Indirect cost rates are once again a hot topic in our network. Since formally establishing a network in 2001, staff at NNPHI and public health institutes around the country have provided capacity-building technical assistance to emerging public health institutes. Establishing and updating indirect cost rates with the federal government has been an essential part of public health institutes evolving into solid nonprofit organizations with sound management and fiscal principles.
See our A Modular Guide to Developing and Thriving as a Public Health Institute for more information about our track-records in this area.
Over the network’s history, many private foundations have instituted restrictions on indirect cost rates for grantees. The restrictions vary but in some cases are limited to 10 or 12 percent. The logic behind these restrictions from the foundation perspective appears to be, “we want you to have this grant but we don’t want you to use the funds to support your overhead.” The recognition that these limits are unfair is not new, though we understand foundations have a duty to assure their resources are put to good use in advancing their mission and goals.
Why the buzz now?
Public health institutes have become key players in a complex ecosystem and landscape. Our members are expected to be nimble like the private sector, have multi-sector fluency, serve as administrative partners for government agencies, manage change, and build bridges between public health and health care.
There appears to be a subtle shift occurring – and some foundations are listening to the concerns of the broader nonprofit sector. After receiving more than 2,000 responses to his call for feedback on the Ford Foundation’s performance during his 12-month tenure, Darren Walker, Ford Foundation President wrote:
“The majority of the feedback I received was not about what we fund. It was about how we fund. Time and again, the organizations we support have said that our prioritizing project support, as opposed to general operating support, tends to stifle their work, forcing them to focus on incremental outputs rather than long-term organizational strategy and effectiveness.
These public comments represent a shift in the foundation’s thinking on this topic.
So, what’s in a rate?
Sure, it’s a percentage. But ultimately it comes down to this question: what do nonprofit organizations need in order to be successful?
Limiting indirect rates may have the unintended consequence of fragmenting the sector even more while stifling opportunities to strengthen it.
If there is consensus that nonprofit organizations have a vital role to play in improving population health, then it’s time to broaden the conversation beyond simply a percentage. This is about far more than “what’s in a rate.”