search of Impact: Practices and Perceptions in Foundation’s Provision of Program and Operating Grants to Nonprofits”
www.effectivephilanthropy.org/images/pdfs/CEP_In_Search_of_Impact.pdf

“Listening to Grantees: What Nonprofits Value in Their Foundation Funders”
www.effectivephilanthropy.org/images/pdfs/ListeningToGrantees_reprint.pdf

2 Center on Philanthropy at Indiana University
“Paying for Overhead: A Study of the Impact of Foundations’ Overhead Payment Policies on Educational and Human Service Organizations”
www.philanthropy.iupui.edu/Research/WorkingPapers/PayingforOverhead.pdf

3 Fieldstone Alliance
Our consulting team has extensive experience helping foundations, nonprofits, and networks develop clear vision, strategy and business plans.
Kellogg Action Lab—Learn about our partnership with Kellogg Foundation and Nonprofit Finance Fund to improve the overall capacity of Kellogg grantees.

4 Grantmakers for Effective Organizations
“Listen, Learn Lead: Grantmaker Practices that Support Nonprofit Results”
www.geofunders.org/document.aspx?oid= b8198f1f-574e-4aa0-8454-0796651db8fe

5 National Center for Charitable Statistics
“The Nonprofit Overhead Cost Study”
http://nccsdataweb.urban.org/FAQ/index.php?category=40

6 National Center for Responsive Philanthropy
“A Call to Action: Organizing to Increase the Effectiveness and Impact of
Foundation Grantmaking”
www.ncrp.org/downloads/PDF/NCRP2007-ACalltoAction.pdf

“Not All Grants Are Created Equal: Why Nonprofits Need General Operating
Support from Foundations”
www.ncrp.org/downloads/PDF/core-op_final_low_res.pdf

7 Stanford Social Innovation Review
“Smart Money” essay supporting general operating grants
www.ssireview.org/articles/entry/smart_money