We know that nonprofit organizations that invest adequately in staffing and infrastructure (otherwise known as “overhead”) are better able to carry out their missions, but there are too many roadblocks that prevent nonprofits from strengthening their capacity. Many organizations and their funders are locked in a vicious cycle in which nonprofits are pressured to under-invest in overhead and to under-report their true overhead costs.

Building on the work that Donors Forum and The Bridgespan Group began at our Real Talk About Real Costs convening last year, we invited 22 national leaders from the nonprofit, philanthropy, and government sectors to Chicago for two days this past January to discuss how we could take collective action to move beyond overhead. The leaders came together to collectively identify elements of a shared agenda to tell a different story about nonprofit overhead costs; and to commit to making some concrete change (either individually or on behalf of their institution) over the next six months to help break down the overhead myth.

In small groups, participants discussed whether the current moment represented a “window of opportunity” for advancing this initative.  The goal of this conversation was to take stock of the current situation to better understand what it would take to begin to tear down the barriers that prevent nonprofits from strengthening their capacity. To further the “window” metaphor, participants assessed what is propping the window open as well as what forces are keeping it shut.

One example of a "window" that has recently opened is the Office of Management and Budget's (OMB) issuance of new guidance regarding federal grants. The guidance includes changes to the amount of indirect costs that can be covered by federal grant funding, increasing to a minimum of 10% of the grant that will be dedicated to indirect costs, with the opportunity to negotiate a higher rate.

(Relatedly, in Illinois, the state has undertaken the task to overhaul its grants management; the recommendations that have been put forth encourage the state to utlize the new OMB guidance for all grants, not just grants that involve federal resources.)

In examining what might be keeping the "window of opportunity" shut, workshop participants focused their attention on individual “archetypes”, or audiences, of leaders within the sector— the nonprofit leader, the government purchaser, the general operating support funder, and the program-focused funder. They envisioned what those individuals would look like as tireless advocates for breaking down the overhead myth, identified barriers that would need to be removed in order to win them over, and identified actions/actors that might positively or negatively impact these barriers. 

Finally, participants shared one specific goal they would be willing to work on with others. Among the goals were:

• Assembling a two-year action plan based on the outcomes of this session.
• Developing a one-page document with a series of "this we believe" statements that the group can use to clearly communicate the importance of this issue, what is at stake, and what needs to change. Part of this work includes developing shared language participants want to use to clearly communicate this issue.
• Focusing activities around the new OMB guidance, including a timeline that the National Council of Nonprofits will put together to help organizations become involved in the comment period for the changes, and then make sure they know how the changes will move forward.

Donors Forum's Work Going Forward

Donors Forum will be taking the lead in Illinois to help and advise on the implementation of the new OMB guidelines, as well as in the related work planned by the State of Illinois. We will be convening a committee with representatives of public, private, funder, and nonprofit organizations to guide this work, which will include capacity building and systems change. Stay tuned for more information in the coming months!

You can find additional resources on Real Talk About Real Costs on our microsite, linked here.

— Valerie S. Lies, President + CEO, Donors Forum, and Ann Goggins Gregory, Senior Director, Knowledge, The Bridgespan Group