3 Simple Ways To Begin Communicating (And Advocating For) Full Cost Funding

Monday, December 18, 2017

Our second Full Cost Project workshop began by asking participants what they were hoping to take away from the two-hour event. Nearly all of the funders shared their collective need to be equipped with the appropriate language to advocate for full cost funding for nonprofits.

The full cost funding approach means recognizing and covering the full costs that nonprofits need to do their work. This approach makes better use of limited philanthropic resources and allows for more flexibility and effectiveness.

Claire Knowlton, a Director at Nonprofit Finance Fund, explains, “Many nonprofits regularly face restrictions in their funding. Too often, lines are still drawn between the costs directly attributable to, for example, delivering meals or adding beds in a homeless shelter, versus basic business costs like staff payroll, office rent, and heat – not to mention the need to innovate and adapt to changes in community needs and operating environments.”

Knowlton, who led the workshop with 20 San Diego funders, left attendees with the following key take homes:

1. Nonprofits need profits.

501(c)3 is a tax status, not a business model. The reason that nonprofits need profits is not for any one individual to get rich but because outside of day-to-day expenses, there are real costs like replacing outdated technology that only get paid out of surpluses generated over year after year.

Step 1: For the nonprofit world, overhead and profits are seen as necessary and a part of the business. Why is the nonprofit sector different?

2. Proactively engage nonprofits in conversations about their full cost needs.

The reality is that real power dynamics exist between funders and their grantees, therefore nonprofits do not feel comfortable communicating to funders what they truly need. Having been turned down many times in the past, they are also used to being told ‘no.'

Step 2: It is up to funders to open the line of communication to let nonprofits know they are willing and open to funding full costs for the organization.

3. Funders should measure for the impact of services, not wasteful compliance demands.

The outcome and impact of services provided is a better accountability measure, which will be a shift in how grants are currently evaluated with compliance measures (such as how many manuals were printed or how many flu shots were given). Real, lasting change requires meaningful shifts in both technical and cultural practices like what funders require nonprofits to report and how they measure success.

Step 3: We have to focus on outcomes for our dollars to get really good, impactful results in the community; a compliance mindset stands in the way of that.

The workshop concluded with recommendations on how to keep the full cost conversation going. Funders were interested in bringing the Nonprofit Finance Fund presentation to their boards, and also to tailor the content to giving circles, donor-advised fund holders and individual donors.

Download or read the presentation from this full cost workshop.

What can I do now?

Read our previous Full Cost blog posts:

Other Full Cost resources:

Get up to speed on recommended Full Cost approaches:

The Full Cost Project is a joint initiative of Philanthropy CA (Northern California Grantmakers, San Diego Grantmakers, and Southern California Grantmakers) and Nonprofit Finance Fund.

We are bringing together education, advocacy, and skill-building with the goal to increase the number of funders that provide full cost funding and to build the skills and capacity of all those engaged in grantmaking – foundations, corporations, individuals, and government.

Get involved!

We will be doing more work on full cost funding in 2018, watch for announcements in the new year!


Written by Annie VanDan, San Diego Grantmakers Communications Specialist

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