”Humentum is the leading global nonprofit working with humanitarian and development organisations to improve how they operate and to make the sector more equitable, accountable, and resilient. Funders for Real Cost, Real Change (FRC), a collaborative of private foundations, commissioned this research and report to gather evidence on the extent to which international donor funding covers the real administration costs of national NGOs…”
This provocative and challenging report, from the organisation Humentum, makes a strong case for a continued imbalance in the allocation of funding, the imposition of power structures and the seeming immutable nature of the funder and funded relationship.
Download the report here: https://humentum.org/policy/administration-costs-research-project/
Although focused on the international/NGO sector, some of the key research findings, and recommendations by Humentum, could equally apply to the most modest community projects at home. Are we understanding our own detailed cost needs as a project, are we asking our funder for the full cost recovery amount and is our funder advancing enough funding, which is unrestricted, to best flexibly serve both delivery and sustainability of our project/cause over time?
The Humentum report quests for a funding context, where funders need to realign their relationships, making them more equitable, and that all parties become more accountable inside that interactional relationship.
It argues cogently from the NGO voices heard that what is needed is…
• a stronger long-term partnership approach that directly addresses the challenge of the unequal power dynamic inherent in the funding relationship.
• longer-term funding agreements with a significant component of general operating support to enable NGOs to become more sustainable, including building up unrestricted reserves.
• better cost coverage of all the administration costs associated with projects, including items such as start-up and closure costs, with less reluctance to fund salary costs.
These deficits in relationships and sweep in grant making result, for Humentum, in the starvation cycle. Humentum argue that for grantees to break out of this constricting and distorting cycle, then funders need to apply a change of approach. Namely, to offer…
a) full cost coverage
b) means by which grantees can contribute to unrestricted reserves
c) support to strengthen grantees’ cost recovery capabilities.
There is to us, thinking again about the local project context, an irony in the application of a grant, which may result in great creative, expertise and community development lift for a local project, which at the same time, because of traditional funding methodologies, powers the deliverer of the grant aided umbrella project into an inability to work for sustainability, skills uplift and cost recovery management to ensure that ‘starvation’ does not occur.
In conclusion, the Humentum paper makes three key recommendations…
- Funders should commit to consistently covering a full and fair share of all associated administration costs.
- Funders should directly fund grantees to strengthen their financial management, cost recovery and fundraising capabilities, and provide unrestricted funding to build reserves.
- Funders should systematically collect data on the extent of adequate cost coverage. This data should be used to drive internal accountability and motivate funders to provide their full and fair share of administration costs in restricted funding agreements.
Could the Humentum research transform the funding landscape, wherever the context? It’s a provocative paper…
Discover the full report and research information here: https://humentum.org/policy/administration-costs-research-project/