Administration Costs Research Project
At present many international donors discriminate against national organizations, by offering lower indirect rates or different cost recovery policies compared to their international grantees. Through the Administration Costs Research Project, we are researching how donor funding practices could be made more equitable in providing fair cost coverage to national civil society organizations on behalf of a group of US and European foundations.
Where NGOs rely heavily on restricted funding to support their project work, there is a risk it could undermine their organizational effectiveness or financial resilience. Restricted funding for project or program grants does not typically cover a full share of the administration costs organization’s incur. These could include organizational management, finance, and payroll functions, or other necessary non-program costs, such as head office rent and utilities.
Administration is essential to the effective, efficient, and safe delivery of projects and programs, but these may be inhibited without adequate funding. Alternatively, the organization must draw on reserves to fund such functions or fund them disproportionately from unrestricted income. A reluctance by NGOs to reveal their actual administration costs can add to the issue. There can be a perception in the sector that expenditure in these areas demonstrates inefficiency and undermines legitimacy. This creates a vicious cycle with organizations reporting lower administration costs and funders not knowing whether they cover a fair allocation of these costs.
The community of international grant-making foundations has identified this as a global issue and has been raising awareness over the last few years. They have come together and commissioned Humentum to gather information on grantees’ experiences in Africa, Asia, Latin America, and Europe as part of that work.
What happens next?
The information collected will be used to write and publish a report. The anonymized data will form part of the analysis, helping inform donors’ future policies concerning cost coverage.
Learn more about this process, how to participate, and who to contact about the research below.