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The goal of the Real Cost Project is to increase the number of funders that provide real-cost funding and to build the skills and capacity of all those engaged in grantmaking, including foundations, corporations, individuals, and government.
The critical first step of the project was to collect information and baseline data on the spectrum of current funder and sector practices that relate to real cost funding. This research allowed for a more thorough conceptualization of real cost funding as well as an opportunity to understand existing challenges, gaps, and needs. Most importantly, the research set a foundation for how future discussion and training should be developed to meet the real needs of practitioners in the field.
The research yielded several major findings, revealed common practices in the field and pinpointed areas for skill building and training among the grantmaking community.
Key takeaways include:
There is a lack of well-defined policies to guide real cost evaluation and reimbursements
There are no standard definitions of terms related to overhead and real cost funding
Funders rely on individual staff members to make decisions around real cost funding
Funder practices driven and reinforced by cultural norms and perceived “best practices” in the field.
Lack of formal policies regarding funding of indirect costs, lack of definition of key terms such as overhead, lack of formal training on determining actual program or organizational costs, and discretion left to program or grants management staff with limited training in nonprofit finance, all contribute to a vicious cycle of underfunding, limited liquidity, weak infrastructure and inability to meet demand.
Fundamentally, a sector wide acceptance of past practice and adherence to cultural norms undergirds the issue of real cost funding. This finding points to the need for human-centered approaches and a shift in behavior, rather than institution of policies alone.