Why this matters
Commitment to doing good means commitment to providing for the actual cost to make change happen. We’re accustomed to seeing certain expenses on a balance sheet, but others are often disguised or hidden from view in order to meet the restrictions built into grants. To position our work together for success, we must recognize that many types of costs are real and necessary to do the work.
Full Cost funding is about more than making things better for nonprofits—it’s about rolling back the habitual funding practices that diminish the effectiveness and vitality of the entire nonprofit sector.
Problematic grantmaking practices have been in use for many years, but nonprofits now face other compounding challenges. In the midst of today's political, social, and economic tensions, there is widespread concern and even fear about nonprofit sustainability. Federal budgets are tightening, increasing pressure on crucial service providers to deliver more with less.
- Governments at the Federal, state and local levels are changing how they fund and approach social problems – often resulting in less money for many nonprofits.
- Government funders are trying to be “smarter” about allocating limited dollars; and trends such as “pay for success” are shifting the risk from government onto philanthropy.
- Increased focus on collaboration and collective action presents incredible possibilities and significant challenges for the sector.
- A new wave of donors is looking for innovative means to invest in social outcomes that is blending the capital and social markets.
- Technology and ‘big data’ are changing how organizations work, presenting a new set of opportunities and potential barriers.
- The increase of big money in political campaigns is threatening to drown out the voices of those who lack the resources to compete.
Nonprofits not only have to run programs, but they have to be adaptable and sustainable over time. Now more than ever, funders must open honest dialogue with nonprofit partners to ensure they have the necessary resources to be adaptable and sustainable.
commitment to social change means commitment to funding the actual cost to make that change happen.
Philanthropy will not be able to respond to these profound shifts in the sector by continuing business as usual. Grantmakers have a responsibility to address nonprofit financial needs more realistically, and to help nonprofits, communities, and funders prepare for these fundamental changes. As Clara Miller, President of the F.B. Heron Foundation, wrote in outlining her foundation’s new strategy, “We have come to conclude that unfortunately, our comfortable habit appears to have outlasted the accuracy of the premises on which it was founded, and in the process has grown less useful year by year. The world has changed, and so must we. It’s time for a new approach.”
Recognizing this imperative, the Full Cost Project seeks to present a new approach to funding nonprofits, a different way to engage with our grantees, and a means to better leverage limited resources to achieve maximum impact.