$0.88 of Every $1 for Programs: That’s Nothing to Brag About!

$0.88 of Every $1 for Programs: That’s Nothing to Brag About!

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But, a larger issue looms. Nonprofits are coming up short on funding their full administrative costs and supporting the kinds of administrative capacity expansions—such as creating a research and evaluation team—critical to all well-managed organizations. Some people call these costs “overhead,” but “management” or “administrative costs” is much more fitting.

There is some good news: changes in the guidance from the federal Office of Management and Budget (OMB), called “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,” became part of the Code of Federal Regulations on December 26, 2014.

The new guidance requires states to pay grantees’ fully-loaded administrative costs. It’s a big win for the nonprofit sector (and comes thanks to a three-year campaign spearheaded by the National Council of Nonprofits). Although there’s still a loophole that allows government to cap the administrative costs in some cases, the regulations require payment of at least 10%. While 10% doesn’t cover the true management costs of running organizations well, it is a step toward recognizing full costs.

Foundations and other funders are also making a priority of supporting building out nonprofits’ management capacity. With growing expectations that nonprofits show outcomes for investments, this kind of support can’t come soon enough. Organizations that can prove that their programs work have more access to funding and opportunities to expand.

Source Name: 
New York Nonprofit Press
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