Seeking the End of Nonprofit Starvation Cycle

It's time to fund the true costs of running effective nonprofit organizations

For more than a decade, The Bridgespan Group has worked with philanthropists to implement flexible approaches to funding that cover their grantees’ total costs. Our 2008 “starvation cycle” research described how funders shortchanged and nonprofits underreported overhead expenditures. In 2016, our analysis of leading nonprofits’ financial records showed that more than half suffer from frequent or chronic budget deficits related to insufficient funding of indirect costs. More recently, we collaborated with the presidents of five leading foundations to advance a menu of solutions to this chronic pattern of grantee underfunding and underinvesting. We will continue to support the community that is helping grantees build stronger, more durable, and more effective organizations.


Ending the Nonprofit Starvation Cycle

Philanthropy's traditional 15 percent indirect cost reimbursement policy does not take into account the wide variation in costs between nonprofits. Doing so would have far-reaching effects on philanthropy and grantees. If nonprofits committed to understanding their true cost of operations and funders shifted to paying grantees what it takes to get the job done, the starvation cycle would end. Read more, including statements from key funders, in our special collection.
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Rethinking Grantmaking

To reframe how funders and grantees think about investing in and building successful, resilient organizations, Bridgespan developed a “grantmaking pyramid,” refined through collaboration with the Ford Foundation. This pyramid reflects a hierarchy of funding needs that begins with foundational capabilities, followed by resilience, and building toward increasing impact. Read more about the framing in "Time to Reboot Grantmaking."

Centering on Equity in Grantmaking

Traditional flat rate indirect cost structures fail to account for the world's inequitable systems and structures. U.S. organizations led by and serving people of color, for example, are often underfunded in comparison to peers. This overall underfunding compounds a lack of indirect cost coverage. Our work to end the nonprofit starvation cycle aims to alleviate underfunding and help ensure equitable outcomes for all nonprofits, regardless of who leads them or whom they benefit. Read more about racial equity in philanthropy.

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